A invoice launched within the New Jersey Senate would require face-to-face counseling for the state’s reverse mortgage transactions and would nullify any loans originated with out proof of such counseling having taken place. The invoice is at present awaiting deliberation within the state Senate’s commerce committee.
The invoice, S2520, would additionally supply a seven-day proper of rescission on any reverse mortgage transaction, permitting a borrower to cancel the mortgage inside that window and not using a penalty.
Bill proposal, lawmaker considerations
The present model of the invoice was launched earlier this month by state Sen. Shirley Turner (D), who represents New Jersey’s fifteenth district encompassing Hunterdon and Mercer counties. Turner initially launched the same invoice in 2016, she instructed RMD in an interview.
Turner defined that her main concern when initially introducing the invoice got here from a distressed constituent whose elderly mom misplaced her home after taking out a reverse mortgage with out totally understanding the necessities of the mortgage, the senator mentioned.
“His mother had taken out a reverse mortgage unbeknownst to him and he was very distraught because he didn’t learn of the reverse mortgage until it was too late for him to intervene,” Sen. Turner defined to RMD. “That was when he contacted me and he also contacted the state attorney general. We both investigated and found out that there was nothing that we could do because it was too late in the process.”
The constituent had employed his personal lawyer, however his mom ended up having to depart the home after falling behind on related taxes.
“She just fell further and further behind, and did not tell [her son] until it was too late, when she was getting the notices threatening to evict her from the house,” Turner mentioned. “And she was then, of course, extremely upset because that was the house that she had lived in — and thought she would die in — because she had lived there for 60 years.”
The home, Turner added, had been constructed by the lady’s late husband within the mid-Nineteen Fifties. That made the senator involved in regards to the reverse mortgage trade’s advertising actions to debtors, notably those that may be coping with the recent lack of a partner.
Industry response
Turner’s invoice would have a “chilling” impact on reverse mortgage business within the state of New Jersey, in line with a letter submitted to the lawmaker’s workplace on Feb. 13 by the National Reverse Mortgage Lenders Association (NRMLA).
When requested if she had seen the letter, Turner mentioned it had not but arrived at her workplace as Friday.
NRMLA contends that the in-person requirement would dampen reverse mortgage availability within the state, primarily since most reverse mortgages originated in New Jersey are Federal Housing Administration (FHA)-sponsored Home Equity Conversion Mortgages (HECMs).
FHA’s HECM program already requires counseling previous to the closing of a reverse mortgage from companies accredited by the U.S. Department of Housing and Urban Development (HUD), and HUD necessities dictate that “clients may receive telephone counseling unless such counseling is prohibited in their state.”
“[W]e further note that, as of today, it appears that only […] six counseling agencies in New Jersey are approved by HUD to provide reverse mortgage counseling,” NRMLA wrote.
NRMLA additionally factors out that an in-person counseling requirement shouldn’t be imposed by FHA or HUD for HECM loans, and that such a requirement in New Jersey would “have the unintended consequence of decreasing the availability of reverse mortgage counseling while simultaneously imposing unnecessary hardships on New Jersey seniors seeking a reverse mortgage loan,” the letter acknowledged.
Turner defined that she could be comfortable to satisfy with NRMLA or some other organization that both helps or opposes any laws she introduces.
“I always meet with everybody,” she mentioned. “Not just those who support my bill but also those that oppose it. And hopefully, we can find common ground and everybody wins.”
In-person hurdles
An in-person counseling requirement stays regulation in Massachusetts, which contributed to the halting of reverse mortgage business all through the state on the onset of the COVID-19 pandemic because of stay-at-home orders handed down by then-Gov. Charlie Baker (R) in an effort to arrest the unfold of the virus.
Soon afterward, an emergency invoice handed by the Massachusetts Legislature relaxed the in-person counseling requirement, notably as a result of susceptibility of older folks to the consequences of sickness brought on by COVID-19. Since that time, the legislature has thought of completely rescinding the in-person counseling requirement, citing post-pandemic challenges and a restricted provide of HUD-approved counselors who serve the total state.
A everlasting resolution has not but materialized, nevertheless, with the legislature as a substitute choosing non permanent extensions of the relaxed rule. The present extension is scheduled to run out on the finish of March 2024.
Comparisons to Massachusetts
Reverse mortgage trade veteran George Downey of The Federal Savings Bank in Braintree, Massachusetts, has been a key determine within the trade’s efforts to alter the regulation inside that state. He supplied his private opinion on the New Jersey matter.
“Clearly, this is another well-intended but misguided initiative,” Downey mentioned an interview, evaluating the proposed New Jersey invoice to the in-person provision in his state. “But in addition to the logistical reasons, attorneys I’ve spoken with agree with my opinion that the issue of disparate impact under the American Disabilities Act and Fair Credit Reporting Act (FCRA) could be a consideration.”
Disparate affect provisions in U.S. regulation check with practices which will adversely have an effect on one group of individuals inside a protected class greater than one other, regardless that guidelines utilized are ostensibly or formally impartial.
“As you bear down on this in-person counseling issue, it puts a protected class at a distinct disadvantage by requiring them to assume additional cost,” Downey mentioned, primarily referring to transportation. Downey has had private expertise with disabled shoppers who needed to shoulder excessive prices to succeed in an in-person counseling appointment.
“Just as easily, the counseling could have been accomplished with a phone call,” he mentioned.
