Carcieri signs reverse mortgage law
The Providence Journal Saturday June 28, 2008
A new state law designed to protect consumers from the risks of “reverse mortgages” mandates greater disclosure of fees charged by lenders but still permits them to penalize borrowers who pay off their loans early.
The allowance for prepayment penalties was described by supporters of the legislation as a compromise measure crafted in the wake of opposition by a national industry lobby group which a year ago scuttled efforts to approve similar legislation.
“Nobody wanted the prepayment penalties,” the state Department of Business Regulation’s director, A. Michael Marques, said yesterday, “[but] if the bill didn’t pass this year, the only one who benefits are the people who are trying to take advantage of the elderly.”
Reverse mortgages allow cash-strapped homeowners who are 62 or older and have paid off their houses to borrow against the equity. The loans do not come due until the borrower sells the house or dies.
If the borrower lives longer than anticipated or the property’s value declines — or both — the homeowner may be unable to sell the house for enough money to repay the mortgage.
Governor Carcieri yesterday signed the reverse mortgage legislation into law at a State House ceremony. (The event was largely a formality; the governor already had signed a House version of the bill, H-7723 Sub A, on June 6.)
The new reverse-mortgage law, effective Jan. 1, mandates greater disclosure of fees charged by lenders, and requires that borrowers receive financial counseling from a government-approved agency prior to entering the loan agreement. The measure also creates a three-day waiting period before the closing is finalized, and prohibits lenders from requiring that borrowers also purchase an annuity as a condition of closing the mortgage.
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