Connecticut Seal

General Assembly

File No. 296

    February Session, 2018

Senate Bill No. 395

Senate, April 5, 2018

The Committee on Banking reported through SEN. WINFIELD of the 10th Dist. and SEN. MARTIN of the 31st Dist., Chairpersons of the Committee on the part of the Senate, that the bill ought to pass.

AN ACT CONCERNING PROTECTIONS FOR CONSUMERS APPLYING FOR REVERSE MORTGAGES.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. (NEW) (Effective October 1, 2018) (a) No entity, including, but not limited to, any Connecticut bank or Connecticut credit union, as defined in section 36a-2 of the general statutes, shall accept a final and complete application for a reverse annuity mortgage loan, as defined in section 36a-265 of the general statutes, or assess any fees for such mortgage, unless such entity has:

(1) (A) Informed the prospective applicant of the counseling requirement in subdivision (2) of this subsection, and (B) provided the prospective applicant with a list of at least five independent housing counseling agencies approved by the United States Department of Housing and Urban Development to engage in reverse annuity mortgage loan counseling, as provided in 24 CFR 206.300 et seq., as amended from time to time. No such counseling agency shall receive any compensation, either directly or indirectly, from the lender or from any other person or entity involved in originating or servicing the loan;

(2) Received a certification signed by (A) the prospective applicant or the prospective applicant's authorized representative, and (B) a counselor from an independent housing counseling agency, as described in subdivision (1) of this subsection, that the applicant has received reverse annuity mortgage loan counseling from such counselor. Such certification shall (i) specify whether the counseling session was conducted in person or by telephone, and (ii) include the date of the counseling session, and the name, address and telephone number of both the applicant and the counselor;

(3) Received a certification of the reverse annuity mortgage loan origination signed by (A) the prospective applicant or the prospective applicant's authorized representative, and (B) the reverse annuity mortgage loan originator. Such certification shall (i) specify whether such origination was conducted in person or by telephone, and (ii) include the date of the loan origination meeting, and the name, address and telephone number of both the prospective applicant and the loan originator; and

(4) Received a certification pursuant to subdivision (2) or (3) of this subsection that indicates either: (A) The reverse annuity mortgage loan counseling session, or (B) the reverse annuity mortgage loan origination was conducted in person.

(b) The lender shall maintain any certification described in subsection (a) of this section in an accurate, reproducible and accessible format for the term of the reverse annuity mortgage loan.

(c) A violation of the provisions of this section shall be deemed an unfair or deceptive act or practice in the conduct of trade or commerce pursuant to subsection (a) of section 42-110b of the general statutes.

This act shall take effect as follows and shall amend the following sections:

Section 1

October 1, 2018

New section

BA

Joint Favorable

 

The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.


OFA Fiscal Note

State Impact: None

Municipal Impact: None

Explanation

The bill expands requirements for reverse annuity mortgages by adding protections for consumers. It is anticipated that there will be few complaints regarding reverse annuity mortgages to be acted upon by the Department of Banking and, therefore, the bill is not anticipated to result in a fiscal impact to the state.

The Out Years

State Impact: None

Municipal Impact: None

OLR Bill Analysis

SB 395

AN ACT CONCERNING PROTECTIONS FOR CONSUMERS APPLYING FOR REVERSE MORTGAGES.

SUMMARY

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:

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.

BACKGROUND

Related Bill

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:

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.

COMMITTEE ACTION

Banking Committee

Joint Favorable

Yea

19

Nay

0

(03/20/2018)

TOP