New Rule Proposed to Protect Seniors Obtaining Reverse Mortgages

Dennis Norman

Reverse mortgages have become increasingly popular over the past few years with seniors that find themselves with a large amount of equity in their home, but short on cash, or struggling to pay for the upkeep of the home, property taxes, insurance or other living expenses.   A reverse mortgage allows people in that situation to pull the equity from their home in a lump sum, monthly payments or just as they need it.

Unfortunately some seniors have gone the route of a reverse mortgage without fully understanding all the terms and costs of the loan as well as many have been preyed upon or taken advantage of to invest the proceeds into a financial or insurance product offered by the company doing the reverse mortgage.

To address this and protect consumers obtaining a reverse mortgage, the Federal Reserve has proposed a change to Regulation Z to help consumers better understand these rather complex loans.  Under the new rule lenders would be required to:

  • Provide a new, two-page disclosure at time of application which highlights in simple language the basic features and risks of reverse mortgages.
  • Provide transaction-specific disclosures to the borrower within 3 days of application reflecting the actual terms of the reverse mortgage being offered.
  • Provide final disclosures, similar to the above, to the borrower at least 3 days prior to closing to allow the borrower the opportunity to compare the final disclosure to the initial disclosure.
  • Ensure that their advertisements for reverse mortgages are accurate and balanced.  For example, if an ad states that a reverse mortgage “requires no payments” it must also clearly disclose the fact that borrowers must pay property taxes and required insurance.

In addition, to protect consumers from unfair practices related to reverse mortgages, the proposal would:

  • Prohibit lenders from, as a condition of the reverse mortgage loan, requiring a borrower to purchase another financial or insurance product (such as annuities or long-term care insurance).
  • Require that a consumer receive counseling about reverse mortgages before any non-refundable fee can be imposed (except a fee for the counseling itself) or the loan can by close.
  • Prohibit creditors from steering customers to specific reverse mortgage counselors or compensating counselors or counseling agencies, to ensure that the counseling is unbiased.

Finally, a consumer generally has three business days after closing to rescind certain home-secured loans, but this right may be extended for up to three years if the lender fails to provide the consumer with certain disclosures or the notice of the right to rescind.  The proposed revisions would:

  • Simplify and improve the notice of the right to rescind provided to consumers at closing.
  • Revise the list of disclosures that, if not properly made, can trigger an extended right to rescind.
  • Clarify lender’s obligations when the extended right to rescind is asserted.
Print Friendly, PDF & Email

13 comments to New Rule Proposed to Protect Seniors Obtaining Reverse Mortgages

  • Outstanding post, I believe people should learn a lot from this web site its really user friendly.

  • seo

    … [Trackback]

    […] Information on that Topic: stlouisrealestatenews.com/financing/new-rule-proposed-to-protect-seniors-obtaining-reverse-mortgages/ […]

  • Great V I should certainly pronounce, impressed with your web site. I had no trouble navigating through all tabs as well as related info ended up being truly easy to do to access. I recently found what I hoped for before you know it at all. Reasonably unusual. Is likely to appreciate it for those who add forums or something, website theme . a tones way for your client to communicate. Excellent task..

  • … [Trackback]

    […] Find More Info here to that Topic: stlouisrealestatenews.com/financing/new-rule-proposed-to-protect-seniors-obtaining-reverse-mortgages/ […]

  • … [Trackback]

    […] Read More Info here on that Topic: stlouisrealestatenews.com/financing/new-rule-proposed-to-protect-seniors-obtaining-reverse-mortgages/ […]

  • Please let me know if you’re looking for a article writer for your weblog. You have some really great articles and I believe I would be a good asset. If you ever want to take some of the load off, I’d really like to write some content for your blog in exchange for a link back to mine. Please send me an email if interested. Thank you!

  • … [Trackback]

    […] Read More Info here on that Topic: stlouisrealestatenews.com/interest-rates-financing/financing/new-rule-proposed-to-protect-seniors-obtaining-reverse-mortgages/ […]

  • very good submit, i definitely love this website, carry on it

  • … [Trackback]

    […] There you can find 78385 additional Information to that Topic: stlouisrealestatenews.com/financing/new-rule-proposed-to-protect-seniors-obtaining-reverse-mortgages/ […]

  • An outstanding share! I’ve just forwarded this onto a colleague who had been conducting a little homework on this. And he in fact bought me dinner simply because I found it for him… lol. So allow me to reword this…. Thank YOU for the meal!! But yeah, thanks for spending time to discuss this issue here on your blog.|

  • … [Trackback]

    […] Read More on that Topic: stlouisrealestatenews.com/financing/new-rule-proposed-to-protect-seniors-obtaining-reverse-mortgages/ […]

  • … [Trackback]

    […] Read More here on that Topic: stlouisrealestatenews.com/financing/new-rule-proposed-to-protect-seniors-obtaining-reverse-mortgages/ […]

  • Great wordpress blog here.. It’s hard to find quality writing like yours these days. I really appreciate people like you! take care

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>