The Minnesota state legislature presented a reverse mortgage bill to Gov. Tim Pawlenty on Monday that keeps a 10-day rescission period and suitability requirements which are supported by the AARP but opposed by lenders.
The Conference Committee marked up the final bill (SF 489) last week. On Friday, the Senate passed it 65 to 2, and the House of Representatives voted 97 to 31 on Saturday.
The governor has until Thursday to act on the bill.
Rep. Jim Davnie, who sponsored the House companion bill, said Monday he had no indication of Pawlenty’s position on the conference bill. But the fact that it passed by strong bipartisan majorities creates an opportunity for him to sign it, he said. It would go into effect Aug. 1 if signed.
The bill contains provisions that would allow the borrower to rescind, in writing, any reverse mortgage 10 days from the day they execute the reverse mortgage documents. The rescission notice would be effective when the borrower deposits a certified letter in the mailbox.
Before sending the customer to a counselor, lenders would be required to have reasonable grounds for believing that the loan is suitable after reviewing the borrower’s personal and financial information and options. Counselors would also be required to review this information in a session of at least 60 minutes. Failure by the lender to comply with the counseling requirement could result in a $1,000 fine payable to the borrower.
The bill also prevents a “producer” from selling or encouraging the purchase of an annuity, life insurance or long-term care insurance product if the producer “knows or should know” it will be purchased with reverse mortgage proceeds for up to 18 months after the loan closes.
Beth Paterson, executive vice president of St.-Paul, Minn.-based Prestige Mortgage LLC, Reverse Mortgages SIDAC, has been advocating to have the rescission period and other provisions removed or changed. She sent an email to industry players encouraging them to ask the governor for a veto.
“Overall the bill leaves a lot of subjectivity and risks that will hurt seniors and lenders and other professionals working with seniors!” Paterson wrote in the email.
The Minnesota AARP sent an email alert to members urging them to tell Pawlenty to sign the bill.
