ATTORNEY NEWSLETTER
Cross-Selling of Reverse Mortgages and Annuities Illegal
Beware of Pressure Tactics
Remedies For Injured Seniors
Bay Area seniors 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. In fact, upfront costs can run as high as $15,000 to $20,000 on a $200,000 home. These high origination costs can be financially disastrous, especially for those who don’t plan to stay in their homes long or want to borrow only a small amount. Other serious downsides include accumulating interest, increased ongoing costs of maintaining your home, and the need to move for medical or other reasons. A reverse mortgage requires you to maintain the residence as your principal home and keep property tax and insurance payments current. One of the angles lenders employ when selling reverse mortgages is to entice the homeowner to purchase an annuity when they take 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. If you are over 62 and live in the San Francisco Bay Area or elsewhere in Northern California and have been sold an annuity in connection with a reverse mortgage, call us today at 415-441-8669 (or toll free at 1-888-50EVANS).
What to Watch For
Reverse mortgages are complicated financial instruments, and entering into such an arrangement is an important decision that impacts seniors for the rest of their lives. Keep a few basic pointers in mind if you or a loved one is considering a reverse mortgage:
- Do not respond to unsolicited advertisements.
- Be suspicious of anyone claiming that you can own a home with no down payment.
- Do not sign anything that you do not fully understand. •
- Do not accept payment from individuals for a home you did not purchase.
- Seek out your own reverse mortgage counselor.
Protections For Seniors
The California Civil Code expressly prohibits the cross-selling of annuities with reverse mortgages. Cal Civ. Code § 1923.2(i)(1). 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. If you’ve already taken out a reverse mortgage and were sold an annuity at the same time, you may be a victim of financial elder abuse, entitling you in certain cases to extra damages and recovery of attorneys’ fees and expenses incurred by you in bringing your case. Cal. Welf. & Inst. Code § 15657.5.
Contact Us
If you or a loved one is a victim of annuity or reverse mortgage fraud in the San Francisco Bay Area or elsewhere in Northern California, contact the Evans Law Firm elder attorneys at (415) 441-8669, or by email at <a href=”mailto:info@evanslaw.com”>info@evanslaw.com</a>.
