OLR Bill Analysis
AN ACT CONCERNING PROTECTIONS FOR CONSUMERS APPLYING FOR REVERSE MORTGAGES.
This bill establishes counseling and loan origination requirements that must be met before any entity, including a Connecticut bank or credit union, may accept a final and complete reverse annuity mortgage loan application or assess any fees for the mortgage. A reverse annuity mortgage allows homeowners to convert accumulated home equity into liquid assets.
The bill prohibits a reverse mortgage lender, originator, or loan servicer from compensating counseling agencies, directly or indirectly. It also requires the lenders to receive and store signed certifications from the borrower or his or her authorized representative documenting that the counseling and origination requirements were met.
A violation of the bill's requirements is an unfair trade practice (see BACKGROUND).
EFFECTIVE DATE: October 1, 2018
COUNSELING AND ORIGINATION REQUIREMENTS
The bill requires reverse mortgage lenders to inform prospective applicants of the counseling requirement and provide them with a list of at least five independent housing counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD) (see BACKGROUND).
The lenders must receive signed certifications from the prospective applicant or his or her authorized representative that:
1. he or she received counseling from a HUD-approved counselor,
2. he or she participated in a mortgage loan origination meeting, and
3. either the loan origination or counseling was done in person.
Under the bill, the counseling and loan origination certifications must be signed by the prospective applicant or the applicant's authorized representative and the counselor or originator, as applicable. They must (1) include the counseling session's or origination meeting's date and the name, address, and telephone number of both the applicant and counselor or originator and (2) specify whether the session or meeting was done in person or by telephone.
The lender must keep the certifications in an accurate, reproducible, and accessible format for the term of the loan.
SB 150, reported favorably by the Aging Committee, sets similar counseling and certification requirements.
Related Federal Laws
Federal regulation requires HUD to establish and maintain a list of reverse mortgage counselors, who must meet specified qualifications (24 C.F.R. 206.300 et seq.). Under federal law, qualified reverse mortgage counselors must discuss certain information with prospective borrowers, including:
1. other options available to the homeowner;
2. the financial implications of entering into a reverse mortgage;
3. a disclosure that a reverse mortgage may have tax consequences, affecting eligibility for assistance under federal and state programs, and have an impact on the homeowner's estate and heirs; 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 (12 U.S.C. § 1715z-20(f) and HUD Mortgagee Letter 2014-07).
Connecticut Unfair Trade Practices Act
The law prohibits businesses from engaging in unfair and deceptive acts or practices. CUTPA allows the consumer protection commissioner to issue regulations defining what constitutes an unfair trade practice, investigate complaints, issue cease and desist orders, order restitution in cases involving less than $10,000, enter into consent agreements, ask the attorney general to seek injunctive relief, and accept voluntary statements of compliance. It also allows individuals to sue. Courts may issue restraining orders; award actual and punitive damages, costs, and reasonable attorney's fees; and impose civil penalties of up to $5,000 for willful violations and $25,000 for violation of a restraining order.