A proposed reverse mortgage bill is making its way through the Illinois legislature and has most recently passed through the State Senate last week.
The Reverse Mortgage Act, or SB1281, was referred to the House Rules Committee on April 29. The bill notes a three-day cooling-off period and amends the Illinois Act on the Aging in regard to its role in reverse mortgages.
A bill summary details the proposed legislation, including a statement that the state’s department on aging must make on reverse mortgage loans:
“…the statement shall provide independent consumer information regarding the potential benefits and risks associated with non-recourse reverse mortgages, potential alternatives to non-recourse reverse mortgages, and the availability of independent counseling services, including services provided by nonprofit agencies certified by the federal government to provide required counseling for non-recourse reverse mortgages insured by the federal government.”
Additionally, the legislation details a proposed three-day cooling off period for all Illinois borrowers.
“The purpose of this requirement is to provide potential borrowers with three business days to consider their decision whether to secure a reverse mortgage or not,” the bill says. “Potential borrowers may want to seek additional information and an analysis of the commitment from a reverse mortgage counselor during this 3-day period.”
According to the bill, the Department of Aging has the power and duty to develop the content and format of a statement regarding non-recourse reverse mortgage loans under a specified provision of the Illinois Banking Act.
The Office of the Attorney General must develop content for two documents regarding reverse mortgage loans for the purpose of consumer education.
The bill also specifies that those seeking a home equity conversion mortgage (HECM) will be required to receive counseling from a federally approved counselor prior to applying for the loan—a requirement that already applies to all reverse mortgage borrowers. Counseling can be done in-person or over the phone, as is the case in the majority of states.
The proposed bill comes on the heels of proposed and finalized reverse mortgage legislation that enacts cooling-off periods in other states.
In Connecticut, a proposed bill would implement a seven-day cooling off period between the completion of counseling and the completion of a reverse mortgage application. As of Jan. 1 in California, a week-long cooling off period is already in effect.
View the Illinois bill here.
Written by Cassandra Dowell