FOR IMMEDIATE RELEASE: August 11, 2015
CONTACT: Bob Palmer, Policy Director, Housing Action Illinois, 312-282-3959 (cell) or bob@housingactionil.org
State legislation to create consumer protections for seniors for considering a reverse mortgage, Senate Bill 1440, was signed into law by Illinois Governor Bruce Rauner on August 10. State Senator Jacqueline Collins and State Representative Arthur Turner were the chief sponsors of the legislation in the Senate and House, respectively.
Advocated for Housing Action Illinois and Attorney General Lisa Madigan, the legislation includes provisions to make sure that seniors considering reverse mortgages are better educated about their responsibilities as a borrower and are protected against predatory lending practices and outright scams.
“Reverse mortgages are complex loan products that have had unusually high default rates in recent years. We want to make sure that seniors understand that while a reverse mortgage may be a good financial decision for them, it’s not a risk-free loan,” said Bob Palmer, Policy Director for Housing Action Illinois. “We particularly want to make sure seniors understand all the things they need to do to avoid defaulting on the loan, such as keeping current on their property taxes and homeowner insurance.”
The legislation includes the following provisions:
- Consolidates duplicative and sometime conflicting state laws regarding reverse mortgages into a new Reverse Mortgage Act, making certain definitions and terms consistent with federally insured reverse mortgage products.
- Makes the Illinois Attorney General responsible for creating a consumer education brochure to be made available by lenders and brokers to potential borrowers.
- Creates a 3-day “cooling off period” from the time the lender makes a written commitment to make a reverse mortgage during which time the borrower cannot be required to close or proceed with the loan.
- Reinforces an existing federal prohibition on “cross selling” that would require the purchase of an annuity, investment, long-term care insurance and/or life insurance products as a condition of obtaining a reverse mortgage loan.
- Under most circumstances, restricts the distribution of loan proceeds to the borrower (and their spouse or partner) in order to keep anyone with a financial conflict of interest from financially benefiting from the reverse mortgage loan.
- Provides for enforcement under the Consumer Fraud and Deceptive Business Practices Act and the Residential Mortgage License Act.
“We thank Governor Rauner for signing the bill into law and also thank Senator Collins and Representative Turner for their leadership on this issue. We look forward to working with Lisa Madigan’s office, HUD approved reverse mortgage counseling agencies, lenders, brokers and others to prepare for implementation of the consumer education and protection measures,” said Palmer.
The legislation goes into effect on January 1, 2016.