Dear Governor Pawlenty, Please Veto Reverse Mortgage Bill

From the time I first heard about the proposed reverse mortgage legislation in 2009, SF489, I have been writing to and in contact with MN Governor Pawlenty’s office. This year even prior to having details of the bill I started contacting Governor Pawlenty’s office, sending emails regarding the suspected legislation. After Friday evening May 14, 2010 when I finally found the details of the bill SF2430 I again sent Governor Pawlenty a message requesting a veto this time outlining with the details of the issues of the bill. Following is the latest letter I sent to him requesting a veto.

Dear Governor Pawlenty,

After having time to review the reverse mortgage amendment to SF2430/HF2699 I want to provide the reasons why this reverse mortgage legislation should be vetoed.


Besides the facts I have pointed out previously:

  • This bill has not been transparent – the amendment was just added on the afternoon of May 14, 2010 with no prior knowledge of the details to those of us in the reverse mortgage industry.
  • This reverse mortgage legislation is controversial. Any reverse mortgage legislation should not happen without a full hearing.
  • While it appears they pulled the language of suitability, this bill still contains some of the same language as the 2009 SF489/HF528 which was vetoed last year which would mean increased costs to reveres mortgage borrowers and/or cause some lenders to refrain from offering reverse mortgages in Minnesota. The main issues include:

1. Why should a lender receive a civil penalty an dhave to pay $1,000 for something a counselor does or doesn’t do? Who and how is this going to be overseen?

The language of this is subjective setting up an opportunity for litigation and lenders may decide not to lend in the state if there is a risk of civil penalty for something they have no control over.

  • Implementing state laws that are different than the HUD requirements will make it more difficult for prospective borrowers to receive counseling. Some of the counseling opportunities currently available to our Minnesota borrowers will no longer be an option as some of the counseling agencies may decide that with different regulations they will not provide counseling in the state.
  • Having the state oversee counseling different than the HUD requirements is likely to be costly for the state in seeing that these regulations are followed by counselors in the state as well as across the country.

2. Adding the language for Lender default and forfeiture may mean lenders will choose not to loan with this requirement and HUD may choose not to insure the loans with these requirements.

3. Seven-day cooling off period; right of rescission will mean the loans will be more expensive for seniors and without the opportunity to waive the provision under certain circumstances such as foreclosure may mean that seniors could lose their home because the reverse mortgage could not be done timely.

  • It appears they changed the 10-day rescission period language to a seven-day cooling off period but it would have the same negative consequences as the 10-day rescission period.
  • Language is vague and subjective, i.e. “written commitment to make the reverse mortgage loan. “ What does “written commitment” mean? This makes it more likely for litigation.

4. This law would be additional costs to the state.

Read the rest of her letter here.

Written by Beth Paterson

Patterson is Executive Vice President of Reverse Mortgages SIDAC

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  • The provisions in the bill as passed are a result of a long series of ongoing conversations between various industry representatives and MN lawmakers. They represent a compromise that is well-intentioned and practical.

    Most of the provisions adopted have been crafted to provide the protections for seniors that lawmakers seek, yet follow procedures that have been successfully implemented elsewhere. For example, the commitment letter and seven-day cooling off period have been used in Massachusetts for several years now with no adverse impact on seniors or the industry. It is very different and far less problematic than a ten-day rescission would have been. The same provision was enacted in Maryland a few months ago and is pending in Louisiana.

    There might be additional costs to the state to administer this law. There always are costs to a state in administering a new law. Obviously, legislators feel this is necessary enough to be willing to make an investment in protecting seniors.

  • It would seem that yet again, NRMLA is in the business of serving large national banks instead of the little guys who make up the real heart of this industry. Why are they defending these laws that do nothing to help the seniors?

  • The reverse mortgage industry should deliver a unified voice to the governor. There seems to be a conflict between Beth Paterson's post and Peter Bell's response.

    We really don't want to look like the Keystone Kops here…

  • The reverse mortgage industry should deliver a unified voice to the governor. There seems to be a conflict between Beth Paterson’s post and Peter Bell’s response. nnWe really don’t want to look like the Keystone Kops here…

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