Mass. Attorney General Sues Reverse Mortgage Broker for Cross-Selling

Massachusetts Attorney General Maura Healey has filed suit against mortgage broker Direct Finance Corp., alleging one of its loan originators worked with an insurance agent in a reverse mortgage cross-selling scheme that involved approximately 16 borrowers. 

Under the complaint filed by the AG’s office this week, the state alleges Direct Finance Corp. employee Daniel Matthews and insurance agent James Moniz convinced elderly homeowners to apply for reverse mortgages and invest their proceeds in risky financial products. Those products included variable annuities.

The defendants allegedly violated anti-cross-selling protections in place to prevent borrowers from losing access to their reverse mortgage funds by investing those funds in certain financial products. Some states have included additional anti-cross selling provisions in their laws around reverse mortgage lending. 

The complaint alleges the two professionals began working together in 2005 and for years continued to partner and receive “significant commissions” as a result of their actions. According to the complaint, the scheme convinced 16 borrowers to take out reverse mortgages and invest the proceeds in financial products that would limit their access to the proceeds. Under the scheme, the defendants allegedly deceived borrowers by withholding documents and disclosures, and deceived lenders in not disclosing their intentions. 

“It is wrong to take advantage of seniors who spend decades building up equity in their homes,” AG Healey said in a press release. “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 suit is being brought against Direct Finance, Matthews and Moniz. It follows previous allegations brought against Moniz’s former employer, John Hancock Life Insurance Company, for failure to effectively supervise Moniz, permitting him to sell unsuitable variable life insurance policies, variable annuities, and other products. The case alleged he developed an association with Matthews on a cross-selling scheme; that case was settled by John Hancock last fall for more than $550,000, according to the AG’s office.

Written by Elizabeth Ecker

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