Reverse mortgage professionals in Illinois will soon be required to abide by the state’s new laws governing Home Equity Conversion Mortgages (HECMs) beginning January 1, 2016.
The legislation rewrites the state’s reverse mortgage law, consolidating duplicative and conflicting state laws regarding these loans. It also creates a series of protections for borrowers, including the implementation of a three-day “cooling-off” period, during which time a prospective borrower cannot be required to close or proceed with the loan.
The Reverse Mortgage Act includes certain provisions intended to ensure that seniors who are considering obtaining a reverse mortgage are better educated about their responsibilities as a borrower, while also being protected against predatory lending practices.
Under the new law, Illinois’ Office of the Attorney General can develop the content and format of educational documents that provide consumer information regarding reverse mortgages, including potential alternatives to these loans.
“Reverse mortgages 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, and this law will help us make sure that consumers are better educated and protected against predatory lending practices and scams,” a spokesperson from the Office of the Attorney General told RMD in August upon Rauner’s signing of the Reverse Mortgage Act.
For lenders working in the state, at the time of making a written commitment, they will be required under the new law to provide prospective borrowers with a document in at least 12-point font that contains a disclosure of the three-day cooling period.
Additionally, the Act states that no reverse mortgage commitment may be made unless all lenders involved in brokering and making the reverse mortgage certify, in writing, that the borrower has received from the lender the educational document prepared by the Office of the Attorney General, along with information regarding the cooling-off period.
Consumer advocacy groups in the state have applauded the passage of the Reverse Mortgage Act, praising Gov. Rauner and the legislation’s chief sponsors, Illinois Senator Jacqueline Collins and Representative Arthur Turner.
“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 of Housing Action Illinois, a organization that aims to preserve the supply of affordable and accessible housing in Illinois for low- and moderate-income households.
Written by Jason Oliva