Generation Adopts 'Suitability' Standard

In response to reports of abusive lending practices in the reverse mortgage arena, an Atlanta-based lender has instituted procedures to protect seniors from taking on loans that are unsuitable for their personal situations. Under Generation Mortgage's policies, products that are designed for long-term wealth accumulation for young adults or that impose surrender or withdrawal charges -- deferred annuities, for example, or long-term certificates of deposit -- are considered inappropriate. "We have an obligation to lead our industry on this important issue," said CEO Joe Morris. "Our new policy will ensure that, as in the past, no Generation customer will buy inappropriate financial products with the proceeds of his or her loan." Products that remain potentially suitable under Generation's policies are those that address the needs and risks seniors face, such as provisions for lifetime income and long-term care needs. Immediate annuities and long-term care insurance, properly designed and purchased, address these needs and risks and remain suitable choices for some seniors, the company said.