OLR Bill Analysis
AN ACT PROVIDING PROTECTIONS FOR CONSUMERS APPLYING FOR REVERSE MORTGAGES.
This bill expands the requirements for reverse annuity mortgages. A reverse annuity mortgage allows elderly homeowners to convert accumulated home equity into liquid assets.
The bill establishes counseling requirements that must be met before any entity, including Connecticut banks and credit unions, may (1) accept a final and complete reverse annuity mortgage loan application or (2) assess any fees for such a mortgage.
It also requires reverse mortgage lenders to receive and store a signed certification from the borrower or his or her authorized representative that the counseling requirements were met.
The bill (1) prohibits a reverse mortgage lender, originator, or loan servicer from compensating counseling agencies and (2) specifies that any violation of the counseling and certification provisions is a violation of the unfair trade practices law.
EFFECTIVE DATE: October 1, 2016
COUNSELING AND CERTIFICATION REQUIREMENTS
The bill requires reverse mortgage lenders to:
1. inform prospective applicants of the counseling requirement and provide them with a list of five independent housing counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD) (See related federal laws in BACKGROUND);
2. receive a signed certification from the prospective applicant or his or her authorized representative that (a) he or she received counseling from a HUD-approved agency and (b) either the loan origination or the counseling was done in person; and
3. keep the certification in an accurate, reproducible, and accessible format for the term of the loan.
The bill specifies that if the counseling session is not held in person, it must be conducted by telephone.
Under the bill, the counseling certification must include the meeting or counseling date and the name, address, telephone number, and signature of the (1) prospective applicant and (2) the counselor or loan originator, accordingly. (The bill does not prescribe a uniform certification form.)
Related Federal Laws
Federal regulation requires HUD to establish and maintain a list of reverse mortgage counselors. The counselors must meet specified qualification standards and follow uniform counseling protocol (24 CFR § 206.300, et seq.). Under federal law, qualified reverse mortgage counselors must discuss certain information with prospective mortgagors, including:
1. other options available to the homeowner;
2. the financial implications of entering into a reverse mortgage;
3. disclosure that a reverse mortgage may have tax consequences, affect eligibility for assistance under federal and state programs, and have an impact on the estate and heirs of the homeowner (12 USC § 1715z-20(f)); and
4. the requirement that a non-borrowing spouse obtain ownership of the property or other legal right to remain in the house after the death of the last surviving mortgagor (HUD Mortgagee Letter 2014-07).
Joint Favorable Substitute