Do You Know The Best Kept Reverse Mortgage Secret in Minnesota?

MN Reverse Mortgage LegislationDuring the 2009 Minnesota Legislation Session a reverse mortgage bill, SF489/HF528 was introduced and then passed by the Senate and House but eventually vetoed by Governor Tim Pawlenty.  During this session I was very involved in addressing my concerns as a reverse mortgage originator, processor and senior advocate, testifying against the bills at every hearing, writing to the Attorney General Lori Swanson, the authors of the bills, Senator Tarryl Clark and Representative Jim Davnie as well as Governor Pawlenty explaining the facts of reverse mortgages and the issues with the bill if signed into law.  Actually I was the only person who testified during this legislation that has actually originated and processed reverse mortgages.  The others who testified were all lobbyists, attorneys or had little knowledge and no experience with the details or originating reverse mortgages.

Some of the issues of the bill included a 10-day rescission period, originators determining suitability and cross-selling prohibition that those who do a reverse mortgage could not purchase insurance products within the 18 months after the reverse mortgage closing.

Governor Pawlenty’s veto letter stated that it is important that reverse mortgages continue to be offered in Minnesota and the legislation could have unintended consequences causing mortgage bankers to refrain from offering reverse mortgages.  He stated the suitability clause was poorly written and would cause litigation.  Governor Pawlenty encouraged the authors to rewrite legislation that protects seniors but does not limit the availability of reverse mortgages in Minnesota.

Early during the 2010 legislation session I heard through the grapevine that a FDIC bank was supporting and “pushing” a bill modeled after the California reverse mortgage law into this legislation session.  For months now I have been researching to find details about this potential legislation but to little avail.  While I was so involved during the 2009 legislation, and as an actual originator trying to educate the bill authors and legislators on reverse mortgages, the process and issues with their bill, I was not contacted by any of them to assist with any new legislation.

Last month the National Reverse Mortgage Lenders Association (NRMLA) stated that a senator was expected to add an amendment on reverse mortgages to a bill that was slated to pass.  My research has continued and  I have learned that, yes, the author of last year’s Senate bill is working on finding a bill to add the reverse mortgage amendment to but with no confirmation of which bill and/or the verbiage of the anticipated amendment.

MN Reverse Mortgage Best Kept SecretI have also learned that a FDIC bank is working on verbiage for the reverse mortgage amendment.  Not sure if this would be the same bill or two different bills.  For some undetermined reason this legislative act has taken on a shroud of secrecy.

My concern with this process and any amendment that may be added to legislation is that this is a very controversial issue that could impact those of us who are brokers or lenders that are not federal chartered banks. We are not on the same playing field – federal chartered banks do not have to abide by the state rules because they are federal chartered yet brokers and non-federal chartered banks and lenders would have to follow any state laws.

What does this mean?  If a 10-day rescission is implemented, the FDIC bank would still be working off the 3-day rescission; yet non-federal chartered banks and lenders would have to operate with the 10-day rescission.  The same is true for a suitability clause and for cross-selling.  This would be a monopolistic-like advantage over other lenders.  This obviously does not foster fair competition between all lenders and small business.  Is this the purpose of the FDIC Bank in supporting and pushing through legislation that they don’t even have to follow?  Is this for their gain rather than for the seniors?

Additionally this legislation has not been transparent. We have not been able to find out exactly what the legislation entails. From what I have heard there is potential that it could be similar to or even worse than last year’s legislation but this is being kept a secret.

I feel that any reverse mortgage legislation should not happen without a full hearing. And without all of us impacted, especially brokers and lenders who are not federal chartered banks having an opportunity to see and address any proposed legislation. Without disclosing the information and keeping this a secret and not consulting those who it will actually be impacting (i.e. the non-federal chartered bank originators who actually work in the field on a daily basis and with the seniors) it appears legislators are not looking at protecting seniors yet looking out for their own political gain.

When we are trying to help homeowners stay in their home, receive help with their mortgages and/or avoid foreclosure it would be a disservice to seniors to pass Minnesota reverse mortgage legislation at this time. Additionally at this time when there are so many changes on the federal level through HUD affecting reverse mortgages, it will be a disservice to Minnesota seniors to pass state legislation adding to the confusion of the product.

© 2010 Beth Paterson, Beth’s Reverse Mortgage Blog, 651-762-9648

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6 thoughts on “Do You Know The Best Kept Reverse Mortgage Secret in Minnesota?

  1. Beth,
    Many thanks for your continued hard work. The playing field is not level and we need to continue to expose what is happening to brokers in this business. As for the knee-jerk state legislation, I have made several attempts to contact Sue Tucker, the MA state senator who chaired the committee and sponsored the legislation here in Massachusetts to require face-to-face counseling PLUS give counselors the power to judge suitability of the reverse mortgage for the borrower. How insulting!

    No response, of course. The unintended consequence will be to make it far more difficult for our senior borrowers to obtain a reverse mortgage if this eventually becomes law. A better approach would be to require face-to-face application so that telephone boiler room operators would be stopped from doing business by mail… from anywhere in the country.

    • Bob,
      Thanks for your comments! It is very frustrating with all the legislation we are facing in the industry!

      I totally agree with you regarding the face-to-face application instead of counseling. Besides we as originators are in a better position to meet face-to-face, the face-to-face application would put a stop to the call centers who just mail and often don’t explain the details. Seniors who are not near cities where counselors are located or just can’t get out due to physical limitations will surely be restricted. And to base the face-to-face requirement on assets… seems discriminatory.

      Keep up the fight there.

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