After weeks of debate, the Senate approved landmark financial reform legislation by a vote of 59 to 39 late Thursday evening.

Lead by Sen. Christopher J. Dodd (D-CT.), the bill would create a new consumer protection watchdog housed at the Federal Reserve, establish oversight of the vast derivatives market and give the government power to wind down large, failing financial firms.

The reverse mortgage amendment proposed by Sen. Claire McCaskill (D-MO) designed to protect seniors from predatory lending abuses wasn’t included in the final version of the bill.

While the industry agrees with the concept and concerns of McCaskill’s amendment, it would have eliminated the reverse mortgage as a possible solution for seniors at the very time they may need it the most said Peter Bell, President of the National Reverse Mortgage Lenders Association in a letter that was hand delivered to members of the Senate Banking Committee earlier this week.

The amendment called for a so-called “determination of suitability” – essentially a spool of red tape that requires lenders to determine several unknown facts about the potential borrowers and their heirs said Bell.  These requirements would’ve made it all but impossible for a lender to provide reverse mortgages to seniors.

“The onerous requirements would require lenders to determine such things as how long a borrower would remain in the home, whether their heirs have the financial capacity to pay off the reverse mortgage loan and whether the homeowner faces a reduction in government benefits as a result of securing a reverse mortgage,” he said.  ”It also subjects banks to vague advertising requirements that appear to be far more Draconian than those required for other loan vehicles, such as variable-interest mortgages.”

Bell said its members pledge to continue to work with Congress to address concerns about reverse mortgages and make the product an even better choice for our nation’s seniors.

The legislation must now be reconciled with a House reform bill passed in December and then pass both the House and Senate.  The amendment could show up during the conference, but reports from Washington say its unlikely as most want to get the bill through to the President.