Delayed Illinois Law Exempting Reverse Mortgages To Take Effect

Delayed legislation that has created obstacles for Illinois brokers originating certain types of reverse mortgages is set to take effect this month after being postponed for one year.

Last year, Illinois Legislature delayed the exemption of reverse mortgages from its High Risk Home Loan Act of 2003 until January 10, 2014, to better align with changes under the federal Home Ownership and Equity protection Act (HOEPA) announced by the Consumer financial Protection Bureau.

The reverse mortgage industry has since advocated for reverse mortgages to become exempt under the Illinois law. In June 2012, Illinois Legislature passed Senate Bill 1692, which exempted reverse mortgages from being included under the definition of high-cost loans.

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The changes outlined in the SB 1692 exemption, slated to take effect on January 1, 2013, were delayed by House Bill 5019. 

Slated to take effect on January 1, 2013, the changes outlined in SB 1692 were delayed for a full year by another piece of legislation: House Bill 5019.

Reverse mortgage brokers have argued that the Illinois law had made originating lower-cost loans almost impossible, as the act considered high-risk loans as those with origination fees that exceeded 5% of the total loan amount.

While the High Risk Home Loan Act excludes open-end credit reverse mortgages and Home Equity Conversion Mortgage (HECM) for Purchase loans, the law delayed the exemption of closed-end reverse mortgages until January 2014, according to the National Association of Reverse Mortgage Lenders (NRMLA).

“As a result, lenders that chose to limit reverse mortgage product offerings in Illinois in the past may choose to continue to do so until early next year,” said NRMLA in a statement January 2013. 

Written by Jason Oliva

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