State Lawmakers Itching to Control Reverse Mortgages

Is it more talk than action as many state lawmakers consider enacting new or additional legislation affecting reverse mortgages? According to James Milano, an attorney with the Washington, D.C. firm, Weiner Brodsky Sidman Kider, the urge to regulate may be reactionary. “State regulators may feel responsible for the subprime mortgage meltdown and don’t want to be fooled again,” he posited. Milano cites Washington State, California and Minnesota as having recently introduced bills and says “a couple of others may do something administratively.”

Further impetus may come from the fact that “government has a historically embedded role in reverse mortgages,” according to Peter Bell, president of the National Reverse Mortgage Lenders Association. That tendency could be played out in new state initiatives coalescing around “who can play – that is, loan-officer licensing, company approvals and product approvals,” he suggests.

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Bell believes there must be a “simple format that gives the senior or their family all the pertinent information they need, detail by detail. It’s there now,” he acknowledges, “but it’s buried in a thick sheaf of papers that you have to go digging through, and you’re at the mercy of your loan officer to figure them out.”

According to a notice sent out to NRMLA members, the Board discussed a strategy for handling reverse mortgage legislation pending in California, Minnesota, Arizona and Washington last week.  An email sent to NRMLA asking what the board plans on doing wasn’t returned at press time.    

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  • The real rub here is most lawmakers have little business sense….at all. Most come from a legal background as an attorney or state bureaucrat. Thus there bills are usually made in haste to garner political points and provide consumer protections. The end result is what we call “the law of unintended consequences”.

    I do agree the industry needs to clean up it’s act when it comes to standard disclosures and explanations of such items as negative amortization, the true and continuing cost of FHA insurance, estate consumption, etc. The sad reality is most originators either don’t understand or take the time to explain the finer points and disadvantages.

    However, extending the right of recision to thirty (30) days and adding extra requirements to counseling will only eliminate or restrict the reverse mortgage for seniors who need it most. No banks will ever want to issue a red cent to a borrower after the standard 3 day recision and funding knowing they can lose big if they can cancel inside of 30 days.

    Word’s every senior should be scared of…”Hi, I’m from the government and I’m here to help”.

  • Good day,

    This is one area I feel the Government needs to maintain control, NOT the states. If this is allowed to occur it will be a disaster and the industry will not be able to keep up with all the different standards states will implement. The seniors will suffer in the long run.

    We seem to either have to much control in the hands of the Government or not enough where it counts!

    Have a good day,

    John A. Smaldone

  • Gee, I wish common sense would prevail. Since the Insurance that makes the FHA HECM work to the benifit
    of all comes from the Federal Government, one would think the Feds could see the value of maintaining
    ultimate control of the Reverse Mortgage process. What it amounts to is States not wanted to lose the licensing revenue, which I understand; Thus, the new licensing procedure now taking place which all States will eventually join, I assume. I spent the $155.00 to affiliate in the National Program because I always wish to work legally, only to learn because my Company is registered in Washington State under the Comsumer Lending Law, my official Originator status is inactive. Oh, I can still legally work mind you:
    I just don’t have an active license (Crazy, isn’t it.) A better way would be to have one Federal Licensing program: Charge $50.00, $100.00, or even $200.00 per State that a loan Officer wishes to work;
    then, let the Feds send the money to the State or States. To work in all 50 States–a maximum of $10,000 perhaps (The Origination Fee of 4 minimum loans!). As far as the Application, what a rediculous hernia we now have: What Seniors really understand
    all of the contents? For that matter, what Loan Officers? The Final Documents, yes –full and complete. But the Application to start the process, no way: Just a 1003, A GFE (Which is really meaningless until an actual FHA Appraisal is completed.), and ID information. You may quarrel
    with my selections, but my point is what we have now to start the process is too overwheming for most Seniors

  • At one time, NRMLA provided us with a template for approaching federal lawmakers regarding a particular piece of pending legislation. Is there a possibility that a similar template could be provided to those of us within states with pending legislation for how to approach state legislators?

    When I try to do it on my own, . . . well let’s just say, I am not very politic in my choice of words to describe how I feel about the California bill.

    Any help?

  • to scared of politicains:

    Please read the law again. It says because of the cpmplexity of reverse mortgages. (since mortgage people don’t know how to properly answer quetionos)

    they want a 30n dya waiting period for seniors to make sure they understand what they are signing. the 30 days is from date of signing and mut be a regersted letter to cancell., since most deals take about 3 to weeks or more no big deal. secondly if they don’t want to close all they have to do is when called to close they can say they don’t want to close.

    What is worse than that they want us to have a fiducary resposable on how they spend thier money .

  • to mrreverse:

    Speak for yourself. Well trained reverse mortgage originators know how to answer questions and also know how to spell.
    I believe scared of politicians comments were right on!
    Please use spell check and write in complete sentences!

  • Traverse,

    A good point but he also missed the fact the way the proposed bill is written it would require a 30 day cancellation period after the closing docs are signed, not the application. That’s a big difference.

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