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

BOSTON – August 20, 2015 – (RealEstateRama) — 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 today.

The complaint, filed Tuesday 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.

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 variable annuities, an insurance company invests money from consumers in securities and, after several years pass, begins making periodic payments to consumers over time.

The defendants allegedly deceived consumers by failing to disclose material information about the financial products and misrepresenting the terms of the products. To carry out their scheme defendants also allegedly misrepresented information to insurance and financial companies to ensure that they would issue the products to their clients. Matthews earned commissions for each reverse mortgage he originated, and Moniz earned a commission each time he sold deferred variable annuities.

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.

Today’s complaint seeks injunctive relief, restitution for consumers – including the return of fees that senior clients paid – along with civil penalties, attorneys’ fees, and repayment of commissions.

Consumers should be aware that using funds from a reverse mortgage to invest in financial products like annuities is always risky. 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.

This matter is being handled by Assistant Attorney General Tiffany Bartz and Legal Analyst Lynda Freshman, with assistance from Legal Analyst John-Michael Partesotti, all of Attorney General Healey’s Insurance and Financial Services Division, and Civil Investigators Christine Junod and Kristen Salera.

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