The National Reverse Mortgage Lenders Association (NRMLA) is working with legislators in Connecticut to address concerns regarding a bill that would mandate in-person counseling, the association announced Friday.
Connecticut legislators are considering a bill (HB 5651) that would mandate face-to-face counseling and implement a seven-day cooling off period between the completion of counseling and the completion of a reverse mortgage application.
The purpose of the proposed bill is “to implement the recommendations of the reverse mortgage task force to protect elderly homeowners from financial harm and unfair deceptive marketing of reverse mortgages,” the proposed bill says.
However, reverse mortgage industry members say face-to-face counseling mandates only hurt those borrowers who are unable to travel in person due lack of transportation, health or other restraints.
NRMLA Co-Chairman Joe DeMarkey testified on NRMLA’s behalf at a hearing last week before the Banking Committee in the Connecticut General Assembly. Massachusetts home equity conversion mortgage (HECM) counselor Tony Lopes testified on behalf of the reverse mortgage counseling community.
DeMarkey is also a principal member of Bloomfield, N.J.-based Reverse Mortgage Funding, and Lopes serves as housing director at Agawam, Mass.-based Cambridge Credit Counseling Corporation.
There are currently four HUD-approved counseling agencies in Connecticut and only four HECM counselors, according to research conducted by NRMLA.
With the four agencies covering only three of eight counties, the state faces a “severe capacity issue,” Lopes tells RMD.
“With only four agencies in Connecticut many seniors will be stripped of the choice to be counseled by phone and have to drive long distances to complete counseling,” he says.
Face-to-face mortgage counseling legislation is in effect in the state’s northern neighbor, Massachusetts. In October of last year, Massachusetts reverse mortgage lenders and counseling agencies rallied to delay face-to-face counseling, which became effective Aug. 1, 2014. Later, a legislative amendment to relieve problems that arose over implementation was filed. It was approved by the Massachusetts House of Representatives and the Massachusetts Senate, but failed to be accepted by the state’s governor before the legislative session ended.
“Numerous difficulties for seniors seeking counseling arose, including extended wait times due to inadequate counseling capacity, increased counseling costs, and the inability to travel to counseling offices,” says George A. Downey, founder and reverse mortgage specialist at Braintree, Mass.-based Harbor Mortgage Solutions, about the negative impact mandatory face-to-face counseling has had on the industry in Massachusetts.
In other states where face-to-face counseling is mandated, there is an “opt out” option (in California) and a hardship exemption (in North Carolina). These essentially allow prospective borrowers to choose to receive counseling over the phone or in person, he says.
“There is no opt out feature in Massachusetts,” Downey says. “Our seniors’ interests are being compromised. It’s a very toxic measure.”
As it stands, the proposed law in Connecticut does not provide for a type of opt out provision.
Written by Cassandra Dowell