State Senator Beth Bye (D-West Hartford) this evening voted to protect elderly homeowners in dire financial circumstances from possible deception or bad decisions by requiring banks to counsel them on the pros and cons of reverse mortgages before signing any such agreement.
The bill passed the Senate on a 24-12 mostly party-line vote, with all Democratic state senators voting in favor of the pro-consumer bill and two-thirds of Republican senators voting against the measure.
The bill now heads to the House of Representatives for consideration.
“For a lot of seniors, their home is not just a familiar and comfortable place, or a lifetime investment—it is their last place of refuge,” Sen. Bye said. ‘It’s already a difficult decision for financially embattled seniors to apply for a reverse mortgage. They need to be sure this is the right thing to do, and to be aware of all the potential pitfalls and financial dangers. This bill ensures they get the counseling they need and deserve, instead of leaving the whole thing to chance. I don’t know why anyone would vote against this bill.”
Senate Bill 579, “An ACT CONCERNING PROTECTIONS FOR CONSUMERS APPLYING FOR REVERSE MORTGAGES,” establishes a counseling requirement that must be met before any Connecticut bank or credit union can accept a reverse annuity mortgage loan application (a reverse annuity mortgage allows elderly homeowners to convert accumulated home equity into liquid assets.)
Such counseling may include telling elderly homeowners about other options available to them, the financial implications of entering into a reverse mortgage, disclosing that a reverse mortgage may have tax consequences, affect eligibility for assistance under federal and state programs, or have an impact on the homeowner’s estate and heirs.
The bill also requires reverse mortgage lenders to store a signed certification from the borrower that the counseling requirements were met.
Nationally, reverse mortgages are sometimes marketed to older Americans with advertisements featuring reassuring celebrity spokesmen. Last year, the Consumer Financial Protection Bureau fined three reverse mortgage companies a combined $800,000 for using deceptive advertisements to sell reverse mortgages, noting that while these national firms promoted the loans as essentially risk-free, borrowers of reverse mortgages can default on their loans and lose their homes through foreclosure if they fail to make necessary payments for property taxes, insurance or home maintenance.