Bank of America announced that it’s suspending the origination of the fixed rate HECM product in Illinois. According to the company’s statement, they have reviewed its current policies and procedures as they relate to a law unique to the state of Illinois called the Illinois High Risk Home Loan Act (HRHLA).
HRHLA applies to all closed end loans and requires lenders to compute the ratio of closing costs to loan amount or, in the case of a reverse mortgage, principal limit, in an effort to identify high-cost loans.
For the purposes of the HRHLA, closing costs which exceed 5% of the principal limit are considered high-cost said a statement from Bank of America. So by nature, a reverse mortgage will eclipse this threshold in most scenarios.
As far as other lenders, Generation Mortgage told RMD that it has never offered the HECM fixed in Illinois for the same reason Bank of America is suspending the product. Typically, when a lender the size of Bank of America does something others start to follow suit.