Florida Senator Mike Fasano recently introduced Senate Bill 1532 to provide specific requirements for reverse mortgage loans. According to the bill analysis, the provisions proposed would impact proprietary reverse mortgage programs not following the HECM provisions (e.g., disclosure and counseling).
Fasano told Tampa Bay Online "My primary concern is that not one senior citizen be taken advantage of by an unscrupulous lender of reverse mortgages”.
"Reverse mortgages can be a very good product when sold by reputable lenders to properly educated borrowers," Fasano added. "In the hands of unscrupulous people it could be a nightmare for a borrower."
The bill provides the following additional consumer protections for reverse mortgages through a mortgage broker loan regulated under ch. 494, F.S.:
- Counseling — Requires a lender to provide a borrower with a list of at least five HUD-approved counseling agencies; requires counseling session to include information regarding the financial implications of a reverse mortgage loan and other options, and prohibits a lender from accepting a final application or collecting any fees from a prospective borrower until the borrower has completed such counseling.
Cross Selling — Prohibits a lender from requiring an applicant to purchase an insurance or other similar financial product (excluding title insurance or hazard, flood, or other peril insurance) as a condition of obtaining a reverse mortgage.
Disclosures — Requires the lender to provide a disclosure in plain language to the borrower, prior to the loan closing, the terms and conditions of the loan, such as the interest rate, the term of the loan, schedule of payments, and conditions under which repayment is triggered.
Fees — Requires reverse mortgage loans to comply with all applicable state and federal standards.
In addition, the bill would require potential borrowers to be at least 62 years of age. If the bill is passed and made law, it would take effect July 1, 2010.