Connecticut lawmakers this week advanced a bill that would introduce new requirements for reverse mortgage lenders in the state.
The state senate on Tuesday unanimously passed S.B. 150, which would prevent lenders from accepting applications for Home Equity Conversion Mortgages unless they clearly explained the pre-loan counseling requirements, provided a list of Department of Housing and Urban Development-approved counselors, and received a signed form attesting that the counseling process had been completed.
Lenders would then be required to retain a copy of the letter, signed by both the borrower and the counselor, for the duration of the loan.
The Associated Press first reported on the passage of the bill.
Should lenders run afoul of the law, they would then be in violation of the state’s unfair or deceptive trade practice laws. Under those statutes, Connecticut’s consumer protection commissioner can issue cease and desist orders, seek restitution, and impose penalties of up to $5,000 for “willful violations.”
The bill was introduced by state Sen. Douglas McCrory, a Democrat, and State Sen. Kevin Kelly, a Republican.
The proposal now goes to the state’s House of Representatives for further approval.
The Connecticut state senate last year passed a similar bill, which some lawmakers at the time noted was “redundant”; HUD already requires all potential borrowers to undergo counseling as a condition of taking out a HECM.
Martin Looney, president pro tempore of the state senate, told the Associated Press that he’s received multiple reports of “reverse mortgage lenders preying on seniors in Connecticut.”
Written by Alex Spanko