PROVIDENCE – The state Senate has approved legislation that would make it it mandatory for all individuals attempting to obtain a reverse mortgage loan to complete a counseling program approved by the U.S. Department of Housing and Urban Development.
The counseling required under the legislation – 2008-S 2598A, sponsored by Sen. David E. Bates, D-Barrington – would cover a variety of issues, including the financial implications of entering into a reverse mortgage and a disclosure that a reverse mortgage may have tax consequences, affect eligibility for assistance under federal and state programs and may affect the homeowner’s estate and heirs.
“The old saying is that if it sounds too good to be true, it probably is,” said Bates. “Reverse mortgages, which are FHA insured, can be good and just what certain individuals need. But we cannot allow senior homeowners to rush out and get a reverse mortgage based on a TV ad without knowing all the facts and figures and potential future implications.
“We owe it to our senior homeowners to provide a means to protect them, and we believe requiring a comprehensive counseling program will allow them to make an informed decision,” Bates said.
“Many elderly homeowners, who have owned their home for a long time, are literally sitting on money, in the form of equity, that they could put to good use,” said Sen. William A. Walaska, D-Warwick, who co-sponsored the bill. “I am sure that the children of these individuals would prefer to have their parents use the equity in their home to make their lives easier now, rather than leaving their children a larger estate when they have passed away. But no loan agreement, for whatever amount of money, should be entered into without full understanding of the costs and other ramifications.”
The legislation – introduced by Bates and Walaska in conjunction with the R.I. Department of Elderly Affairs – also would require that all reverse mortgage loan officers be registered as mortgage loan originators. In addition, it would require specific pre-closing disclosures and other annual account statements and disclosures.
The bill now goes to the state House of Representatives, which recently passed a companion version, 2008-H 7723A, sponsored by Rep. Richard W. Singleton, I-Cumberland.
Additional information from the R.I. General Assembly, including the House and Senate calendars and listings of measures introduced each day, is available at rilin.state.ri.us.
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