The entire reverse mortgage industry feels the effects of changes in federal legislation, but state changes to reverse mortgage policy can have profound effects on the way business is done. While a past target of state legislation was reverse mortgage propriety product oversight, there is counseling legislation now in three states that could make face-to-face HECM counseling a growing trend.
With a new law passed in Massachusetts in August that will require face-to-face counseling for reverse mortgage borrowers who do not satisfy certain income and asset thresholds, reverse mortgage lenders in the Bay State are gearing up for change. Already mandated in North Carolina since the program’s inception, most agree that face-to-face counseling is most effective, but it undoubtedly takes more time and can introduce logistical challenges to the counseling process. Now, recent legislation may add Georgia to the list of states that will mandate in-person HECM counseling.
A bill introduced in Georgia in February nearly mimics the Massachusetts law on reverse mortgage counseling, as it includes a similar income and asset qualification, which, if not met, would require face-to-face HECM counseling. Specifically, the Georgia bill, HB 338, specifies that if the borrower fails to meet one of the following, face-to-face counseling would be required: gross income of less than 50% of the area median income; must be 62 years of age; assets excluding primary residence valued at less than $120,000 and borrower is not signing on behalf of the mortgagor unless approved by a Court Order.
In Massachusetts, where the law will take effect in 2012, one lender told RMD the new requirements are at the top of his list of concerns with regard to doing business.
While it is the best way to communicate, says George Downey, founder of Harbor Mortgage Solutions in Braintree, Mass., the timing, is not ideal.
“When you get down to the logistics of it, there are just about a dozen counselors in the Commonwealth [of Massachusetts], notwithstanding the fact you don’t have counselors available.” Downey points to transportation issues and language barriers as difficulties he has seen with face-to-face counseling in the past. “The burden backs up on the counselors. In order to get the counselors positioned, that requires funding. Clearly in this environment, there isn’t dollar one.”
Downey recalls an incident in his experience where previously required face-to-face counseling brought counseling to a halt.
“I can easily see this could add weeks or months… it also will discourage people from going into the process at all.”
Written by Elizabeth Ecker