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Attorney general settles with reverse mortgage broker accused of misleading elderly

Dolores Rush of Quincy complained to the attorney general after a financial planner convinced her to get a reverse mortgage without explaining the high costs.Jenifer McKim/The Eye

Dolores Rush of Quincy wishes she never obtained a reverse mortgage on her three-bedroom family home. She and her now-deceased husband had paid off their conventional mortgage and had no debts.

But she said a financial adviser persuaded the retired couple in 2009 to take out a $250,000 loan against the value of their home and funnel the money into investments — without explaining the financial repercussions, including $17,000 in closing costs alone. When monthly statements revealed that the Rushes were sinking further into debt, she called the state attorney general’s office for help.

“It’s like borrowing from Peter to pay Paul,’’ said the sprightly 74-year-old. “There are so many things they don’t tell you.”


Rush’s complaint spurred a state investigation into alleged collusion between a Massachusetts mortgage broker and an insurance agent and serves as a warning, state regulators say, about the perils of obtaining a complicated reverse mortgage.

Attorney General Maura Healey said last week that she had obtained a $137,500 settlement with the two men — James Moniz and Daniel Matthews — to discharge claims they colluded to profit from “risky financial transactions” that involved funneling reverse mortgage proceeds into other investments.

Reverse mortgages are meant to help people 62 and older “age in place” by giving them cash from the equity in their homes. Borrowers typically receive a loan or a line of credit, in a lump sum or in monthly payments. They are allowed to defer payments on the debt until they die, move away, or fail to pay taxes and insurance. Proceeds from the sale of the property can be used to pay off the loan.

Healey said people should be wary about using funds from the home loans to buy financial products like annuities, which provide investors with steady dividends over time. First, the costs of the reverse mortgage can more than offset the income from the annuity. Also, annuities pose other risks because there can be steep financial penalties for withdrawing funds ahead of time, according to the state’s lawsuit.


“These defendants took advantage of elderly homeowners who spent decades building equity in their homes,” Healey said.

Moniz and Matthews admitted no wrongdoing. But the agreement focuses added attention on reverse mortgages, which for the most part are insured by the US Department of Housing and Urban Development, with nearly 636,000 active loans across the United States. There’s been a growing momentum among some financial advisers to market reverse mortgages to people with more financial means as part of an overall retirement strategy.

But the growth of reverse mortgages has been marred by deceptive practices, scams, and foreclosures. In December, the Consumer Financial Protection Bureau took action against three companies for deceptive advertising, claiming the groups falsely said homeowners could not lose their properties while they have reverse mortgages. Lenders can foreclose if owners don’t pay their property charges or maintain their properties.

In California last month, a woman was sentenced to a year in prison for allegedly stealing $117,000 from a 74-year-old man as part of a reverse mortgage scam.

HUD in 2008 instituted a requirement that reverse mortgage brokers not work with other investment or insurance groups. That was done “to insulate seniors from unscrupulous brokers who would use the reverse mortgage platform to sell them products they don’t need,” said HUD spokesman Brian Sullivan.


To better educate homeowners, the industry organization, the National Reverse Mortgage Lenders Association, published an online guide in November. Among the recommendations, the pamphlet says, “It is never recommended that reverse mortgage borrowers use their loan proceeds to speculate on real estate or securities.”

Rush said that she and her husband, a firefighter and bricklayer, went to Moniz, who billed himself as a financial adviser, to make sure they were set for retirement.

She said Moniz persuaded them to take out a $250,000 loan from their home and funnel it into a $100,000 annuity and a $150,000 investment account. They didn’t understand, she said, how costly the home loan would be — including mounting debt each month as the mortgage increased with interest and fees.

“They don’t tell you about the high fees,” she said.

In 2015, the attorney general’s office filed suit in Suffolk Superior Court against Moniz, Matthews, and Matthew’s employer, Norwell-based Direct Finance Corp., seeking restitution as well as civil penalties.

They claimed the defendants failed to disclose details of the mortgage and insurance products — a “toxic mix of financial obligations” — and that they were paid commissions.

In the March settlement, Moniz and Matthews agreed they would not blend their products — Moniz would not associate with mortgage brokers to market reverse mortgages, and Matthews would not “voluntarily” refer clients to financial advisers or market insurance or investment products.

Moniz could not be reached for comment.

Matthews said that he did nothing wrong and never pushed clients to funnel mortgage proceeds into other investments. He said the Rushes were counseled about the financial details of a reverse mortgage and knew what they were getting into. He released affidavits from clients who said they were happy with his service and clear on the costs of a reverse mortgage. He also released records showing that Moniz paid the entire settlement to the state.


“We don’t tell people what to do with their money,’’ Matthews said.

Alain Valles, president of Direct Finance Corp., could not be reached for comment. On its website, the company advertises the reverse mortgage as a “tax-free loan” that can be used to pay bills, taxes, and vacations.

In a settlement with the attorney general, John Hancock Life Insurance Co. in 2014 agreed to refund seniors more than $550,000 to settle allegations it had failed to supervise Moniz, who sold “unsuitable” annuities and life insurance policies.

Moniz was terminated in 2013 after an internal investigation, according to a John Hancock spokeswoman.

Rush said that, in the end, she was able to repay the home loan to get out of the reverse mortgage. She’s eager to warn others to avoid her troubles.

“We were just your average American, ‘Joe Schmo,’ and we wanted to make sure everything was OK, and they took us for a nice big ride,’’ she said. “Initially I was scared. Then I was angry.”

The Eye is the online news site of the New England Center for Investigative Reporting, based at Boston University and WGBH Public Radio. Jenifer McKim can be reached at