Post by Sapphire Capital on Jul 22, 2008 4:05:21 GMT 4
New Rhode Island Law Imposes Three-Day Wait and Counseling
July 16, 2008
A new Rhode Island law requires independent counseling, bans annuity sales and establishes a three-day waiting period for all reverse mortgages. The law, effective Jan. 1, 2009, also allows lenders to charge a prepayment penalty for proprietary loans in some cases.
Gov. Donald Carcieri signed the law (S 2598/H 7723) on June 27. It requires all seniors to receive counseling from an agency approved by the Department of Housing and Urban Development. The loan cannot close until three days after submitting the counseling certificate to the lender.
The counseling should include tax consequences and the effect the loan will have on the senior's eligibility for government assistance programs. It also prohibits originators from requiring an annuity to close the loan or offering one for sale until after it has closed. Loan officers must now be registered with the state to originate loans.
Some lenders wanted the provision allowing prepayment penalties, according to Darryl Hicks of the National Reverse Mortgage Lenders Association. The penalty is permitted only for proprietary loans where the lender waives the origination fees up front, and the borrower pays off the loan before moving or selling the house or death.
The Department of Housing and Urban Development does not allow prepayment penalties for federally insured HECM loans, the dominate loan form. Between October and June, there were 375 HECM loans written in Rhode Island, according to HUD.
The legislation was sponsored by state Sen. David E. Bates and Rep. Richard Singleton. It was supported by the AARP, Rhode Island Housing, the Rhode Island Department of Elderly Affairs, and the Rhode Island Department of Business Regulation.
July 16, 2008
A new Rhode Island law requires independent counseling, bans annuity sales and establishes a three-day waiting period for all reverse mortgages. The law, effective Jan. 1, 2009, also allows lenders to charge a prepayment penalty for proprietary loans in some cases.
Gov. Donald Carcieri signed the law (S 2598/H 7723) on June 27. It requires all seniors to receive counseling from an agency approved by the Department of Housing and Urban Development. The loan cannot close until three days after submitting the counseling certificate to the lender.
The counseling should include tax consequences and the effect the loan will have on the senior's eligibility for government assistance programs. It also prohibits originators from requiring an annuity to close the loan or offering one for sale until after it has closed. Loan officers must now be registered with the state to originate loans.
Some lenders wanted the provision allowing prepayment penalties, according to Darryl Hicks of the National Reverse Mortgage Lenders Association. The penalty is permitted only for proprietary loans where the lender waives the origination fees up front, and the borrower pays off the loan before moving or selling the house or death.
The Department of Housing and Urban Development does not allow prepayment penalties for federally insured HECM loans, the dominate loan form. Between October and June, there were 375 HECM loans written in Rhode Island, according to HUD.
The legislation was sponsored by state Sen. David E. Bates and Rep. Richard Singleton. It was supported by the AARP, Rhode Island Housing, the Rhode Island Department of Elderly Affairs, and the Rhode Island Department of Business Regulation.