Thursday, September 03, 2015

Mass AG: Mortgage Broker, Insurance Agent Tag-Team Targeted Elderly With Scheme That Conned Them Into Pledging Their Home Equity To Get Reverse Mortgages, Then Using Proceeds To Buy Risky Annuities, Other Unsuitable Investments

From the Office of the Massachusetts Attorney General:
  • A Norwell-based mortgage broker, one of its loan originators, and an outside insurance agent have been sued for sales tactics that convinced elderly homeowners to apply for reverse mortgages and invest their proceeds in risky financial products, including variable annuities, Attorney General Maura Healey announced [].

    The complaint, filed [] in Suffolk Superior Court against mortgage broker Direct Finance Corp. (DFC), its employee Daniel Matthews, and insurance agent James Moniz, alleges they earned significant commissions as a result of their scheme. Several of these consumers were widows who wanted ready access to their money but instead faced severe withdrawal penalties if they accessed more than a small percentage of their proceeds for the first several years the annuities were in place.

    It is wrong to take advantage of seniors who spend decades building up equity in their homes,” AG Healey said. “We allege these defendants preyed on elderly homeowners so they could earn more money at their clients’ expense. Individuals and businesses who target vulnerable populations by promoting these risky transactions will be held accountable.”

    The complaint alleges that the defendants worked together to convince seniors to apply for reverse mortgage loans, which freed up money to invest in risky annuities and other financial products. In one case, Moniz and Matthews allegedly convinced a widow unfamiliar with financial products to invest her reverse mortgage proceeds in an annuity that tied up her money for several years. Moniz allegedly convinced the widow to sign blank forms in order to place her money into an annuity without her knowledge.

    ***

    Last fall, the AG’s Office settled allegations with Moniz’s former employer, John Hancock Life Insurance Company (U.S.A.) that it unfairly failed to effectively supervise Moniz, permitting him to sell unsuitable variable life insurance policies, variable annuities, and other insurance and financial products. The settlement also alleged that Moniz developed an association with Matthews to induce senior clients to apply for reverse mortgages and invest the proceeds in unsuitable variable annuities. John Hancock paid more than $550,000 to seniors in Massachusetts to resolve those allegations.
For more, see AG Healey Sues Mortgage Broker and Insurance Agent for Taking Advantage of Elderly Homeowners (Defendants Allegedly Convinced Senior Clients to Invest in Risky Financial Products in Order to Earn Commissions).

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