BOSTON – Massachusetts seniors will receive more than $130,000 in refunds as a result of a settlement with a mortgage broker, its employee and an insurance agent that resolves claims they induced elderly clients to take out reverse mortgages and invest the proceeds in unsuitable variable annuities, Attorney General Maura Healey announced today.
This settlement resolves allegations from a lawsuit filed by AG Healey in August 2015 against mortgage broker Direct Finance Corp., its employee Daniel Matthews, and insurance agent James Moniz.
“We found that these defendants took advantage of elderly homeowners who spent decades building equity in their homes,” said AG Healey. “My office is focused on stopping the financial abuse of seniors.”
The AG’s lawsuit alleged that while employed by John Hancock Life Insurance Company (U.S.A.), Moniz developed an association with Matthews to induce elderly clients to take out reverse mortgages through Direct Finance and invest the proceeds in unsuitable variable annuities. John Hancock terminated Moniz for conduct uncovered during the investigation.
As a result of this settlement, affected consumers will receive a total of $137,500 in refunds that will be distributed by the AG’s Office. Eligible consumers will be contacted by the AG’s Office.
In addition to monetary relief, the settlement imposes restrictions on Moniz, Matthews, and Direct Finance to prevent improper association between the origination of reverse mortgages and the investment of the proceeds in annuities or other investment products. The defendants are also prohibited from misrepresenting the sources of investments or investment intentions of their clients.
The AG’s Office previously settled allegations with John Hancock 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. In September 2014, John Hancock paid nearly $900,000 to seniors in Massachusetts to resolve those allegations.
Unlike traditional mortgages, reverse mortgages do not require borrowers to make monthly payments to pay off the loan. Instead, borrowers receive money from lenders, and the lender is often paid back when the last surviving borrower dies. With reverse mortgages, home equity decreases over time as interest and fees are added to the loan balance each month. With deferred variable annuities, an insurance company invests money from consumers in securities and, after several years pass, begins making periodic payments to consumers over time.
Consumers should be aware that using funds from a reverse mortgage to invest in financial products like annuities is always risky. Variable life insurance policies and variable annuities may not be appropriate investments for older individuals because of steep surrender and withdrawal penalties. Before purchasing any financial product, consumers should always ask questions and make sure that they understand the investment risks, read any forms that they sign, and never sign blank forms.
Consumers seeking more information can contact the Attorney General’s Insurance and Financial Services Division at 1-888-830-6277.
The litigation and the settlement implementation are being handled by staff of Attorney General Healey’s Insurance and Financial Services Division, including Assistant Attorneys General Tiffany Bartz, Claire Masinton, and Tim Hoitink, as well as Legal Analyst John-Michael Partesotti and Civil Investigator Kristen Salera.