Attorney general settles with reverse mortgage broker accused of misleading elderly

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.

READ MORE IN THE BOSTON GLOBE

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.

READ MORE IN THE BOSTON GLOBE