If you are providing a reverse mortgage, do not – repeat – do not think of trying to sell an annuity at the same time.
Federal agencies have made that point, several times, in a new batch of "final guidance," or official advice, on reverse mortgage sales compliance management.
The agencies that teamed up to issue the guidance or the Office of the Comptroller of the Currency, the Federal Reserve System, the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the National Credit Union Administration.
A reverse mortgage is a financial instrument that consumers ages 62 and older can use to tap home equity without having to make payments while they are living in the home.
The new guidance, which will take effect Oct. 18, gives ideas about strategies financial institutions and other entities involved with marketing reverse mortgages can use to avoid taking advantage of older consumers, or looking as if they are doing so.
"Reverse mortgages present substantial risks both to institutions and to consumers, and, as with any type of loan that is secured by a consumer's home, it is crucial that consumers understand the terms of the product and the nature of their obligations," according to the text of the guidance.
In a section on "Conflicts of Interest and Abusive Practices," the guidance states that, "The potential for inappropriate sales tactics and other abusive practices in connection with reverse mortgages is greater where the lender or another party involved in the transaction has conflicts of interest, or has an incentive to market other products and services."
