Illinois Governor Bruce Rauner (R ) signed legislation into law that would implement a 3-day “cooling-off” period, impose restrictions on the cross-selling of insurance products, create new borrower disclosures and place limitations on the distribution of reverse mortgage proceeds.
The Reverse Mortgage Act, or Senate Bill 1440, takes effect on January 1, 2016, and would:
- Implement a three-day “cooling-off period” from the time a lender makes a written commitment to originate a reverse mortgage, during which time the borrower cannot be required to close or proceed with the loan.
- Authorize the Office of the Attorney General to create two educational documents that lenders must give to clients, one that provides background information on reverse mortgages and potential alternatives, and another that talks about the counseling process.
- Prohibit a lender from requiring the purchase of an annuity, investment, life insurance, or long-term care insurance product as a condition for obtaining a reverse mortgage loan, or from being compensated from the loan proceeds for providing information about such products. Nothing precludes a lender from requiring the purchase of property and casualty insurance, title insurance, flood insurance, or other products meant to insure or protect the value of the home and are customary for a residential mortgage or reverse mortgage; and
- Restrict the distribution of loan proceeds to the borrower, or borrower’s spouse or partner, other than for bona fide fees necessary for the origination of the loan or for mandatory obligations, including required home repairs.