The National Reverse Mortgage Lenders Association (NRMLA) this week sent a letter to a New Jersey lawmaker, stating its opposition to a legislative proposal tied to reverse mortgage counseling requirements in the Garden State.
The letter is addressed to state Sen. Shirley Turner (D), the sponsor of New Jersey Senate Bill 264, which creates “pre-loan counseling requirements and borrower rights of recission for reverse mortgage loans.”
NRMLA President Steve Irwin, who signed the letter, said that while the trade association “fully supports seniors receiving counseling before obtaining a reverse mortgage,” it opposes the bill as currently drafted for multiple reasons.
The group believes that proposed requirements for reverse mortgage counseling agencies to be physically located in the state, and for their services to be conducted in person, will create a “severe and unnecessary chilling effect on seniors’ ability to obtain a reverse mortgage in New Jersey.”
HousingWire‘s Reverse Mortgage Daily reached out to Turner’s office for further information on the bill but did not receive an immediate response.
NRMLA also opposes the bill’s plan to create a seven-day recission period after the closing of a Home Equity Conversion Mortgage (HECM). Irwin wrote that this rule would create “a needless and burdensome extension beyond the 3-day rescission period already mandated for reverse mortgages under federal law.”
He went on to say that HECM is the “most prevalent reverse mortgage program” in the U.S. and New Jersey, and HUD rules already limit how lenders receive and process applications prior to the borrower completing the mandatory counseling requirement. Companies must provide potential HECM borrowers with a list of HUD-approved counseling agencies.
The in-person counseling requirements included in the bill also would run afoul of federal statutes.
“Pursuant to FHA’s requirements, HUD-approved national intermediaries and HUD-approved agencies that provide reverse mortgage counseling services over the phone must always be included on the list,” the letter explained.
NRMLA said it appears that only two counseling agencies located in New Jersey are HUD-approved providers today. This violates HUD rules requiring at least five agencies within “the local area and/or state of the prospective applicant.”
Additionally, the trade group argued that seniors should be allowed to choose whether to do the counseling in person or over the phone. The bill would “deny consumers’ choices and rights” and potentially harm those with a special need, such as a disability or language barrier.
“We firmly believe that SB 264, as currently drafted, will have the unintended consequence of decreasing the availability of reverse mortgage counseling while simultaneously imposing unnecessary hardships on New Jersey seniors seeking a reverse mortgage loan,” Irwin wrote. “This may potentially result in seniors being denied access to credit and a critical economic ‘lifeline’ in their time of need.”
NRMLA recently took a stance on another piece of legislation in New Jersey involving mortgage repayment rules. It said the bill at hand, Senate Bill 4970, would misalign reverse mortgage structures with a requirement that all second-lien mortgages be repaid in “substantially equal” installments over equal periods. Reverse mortgages allow seniors to convert their home equity into cash without making monthly payments.