Bill Text: NJ A4753 | 2016-2017 | Regular Session | Amended
Bill Title: Establishes pre-loan counseling requirements and borrower right of rescission for reverse mortgage loans.
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Introduced - Dead) 2017-11-30 - Reported out of Assembly Comm. with Amendments, 2nd Reading [A4753 Detail]
Download: New_Jersey-2016-A4753-Amended.html
Sponsored by:
Assemblyman DANIEL R. BENSON
District 14 (Mercer and Middlesex)
Assemblyman NICHOLAS CHIARAVALLOTI
District 31 (Hudson)
SYNOPSIS
Establishes pre-loan counseling requirements and borrower right of rescission for reverse mortgage loans.
CURRENT VERSION OF TEXT
As reported by the Assembly Financial Institutions and Insurance Committee on November 30, 2017, with amendments.
An Act concerning reverse mortgage loans and supplementing P.L.1979, c.140 (C.46:10B-16 et seq.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. As used in this act:
"Borrower" means any individual inquiring about or applying for a reverse mortgage loan, whether or not the loan is granted, and any individual who has obtained a reverse mortgage loan.
"Lender" means a banking institution that is authorized in the State to make a reverse mortgage loan pursuant to section 3 of P.L.1979, c.140 (C.46:10B-18).
"Reverse mortgage" means a reverse annuity mortgage or a reverse direct payment mortgage as defined in section 2 of P.L.1979, c.140 (C.46:10B-17).
2. Prior to accepting a final and complete application for a reverse mortgage loan or assessing any fees, a lender shall:
a. provide the borrower with a written checklist, in 12-point type or larger, advising the borrower to discuss the following issues with a reverse mortgage counselor:
(1) how unexpected medical or other events that cause the borrower to move out of the borrower's home earlier than anticipated will impact the total annual cost of the reverse mortgage loan;
(2) the extent to which the borrower's financial needs would be better met by options other than a reverse mortgage loan, including less costly home equity lines of credit, property tax deferral programs, or governmental aid programs;
(3) whether the borrower intends to use the proceeds of the reverse mortgage loan to purchase an annuity or other financial or insurance product and the consequences of doing so;
(4) the effect of repayment of the reverse mortgage loan on other residents of the home securing the reverse mortgage loan after all borrowers have died or permanently left the home;
(5) the borrower's ability to finance routine or catastrophic home repairs, especially if maintenance is a factor that may determine when the reverse mortgage loan becomes payable;
(6) the impact that the reverse mortgage loan may have on the borrower's tax obligations and eligibility for government assistance programs, and the effect that losing equity in the home securing the reverse mortgage loan will have on the borrower's estate and heirs; and
(7) the ability of the borrower to finance alternative living accommodations, such as assisted living or long-term care, after the borrower's equity is depleted.
b. provide to the borrower the names and contact information for at least five counseling agencies domiciled in New Jersey that are approved by the United States Department of Housing and Urban Development to engage in reverse mortgage counseling pursuant to Subpart B. of 24 C.F.R. s.214, provided that the counseling agencies do not receive any compensation, either directly or indirectly, from the lender or from any other person or entity involved in originating or servicing the reverse mortgage or the sale of annuities, investments, long-term care insurance, or any other type of financial or insurance product and neither make loans nor refer borrowers to any person or entity that makes loans. The lender shall not pay any counseling service fees to a counseling agency without first informing the borrower in writing that this may create a conflict of interest.
c. receive a certification from the borrower or the borrower's authorized representative attesting that the borrower has received in-person counseling 1or counseling via telephone1 on reverse mortgage loans from a counseling agency as described in subsection b. of this section that included information specified in subsection a. of this section and such other information as the Commissioner of Banking and Insurance may designate by regulation.
The certification shall be signed by the borrower and the counseling agency counselor, and shall include the date of the counseling and the name, address, and telephone number of both the counselor and the borrower. An electronic facsimile copy of the certification satisfies the requirements of this subsection. The lender shall maintain the certification in an accurate, reproducible, and accessible format for the term of the reverse mortgage.
A certification shall only be valid if dated at least three business days prior to the close of a reverse mortgage loan and shall expire 180 business days from the date it was signed.
3. If the Commissioner of Banking and Insurance or his designee determines that:
a. a reverse mortgage loan was executed with a borrower who has not received counseling pursuant to subsection c. of section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill), the reverse mortgage loan shall be rendered void and unenforceable.
b. a lender failed to comply with any provision of section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill), the commissioner or his designee may impose a $1,000 civil penalty upon the lender which shall be payable to the borrower.
4. a. A borrower shall not be bound for seven days after the borrower's acceptance, in writing, of the lender's written commitment to make the reverse mortgage loan, and shall not be required to close or proceed with the loan during that time period. The lender shall provide the borrower with written notice of the seven-day right of rescission, which shall be on a separate sheet of paper and in at least 12-point type. A borrower shall not waive the provisions of this section.
b. Nothing in this section shall prevent a borrower from rescinding a reverse mortgage loan within three days of execution, as provided pursuant to 12 C.F.R. s.1026.1 et seq.
5. This act shall take effect on the first day of the third month next following enactment, except the commissioner may take any anticipatory administrative action in advance as shall be necessary for the implementation of this act.
