Last week the US Department of Housing and Urban Development released data showing the number of borrowers unable to make their mortgage modification payments nearly doubled in March. In addition, several pieces of reverse mortgage legislation were discussed at the state level.
Louisiana HB792, which provides for the regulation of reverse mortgages, was considered on Tuesday and assigned to the House Commerce Committee. The majority of the bill follows the same guidelines as the HECM program, with several exceptions. These include a 30 day right of rescission, and the requirement that borrowers receive a list of all counselors in the state. It also notably requires that reverse mortgage lenders “act in the best interest of the elder, with the utmost care, honesty, and undivided loyalty, diligence, and good faith towards the elder…”
The Maryland Bill states that federally insured HECMs must abide by federal regulations, but if the reverse mortgage is privately insured, it does not need to abide by those regulations, including the $6,000 origination fee limit, maximum claim amounts or government insurance requirement. In addition, reverse mortgage lenders are not explicitly required to offer any particular payment plan in conjunction with reverse mortgage loans.
Cross-selling is prohibited by the bill, which forbids a lender from requiring a borrower to purchase an annuity, a long-term care policy or other financial or insurance product as a condition to obtaining a reverse mortgage loan, except for title insurance, flood insurance, and other catastrophe insurance as required for a reverse mortgage loan to be transacted in accordance with federal guidelines. A borrower may also not be referred by a lender to anyone for the purchase of an annuity or other financial or insurance product until the loan is closed and the period of rescission has ended, with the exception of title insurance, hazard insurance, and “other products that are customary under a reverse mortgage loan.”
The bill was sent to Governor Martin O’Malley for his signature.
Written by Reva Minkoff