Massachusetts Introduces New Reverse Mortgage Legislation

massachusetts-seal.jpgThe Massachusetts Senate has introduced new legislation to establish specific reverse mortgage requirements for borrowers and lenders.

According to S2355, lenders are not allowed to originate a reverse mortgage loan unless the borrower “affirmatively opts in writing for the reverse mortgage and has received certification from a counselor with a third¬≠party organization” and in person on the suitability of the loan.

In addition, the third party organization providing the counseling must be approved by the US Department of Housing and Urban Development and the Massachusetts Executive Office of Elder Affairs.

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If a mortgagee doesn’t obtain evidence that the borrower has completed an approved counseling program the terms of the loan shall not be enforceable.

If passed, the Commissioner of Banks shall issue guidelines or adopt regulations to administer and carry out the bill and to further define the terms used in this section said S2355.

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  • If I am not mistaken, most applications already include the form “Borrower's Acknowledgment of Disclosures” has the borrower check if “I/we would like to proceed with the origination of my/our reverse mortgage loan”…or not. Seems redundant.

    Rural borrowers may have an issue requiring face-to-face counseling. Perhaps we will see an increase of fee-based “reverse mortgage advisors”.

    • Save the HECM,

      These are not HECM issues; they are general reverse mortgage issues.

      The industry and HUD made a very, very poor decision in not maintaining the requirement that if the borrower did not meet face-to-face with a counselor, the originator must. Even though many lenders believed that this would facilitate more transactions across state lines, etc., it has also opened up the industry to further suspicion by legislators and regulators.

      The risks associated with the failure of at least one party who allegedly knows the product to meet face-to-face with the senior are high. The convenience to originators in avoiding rural communities hardly seems relevant. If exceptions are needed, it seems as if HUD would want to be involved with making that determination and tracking the number of deals each originator is requesting an exception to this requirement.

      The value of face-to-face meetings cannot be overemphasized.

  • The MA DOB thinks reverse mortgages are predatory loans. They do not understand the impact this will cause. When they switched to require counseling agencies to be approved through the executive office of elder affairs it backlogged the counseling severely before MMI worked an arrangement to have thier offices outside MA do counseling. Now with a face to face requirement it could take a month or 2 before counseling occurs. This will be interesting when pricing changes while they are waiting for counseling and you have to tell them the program is no longer available, or now they no longer qualify to pay off an existing mortgage because rates increased and may risk foreclosure if they are struggling with thier mortgage payment. Over 90% of people we encounter prefer to do counseling over the phone. The HOME program, which influences a lot of the views of the MA DOB, would rather see your 80 year old grandmother do a state work program to get a reduction on thier real estate taxes than do a reverse mortgage. This usually calculates out to minimum wage. Just what I want in retirement.

    • John,

      I agree. Some seniors cannot go to or physically an endure a meeting outside of their home. This lack of consideration is deplorable.

  • Wow. What are these legislators thinking? I just did a couple of reverse mortgages that helped two seniors avoid foreclosure. Of course I worked with them face to face, worked with their families since children would have to come off title (more than willing to do that to avoid bigger dings to their credit) and stopped the incessant phone ringing that, in both cases, was causing severe health problems. What will MA seniors do when they can't get counseling fast enough to avoid foreclosure? Does the MA legislature have the wherewithal to support seniors who lose their homes and have no where to go?
    Wow.

  • As quoted by the_Critic:

    “The industry and HUD made a very, very poor decision in not maintaining the requirement that if the borrower did not meet face-to-face with a counselor, the originator must. The risks associated with the failure of at least one party who allegedly knows the product to meet face-to-face with the senior are high.”

    Well said!

    If HUD would bring back this one requirement, the Reverse Mortgage industry would once again have a tremendous amount of accountability. Accountability that would be before the fact instead of after. It seems they want to regulate instead of educate. If a LO is required to meet face-to-face with the borrower and THEN the counseling is performed over the phone or in person at that point, even better.
    1. Then the counselors are not the only one educating the borrower.
    2. Counselors won't feel like they are doing the LO's job but instead complimenting or heaven forbid correcting it.
    3. Retention would be greater b/c the borrower is hearing it a second time.
    4. Doing the process in this order allows the borrower to ask questions of the second party (the Counselor) who is not out to make a sale.

    More checks and balances up front will certainly reduce the number of issues on the back. Take the recent GFE changes for example. They are just a different shade of gray if no one is there to explain them to the borrower when they get the loan packet in the mail. Quality control at the end of the production line is a little too late.
    jmtc

    • j_m_t_c,

      We normally discuss HECMs with prospects before counseling and get enough borrower information to be able to provide limited specific loan details but not enough borrower information that we must provide a GFE. What a mess RESPA changes have made in that regard.

  • All comments are well founded! We must speak up in Mass. The objections to phone counseling are exaggerated, unfounded and unreasonable. Phone counseling is lengthy, detailed and well explained. All of which is documented in the counselors notes, and length of session is documented on the certificate itself.
    Massachusetts faces an enormous challenge without a reasonable voice at the DOB.

  • All comments are well founded! We must speak up in Mass. The objections to phone counseling are exaggerated, unfounded and unreasonable. Phone counseling is lengthy, detailed and well explained. All of which is documented in the counselors notes, and length of session is documented on the certificate itself. rnMassachusetts faces an enormous challenge without a reasonable voice at the DOB.

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