Massachusettes Law On Reverse Mortgage

Posted by Charles D

April 2, 2009

Industry Guidance on Reverse Mortgage Loans

Information for Banks, Credit Unions, and Lenders seeking to make Reverse Mortgage Loans in the Commonwealth:

The Law:

In the Commonwealth, reverse mortgage loans must be made in accordance with programs which have been reviewed and approved by the Commissioner of Banks. Reverse mortgage loan programs submitted to the Division for approval must meet the requirements of M.G.L. c. 167E, §7. This provision applies to Massachusetts state-chartered banks and all other mortgagees pursuant to M.G.L. c. 183, §67. Massachusetts state-chartered credit unions seeking to make reverse mortgage loans must request approval of a program meeting the requirements set forth in M.G. L. c. 171, §65.

Borrower Protections to Provide:

These programs must provide for certain borrower protections such as:

Mandatory participation in a reverse mortgage counseling session approved by the Commonwealth’s Executive Office of Elder Affairs (List of Approved Counseling Services). Verify receipt of the counseling certificate from each borrower.
Seven day “cooling off” period following a consumer’s acceptance of a commitment, during which a consumer cannot be required to close or proceed with the loan transaction.
Required plain language disclosures of specific mortgage loans terms.
No prepayment penalties or restrictions permitted.
Disclosure requirement and acknowledgment of contingencies which could force a sale of the property securing the loan.
Inclusion of a disclosure statement that a reverse mortgage loan has estate and tax planning consequences and may affect eligibility for government benefits and that applicants are advised to seek appropriate advice.

License Requirements:

In addition to receiving an approval of its reverse mortgage loan program under the above statutory provisions, a lender must hold a valid mortgage lender license, or qualify for an exemption from licensing under G.L. c. 255E, §2, in order to make reverse mortgage loans.

Entities intending to broker reverse mortgage loans must hold a valid mortgage broker license, or qualify for an exemption, in the Commonwealth and are limited to acting in the capacity of a broker for reverse mortgage programs offered by lenders which are approved by the Commissioner of Banks. Loan originators of reverse mortgage loans must be appropriately licensed pursuant to G. L. c. 255F, added by Chapter 206 of the Acts of 2007. See the Division’s Approved Reverse Mortgage Lender List www.mass.gov/dob