Counseling and disclosure requirements for reverse mortgages

Section 138 of the Truth in Lending Act (15 U.S.C. 1648) is amended by adding at the end the following:

(c)

Required statement regarding counseling

A creditor may not take an application for a reverse mortgage unless the creditor has provided to the applicant for the reverse mortgage, before the applicant receives any counseling regarding reverse mortgages pursuant to subsection (e), the following written statement, disclosed clearly and conspicuously in type that is 16-point or larger: IMPORTANT NOTICE TO REVERSE MORTGAGE LOAN APPLICANT: A REVERSE MORTGAGE IS A COMPLEX FINANCIAL TRANSACTION. IF YOU DECIDE TO OBTAIN A REVERSE MORTGAGE LOAN, YOU WILL SIGN BINDING LEGAL DOCUMENTS THAT WILL HAVE IMPORTANT LEGAL AND FINANCIAL IMPLICATIONS FOR YOU AND YOUR ESTATE. IT IS THEREFORE IMPORTANT TO UNDERSTAND THE TERMS OF THE REVERSE MORTGAGE AND ITS EFFECT. BEFORE ENTERING INTO THIS TRANSACTION, YOU ARE REQUIRED TO CONSULT WITH AN INDEPENDENT LOAN COUNSELOR. A LIST OF APPROVED COUNSELORS WILL BE PROVIDED TO YOU BY THE LENDER. SENIOR CITIZEN ADVOCACY GROUPS ADVISE AGAINST USING THE PROCEEDS OF A REVERSE MORTGAGE TO PURCHASE AN ANNUITY OR RELATED FINANCIAL PRODUCTS. IF YOU ARE CONSIDERING USING YOUR PROCEEDS FOR THIS PURPOSE, YOU SHOULD DISCUSS THE FINANCIAL IMPLICATIONS OF DOING SO WITH YOUR COUNSELOR AND FAMILY MEMBERS.. (d)

Counseling checklist

(1)

Requirement for creditor to provide counseling checklist before loan application

A creditor may not take an application for a reverse mortgage unless the creditor provides to the applicant, before his or her meeting with a counseling agency regarding reverse mortgages pursuant to subsection (e), a written checklist that complies with paragraph (3). (2)

Requirement for counseling agency to provide checklist

If a consumer seeks counseling regarding reverse mortgages before requesting a loan application for a reverse mortgage from a creditor, the counseling agency shall provide the consumer with a written checklist that complies with paragraph (3). (3)

Contents of checklist

A written checklist, with respect to an applicant (or consumer, in the case described in paragraph (2)), complies with this paragraph only if the checklist meets the following requirements: (A)The checklist is in writing in 12-point type or larger. (B)The checklist conspicuously notifies the applicant (or consumer) under the reverse mortgage that he or she should discuss with the counselor of the counseling agency the following issues: (i)How unexpected medical or other events that cause the applicant (or consumer) to move out of the home, either permanently or for more than one year, earlier than anticipated will impact the projected total annual loan cost of the mortgage. (ii)The extent to which the applicant’s (or consumer’s) financial needs would be better met by options other than a reverse mortgage, including less costly home equity lines of credit, property tax deferral programs, or governmental aid programs. (iii)Whether the applicant (or consumer) intends to use the proceeds of the reverse mortgage to purchase an annuity or other insurance products and the consequences of doing so. (iv)The effect of repayment of the loan on nonborrowing residents of the home after all borrowers have died or permanently left the home. (v)The applicant’s (or consumer’s) ability to finance routine or catastrophic home repairs, especially if maintenance is a factor that may determine when the mortgage becomes payable. (vi)The impact that the reverse mortgage may have on the applicant’s (or consumer’s) tax obligations and eligibility for government assistance programs, and the effect that losing equity in the home will have on the applicant’s (or consumer’s) estate and heirs. (vii)The ability of the applicant (or consumer) to finance alternative living accommodations, such as assisted living or long-term care nursing home registry, after the applicant’s (or consumer’s) equity is depleted. (e)

Counseling requirement

A creditor may not accept a final and complete application for a reverse mortgage from a consumer or assess any fees upon a consumer unless the creditor has complied with the following requirements: (1)

Required counseling referral

The creditor shall— (A)refer the consumer to a housing counseling agency approved by the Secretary of Housing and Urban Development for counseling that meets the standards and requirements established by the Secretary for reverse mortgage counseling; and (B)provide the consumer with a list of at least 5 such housing counseling agencies approved by the Secretary, including at least two agencies that can provide counseling by telephone. (2)

Required certification of counseling

The creditor shall have received from the consumer or the authorized representative of the consumer— (A)a written certification (which may be in the form of an electronic facsimile copy) that the consumer has received counseling regarding reverse mortgages from an agency as described in paragraph (1), which shall be signed by the consumer and the agency counselor providing such counseling, and shall include the date of the counseling and the name, address, and telephone number of both the counselor and the consumer; and (B)a copy of the checklist provided to the consumer pursuant to subsection (d) that is signed by the agency counselor providing such counseling, if the counseling was done in person, and by the consumer, and a copy of such signed checklist shall be provided to the consumer. The creditor shall maintain the certification described in paragraph (2)(A) in an accurate, reproducible, and accessible format for the entire term of the reverse mortgage.