Gary Winfield

Sen. Winfield Votes to Protect Elderly Homeowners Seeking a Reverse Mortgage

Hartford, CT— Senator Gary Winfield (D-New Haven) voted today to protect elderly homeowners in dire financial circumstances from possible deception by requiring banks to counsel them on the pros and cons of reverse mortgages before signing any such agreement. 

The bill passed in 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. 

“Unfortunately, FBI research shows that because seniors tend to have good credit, are a trusting population, and are less likely to report fraud, they can be extremely vulnerable to many types of scams and are often taken advantage of,” Sen. Winfield said. “This bill would establish a fair and critical step to protecting a senior home-owner’s finances by requiring banks to give them clear and necessary counseling they need to make an informed decision.”

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.