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New Bill Could Bring Fixed Rate Reverse Mortgages Back to Illinois

A Senate bill introduced in Illinois amends the High Risk Home Loan Act (HRHLA) to specify that high risk home loans do not include reverse mortgagesincluding those under programs regulated by the Federal Housing Administration.

Currently, the HRHLA applies to all closed end loans and requires lenders to compute the ratio of closing costs to loan amount or, in the case of a reverse mortgage, principal limit, in an effort to identify high-cost loans. Closing costs which exceed 5% of the principal limit are considered high-cost and as a result, some lenders have stopped offering fixed rate reverse mortgages in the state.

The new bill, SB 1846, introduced by Sen. Terry Link in February, includes an amendment which “Provides that ‘high risk home loan’ does not include a loan for reverse mortgage financing of residential real estate, including under programs regulated by the Federal Housing Administration (FHA),” according to its contents.

The bill was assigned to Financial Institutions and a hearing is scheduled for March 10, 2011.

See SB 1846.

Written by Elizabeth Ecker