A bill that would create consumer protections for seniors considering reverse mortgages in Illinois has passed the state legislature with bipartisan support, following a stall last week.
Sponsored by Illinois Senator Jacqueline Collins and State Representative Arthur Turner, Senate Bill 1440 will soon be sent to the desk of Illinois Governor Bruce Rauner where it will await his signature before it can be enacted into law.
The legislation, which creates the Reverse Mortgage Act, requires a three-day “cooling-off period” from the time a lender makes a written commitment to make a reverse mortgage, during which time the borrower cannot be required to close or proceed with the loan.
The bill also includes certain provisions that consolidate conflicting state laws regarding reverse mortgages to make certain definitions and terms consistent with federally-insured Home Equity Conversion Mortgages.
Advocated for Housing Action Illinois and Illinois Attorney General Lisa Madigan, the legislation includes provisions intended to ensure that seniors considering reverse mortgages are better educated about their responsibilities as a borrower, while also being protected against predatory lending practices and scams.
“We want to make sure that seniors understand that while a reverse mortgage may be a good financial decision for them, it’s not a risk-free loan,” said Bob Palmer, policy director for Housing Action Illinois. “We particularly want to make sure seniors understand all the things they need to do to avoid defaulting on the loan, such as keeping current on their property taxes and homeowner insurance.”
As part of SB 1440, the Illinois Attorney General is responsible for creating a consumer education brochure to be made available by lenders and brokers to potential borrowers.
“Reverse mortgages are complex loans that should be taken out only after a consumer has had an opportunity to carefully consider his or her financial future and consult with a qualified housing counselor,” said Madigan in a written statement.
Senate Bill 1440 is essentially the same as SB 1281, which was dubbed the Reverse Mortgage Act, as confirmed by the Attorney General’s office and Housing Action Illinois.
Written by Jason Oliva