Last week, the U.S. Senate passed H.R. 3221, the Housing and Economic Recovery Act of 2008, which provides measures to shore up Fannie Mae, Freddie Mac and the Federal Home Loan Banks, and provides relief to thousands of homeowners facing foreclosure. More importantly for the insurance industry, Section 2122(a)(3) prohibits originators of reverse mortgage loans guaranteed or backed by the Federal Housing Administration from selling insurance, annuities or other types of financial or insurance products to senior citizens without the involvement of independent third parties.
The American Bankers Association (the “ABA”) and the American Council of Life Insurers (the “ACLI”), while expressing support for anti-tying provisions, argued that the prohibition would prevent senior citizens from getting the insurance products they want or need when they refinance their homes with reverse mortgages originated by banks and mortgage companies.
The ABA and ACLI’s lobbying efforts, however, were unsuccessful, and the President signed H.R. 3221 into law on July 30, 2008. Both ABA and ACLI have indicated that they plan to work closely with the U.S. Department of Housing and Urban Development as it develops regulations to implement the provision.
Click here for a copy of the bill (Note: the relevant section begins on Page 459).