After a short hiatus, the weekly legislative update is back. This week sees several significant developments within the reverse mortgage industry and beyond.
About a month after passing H.B. 792, which would regulate reverse mortgages in Louisiana, the House of Representatives passed H.B. 1468. The bill is a revised version of H.B. 792, without 30-day right of rescission or fiduciary liability contained in the original bill. The changes come after NRMLA worked with the bill’s sponsors to create an alternative to the original legislation.
H.B. 1468 also requires the first page of any mortgage securing a reverse mortgage loan to contain the statement “This mortgage secures a reverse mortgage loan” in 10-point boldface type. The bill still contains a cross-selling provision, prohibiting the reverse mortgage lender from entering into any agreement that would require the borrower to purchase long term care insurance, an annuity, or an investment before the loan has closed and the right of rescission has passed, if one applies.
A reverse mortgage lender may not pay counseling fees for the borrower without first disclosing in writing that this may constitute a conflict of interest. Finally, at least seven days prior to the closing of the reverse mortgage loan, the lender must provide the borrower with a loan sheet or commitment letter informing the borrower of the terms of the loan and letting the borrower know that they are not obligated to proceed with the transaction.
The bill also includes a list of seven items a reverse mortgage lender must discuss with the prospective borrower. This list includes the borrower’s ability to refinance alternative living arrangements, the borrower’s ability to finance routine or catastrophic home repairs, and alternative options to a reverse mortgage. H.B. 1468 is currently waiting to be introduced in the State Senate.
Meanwhile, the U.S. Senate added several amendments to S 3217 yesterday, the Restoring American Financial Stability Act sponsored by Senate Banking Committee Chairman Senator Chris Dodd (D-CT). These include an amendment by Senator Jeff Merkley (D-OR) that bans mortgage lenders from accepting payments based on the interest rate or other terms of the loan, and an amendment by Senator Olympia Snowe (R-ME) that exempts small businesses from the Consumer Financial Protection Agency (CFPA).
Written by Reva Minkoff