Massachusetts Bill Adds New Counseling Requirements for Low Income Seniors

Recently the Massachusetts Senate gave final approval on House Bill 4934, sending it along to Governor Deval Patrick. The legislation has been declared emergency law, “necessary for the immediate preservation of the public convenience” as the state continues to struggle with a high rate of foreclosures; it has more than doubled in the past year.

Massachusetts HB 4934 also makes adjustments to the reverse mortgage process for low-income seniors. These seniors are described in the legislation as those with a gross income of less than 50 percent of the average area income, a figure determined by the U.S. Department of Housing and Urban Development, and also must possess assets valued at less than $120,000 (excluding a primary residence).

At or before closing any reverse mortgage loan, the new legislation requires any one that fits the description of the low-income senior, to receive written certification from a counselor from a third-party organization stating that he or she has received counseling in person, relative to the appropriateness of the loan transaction, and has completed the approved counseling program. The third-party organization must be approved by the Executive Office of Elder Affairs in order to engage in such counseling. Then the senior must affirmatively opt in writing for the reverse mortgage loan. Any reverse mortgage executed with a borrower that has not received counseling from an approved third-party organization will be rendered unenforceable.

The bill institutes a delay of implementation for 24 months for these new amendments. The National Reverse Mortgage Lenders Association pushed hard for this delay for many critical reasons, finding the provisions in the bill extremely harmful to the industry.

According to NRMLA, there were around 3,600 counseling sessions in Massachusetts last year, with approximately 130 of those being face-to-face, equaling a 96 percent opt-out rate for face-to-face counseling. Based on a recent “mystery shopping” experiment, the association found only eight agency-approved face-to-face counselors in the entire state of Massachusetts.

A map of the state, pinpointing the physical location of these approved counselors, shows that many loan applicants would have to travel quite the distance to seek counseling, up to two hours of driving for many areas. Seniors in wheelchairs would have to arrange handicap transportation and there are no approved face-to-face counselors in Massachusetts that can conduct counseling in Spanish, Portuguese, Mandarin, Filipino, Russian, and most other foreign languages.

“Consumer protection laws inherently prohibit discrimination based on sex, race, religion, and income,” says Brett Kirkpatrick, Reverse Mortgage Specialist from Mortgage Financial Services. “Why would this legislation impose a discriminatory burden on low-income seniors? Why is there a presumption of incompetence or lack of intelligence? We know that many seniors ‘spend down’ their assets for estate planning purchases. The asset threshold of $120,000, exclusive of real estate, is a limit that many estate lawyers would counsel their clients against.”

Fortunately, the 24-month delay will provide NRMLA time to create studies and properly negotiate the terms of Massachusetts Bill 4934. To review the entire bill from the state of Massachusetts’ government website, including amendments to tenant laws regarding foreclosures, please click here.

Written by Kelly Mellott

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