FOR IMMEDIATE RELEASE: June 2, 2015
CONTACT: Bob Palmer, Policy Director, Housing Action Illinois, 312-282-3959 (cell) or firstname.lastname@example.org or Maura Possley, Press Secretary, Illinois Attorney General, 312-914-2039 (cell) or email@example.com
State legislation to create consumer protections for seniors for considering reverse mortgage has passed the General Assembly with bipartisan support. The legislation, Senate Bill 1440, sponsored by State Senator Jacqueline Collins and State Representative Arthur Turner, will soon be sent to Illinois Governor Bruce Rauner, who has to sign the bill before it becomes law.
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 Illinois Attorney General has been pursuing legal action against Mark Diamond for scamming seniors into taking out reverse mortgages on their homes with the promise that he’ll use the money to make repairs to their homes. Diamond then keeps the money without ever completing the promised work. Seniors are left with little to no equity in their homes and are unable to pass their single largest asset – their home – on to their heirs.
“Many homeowners who were victims of these scams reported that they didn’t even know these offers were for reverse mortgages or a loan of any kind. Now, they are at risk of foreclosure or have already lost their homes, and that is simply unacceptable,” Madigan said. “Reverse mortgages are complex loans that should be taken out only after a consumer has had an opportunity to carefully consider his or her financial future and consult with a qualified housing counselor.”
Rev. Robin Hood, founder of the Illinois Anti-Foreclosure Coalition, has been organizing community protest to bring attention to Mark Diamond’s practices and the issue of reverse mortgage scams. Rev. Hood’s aunt, Lillie Williams, alleges she was victimized by Diamond.
“We thank our legislators for passing this very important bill that will protect our seniors and arm our attorney general with more weapons to stop predators like Mark Diamond. We are steadfast to continue protecting our seniors and we hope the Governor will sign this bill soon,“ said Rev. Hood.
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.