As part of a foreclosure bill signed into law by Minnesota Governor Tim Pawlenty earlier this year, new reverse mortgage consumer protections and counseling requirements went into effect on August 1, 2010.
The new law requires reverse mortgage borrowers receive HECM counseling (face to face and telephone) prior to application and from an agency located within the state. With only seven approved HECM counseling agencies located in Minnesota, originators worry the new requirements could delay counseling for seniors.
“With all borrowers needing to receive the counseling from these agencies, borrowers could face a longer wait time to receive their counseling,” says Beth Paterson, Executive Vice President of Reverse Mortgages SIDAC. Prior to the new law, Patterson said it sometimes took two to three weeks in order to receive counseling and this could add to the wait.
Borrowers are also required to sign and date a commitment letter at least seven calendar days prior to a loan closing and receive a “notice of cooling off period”. The borrower has seven days to think it over, during which time the lender cannot be required to close or proceed with the loan.
The new law also forbids lenders from requiring borrowers to purchase an annuity, investment, life insurance, or long term care insurance in connection with the reverse mortgage.
