Reverse mortgage advice bill introduced by Penn. state legislators, industry reacts

Late last month, a Pennsylvania state official took on reverse mortgage advice by proposing legislation to reduce the “gotchas” of engaging with reverse mortgage products offered in the Federal Housing Administration (FHA) Home Equity Conversion Mortgage (HECM) program. . It would do so by limiting the HECM counseling process to in-state face-to-face sessions only. Now, the lead sponsor has found 17 colleagues to serve as co-sponsors and introduced the proposed bill to the state legislature in late January.

However, representatives from the National Reverse Mortgage Lenders Association (NRMLA) recently explained that the reverse mortgage industry has concerns about the bill as it has been introduced, but hopes to work with lawmakers in the process. hope to develop his support. That’s according to the wording of the bill according to the Pennsylvania State House of Representatives and an email alert sent to NRMLA members this week.

The new bill on councils, support in Penn. lodge

The new reverse mortgage advice bill is referred to as HB 2316, with Rep. Morgan Cephas (D) serving as the lead sponsor. The wording of the bill would require licensed reverse mortgage agents or brokers active in the state to provide in-person counseling to a potential borrower and present alternatives to a reverse mortgage.

“[The licensee shall] provide in-person and face-to-face housing counseling to applicants with a housing counseling agency approved by the United States Department of Housing and Urban Development in this Commonwealth,” reads the first provision of the draft of law. “The housing advice agency must provide advice on a reverse mortgage and alternatives to a reverse mortgage,” reads the second provision.

Unlike a similar requirement that exists in Massachusetts — and which has caused a host of difficulties for reverse mortgage professionals in that state due to seniors’ anxiety resulting from the COVID-19 pandemic — the bill of Pennsylvania also includes provisions that would exclude the face-to-face requirement based on a few key criteria.

“If applicants are unable or choose not to schedule an in-person visit with a housing counsellor, either by visiting a housing counseling agency or having a home visit from a counsellor, [the licensee may] conduct housing advice by telephone or videoconference,” the provision reads.

The bill also outlines next steps after a reverse mortgage counseling session ends and would require the HECM loan applicant to receive a certificate containing the advisor’s and applicant’s signatures and the date their session took place. place ; as well as the name, telephone number and address of the reverse mortgage applicant and the counseling agency that served them.

Interestingly, while the Pennsylvania House is currently under Republican control, Rep. Cephas and all but one of her co-sponsors are members of the Democratic Party.

The full list of Democratic sponsors includes Rep. Cephas, Maureen Madden, Danilo Burgo, Napoleon Nelson, Stephen Kinsey, Joe Hohenstein, Ben Sanchez, Robert Freeman, Rick Krajewski, Darisha Parker, Dave Delloso, Elizabeth Fiedler, Liz Hanbidge, Emily Kinkead, John T. Galloway, Manuel Guzman and Joseph Ciresi. The only Republican co-sponsor is Jim Cox, who currently serves as chairman of the body’s Labor and Industry Committee.

Reverse Mortgage Industry Response

The NRMLA submitted a letter to the 18 sponsoring lawmakers and explained that it was “generally supportive” of the bill, but had identified a number of specific issues that need to be addressed according to a weekly update by e -mail to the members of the association. The first issue as pointed out by the association is that the bill would require reverse mortgage prospects to receive advice from a Pennsylvania-based agency.

“At this time, there are only five HUD-approved HECM consulting agencies in the Commonwealth,” the NRMLA said in its update.

This echoes a similar problem seen in Massachusetts, where there are only five full-time HUD-approved counselors and two part-time counselors, adding a lot of logistical difficulties for borrowers and counselors.

“The NRMLA noted that as part of the HECM program, lenders must provide potential senior applicants with a list of HUD-approved counseling agencies, including domestic intermediaries who provide telephone counseling services and may be located anywhere in the country,” the association said. “The NRMLA added that in some cases the nearest counseling agency may be located in a neighboring state. For these reasons, the NRMLA asked lawmakers to remove the requirement that the consulting agency be based in Pennsylvania.

The NRMLA also pointed out that the requirement to include the borrower’s phone number on the counseling certificate could create further problems.

“In their letter, the NRMLA explained that there is no data field for an individual’s phone number and, for privacy reasons, some borrowers may not want to disclose it,” said the association in its update.

When contacted for additional perspective, NRMLA President Steve Irwin explained that this is part of the association’s normal course of work and that he looked forward to continued dialogue with lawmakers on this. topic.

“Our outreach effort with Pennsylvania bill sponsors is typical of the state-level work we continue to do on behalf of our members,” Irwin told RMD. “I don’t believe the sponsors of the bill necessarily agree with the policies put in place by HUD regarding the use of domestic intermediaries, and we will continue our work to educate sponsors on these issues.”

Read the proposed bill on the state legislature website.