September 12, 2007
National Coalition Calls Upon Congress to Prohibit the Use of
Reverse Mortgage Equity of Seniors to Fund Deferred Annuities.
WASHINGTON – CEASE, the Coalition to End Elder Financial Abuse, in testimony submitted to the U.S. Senate’s Special Committee on Aging for its hearing today on reverse mortgages and the elderly, called for congressional action to stop unscrupulous salespeople from selling inappropriate financial products under false pretenses and through fear tactics.
Prescott Cole, an attorney with California Advocates for Nursing Home Reform (CANHR), speaking for CEASE, testified before Senator Claire McCaskill (D–MO), who chaired the Senate Special Committee on Aging’s hearing, "Reverse Mortgages: Polishing not Tarnishing the Golden Years," emphasizing three key problem areas associated with the sales of reverse mortgages. Cole noted the inappropriate marketing of reverse mortgages for the purpose of financing deferred annuities, ineffective reverse mortgage counseling, and the adverse effects on low–wealth seniors of the Deficit Reduction Act (DRA) passed by Congress in 2005. According to Cole, "The deferred annuity will never generate enough interest to offset the money owed on the reverse mortgage loan."
Through cases brought to the attention of CANHR, Cole noted, "We are now seeing insurance brokers actively recruiting insurance agents to promote reverse mortgages at senior centers. Some brokers are even offering to help insurance agents become HUD–certified counselors." Moreover, added Cole, "These brokers are telling the insurance agents that it is "ethical" to advise seniors to remove thousands of dollars from their home equity to buy annuities."
In their testimony, CEASE offered specific recommendations to protect older consumers including:
- Prohibiting the predatory practice of using reverse mortgages to fund deferred annuities.
- Strengthening the federally required "mortgage counseling" to include "suitability" criteria by allowing mortgage counselors to suggest alternatives to reverse mortgages, allowing them to inquire as to what the senior intends to do with the funds, and equipping counselors with the ability to disapprove a loan when appropriate to do so.
- Removing the federal endorsement of reverse mortgages as a means to qualify for Medicaid.
Kathleen Quinn, Executive Director of NAPSA, the national organization representing the nation’s adult protective services (APS) programs, and a founding member of CEASE, said, "If these unscrupulous practices aren’t stopped, we are likely to see already strapped state and local APS programs caseloads grow, as seniors are forced into poverty due to the loss of their homes and savings."
CEASE’s founding member organizations include CANHR, the National Adult Protective Services Association (NAPSA), the Women’s Institute for a Secure Retirement (WISER,) and the American Association for International Aging). CANHR, with 25 years of experience in elder abuse issues, is the sponsor of groundbreaking legislation on consumer protections for elder abuse victims; and received the California Attorney General’s 2005 Distinguished Service Award for Elder Abuse Prevention by a Community–Based Organization. NAPSA is the national coordinating organization for state and local Adult Protective Service Agencies, the front line professionals preventing elder abuse, neglect and financial exploitation and protecting its victims. WISER is a nationally recognized leader in developing and disseminating accessible information on a wide range of financial issues for women (and men). AAIA is nationally recognized for its work on behalf of minority populations, especially indigenous communities and its work in elder abuse.
Prescott Cole, Esq.
California Advocates for Nursing Home Reform/CEASE