Vermont Gov. Jim Douglas signed a bill today that limits reverse mortgages to federal programs, effectively eliminating the potential for a proprietary market in the small state.
The bill, H 222, states lenders must be approved by the Department of Housing and Urban Development. The loan must comply with HUD’s home equity conversion mortgage program or similar federal reverse mortgage program and be insured by the Federal Housing Administration or other federal agency. Or it could be a government-sponsored enterprise reverse mortgage.
The legislation also requires face-to-face counseling in most cases. Borrowers who request phone counseling would have to use a counseling agency that is approved by the state Department of Banking, Insurance, Securities and Health Care Administration (BISHCA). It prohibits cross-selling of annuities until after the borrower’s right of rescission period.
Other provisions in the bill regulate life settlements and would allow BISHCA to adopt rules regarding professional senior advisory designations. The reverse mortgage provisions become effective July 1.
“We wanted to make sure if reverse mortgages became a vehicle for people who had economic needs that there were some consumer protections in place so that those were appropriate mortgages and seniors were protected from any downside of getting a reverse mortgage,” said BISHCA Commissioner Paulette Thabault during an interview last week. She confirmed the bill was signed during a scheduled ceremony today.
