California Law Prohibits Cross-Selling of Reverse Mortgages and Annuities

Beware of Pressure Tactics

Seniors in Alameda and Marin County and throughout the State of California are often approached to take out reverse mortgages on their homes. Often, these individuals have substantial equity and significant appreciation in home value but reduced income following retirement (you have to be 62 or older to qualify for a reverse mortgage). The sales pitch is to “reverse mortgage” the home’s value and generate cash. Don’t let the product name fool you – you ARE borrowing when you take out a reverse mortgage. And the origination fees and subsequent interest rates are very steep and at maturity or death the home belongs to the bank, not you or your estate. As you can tell, the stakes are very high and these are potentially dangerous decisions. Fortunately, California is a leader in protecting its seniors from predatory practices in reverse mortgages and we want you to know your protections.

What to Watch For

One of the angles lenders employ when selling reverse mortgages is to entice the homeowner to purchase an annuity when they took out their reverse mortgage. The recommendation (or sometimes, requirement) was that the homeowner use the reverse mortgage proceeds to purchase an annuity issued by the lender, one of its affiliates or a “referred” carrier. This is not legal in California. The legislature saw this was a trap for seniors and the borrower, with few options remaining in life to increase cash flow, was easy prey and often capitulated and bought the annuity. Luckily, the legislature spotted this exploitation and did something about it. We want you to know your rights under California law.

Protection

The California Insurance Code expressly prohibits the cross-selling of annuities with reverse mortgages. You cannot be forced – or enticed – to use the proceeds of your reverse mortgage to purchase an annuity. Once you qualify and subsequently close on a reverse mortgage, what you do with the proceeds is up to you. You can’t be coaxed into purchasing an annuity or any other insurance product. This is not the only protection you have under California law, however. You also must undergo mandatory counseling (see the checklist of topics in the attached article) and be given a seven-day “cooling off” period after counseling to decide is a reverse mortgage is right for you. If you are considering a reverse mortgage, please seek out the advice of a professional not interested in the transaction. These are dangerous and expensive products and you need to learn all about them before you move forward in considering one. Don’t trust the lender to give you the facts and do not allow the lender to attempt to “tie in” other products to your loan.

Contact Us

If you or a loved one is a victim of annuity or reverse mortgage fraud in Santa Clara County or in any California county, contact the Evans Law Firm elder attorneys at (415) 441-8669, or by email at info@evanslaw.com. Our attorneys have experience with complex financial contracts and large insurance companies. We can help guide your case through a jury trial or toward an equitable settlement. We handle cases involving physical and financial elder abuse, qui tam and whistleblower law, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.