Reverse Mortgage Information

The Governor of Vermont, Jim Douglas signed a bill last week that puts a limit on reverse mortgages to federal programs. This bill effectively eliminated the possibility and potential of a proprietary market in Vermont.

The H222 bill, mandates that Vermont lenders has to be approved by the Department of Housing and Urban Development. The new bill also stipulates that all loans must be in accordance with the HUD home equity conversion mortgage program or federal reverse mortgage program with same standards. The loan also has to be insured by the Federal Housing Administration or similar federal agency. The bill however allows reverse mortgage loans by government-sponsored enterprises.

The bill also makes face to face counseling a requirement in most loan cases. A counseling agency will have to be used by those borrowers who chose to request for phone counseling. The chosen counseling agency must be approved by the state Department of Banking, Insurance, Securities and Health Care Administration (BISHCA). The bill also makes the cross selling of annuities before the borrower’s right of recession period is over illegal.

BISHCA Commissioner Paulette Thabault was quoted during a interview the week before the bill was passed as saying “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,”

The new bill would be effective from July 1 and also includes other provisions that regulates life settlements and allows BISCHA to new rules in relation to professional senior advisory designations.