By Weiner Brodsky Kider, PC
The Tennessee Home Equity Conversion Mortgage Act (“HECMA”, Tenn. Code Ann. § 47-30-101, et seq.) has and continues to require mortgage lenders that wish to engage in the business of making reverse mortgages in Tennessee to submit an application to the Tennessee Department of Financial Institutions (“DFI”) and obtain authorization therefrom before doing so. On January 17, 2017, the DFI updated regulations under the HECMA for lenders that wish to engage in the business of making reverse mortgages in Tennessee.
The HECMA states in part that any non-exempt person must file an application for authorization to make reverse mortgage loans, in writing, to the Commissioner of Financial Institutions (“Commissioner”) on a form prescribed by the Commissioner. Please note that under the HECMA, banks and the Tennessee Housing Development Agency are exempt from this approval requirement. As provided in the HECMA, the application must contain the name and business address or addresses of the applicant and contain evidence that the applicant is an approved Fannie Mae or HUD lender. The application must also include such information the Commissioner deems necessary to evaluate the applicant. Such information may include, but is not limited to, affirmation of financial solvency, all capitalization requirements that are required by the Commissioner, and the character, personal experience and business plan of the applicant. The application shall be accompanied by an application fee, payable to the Commissioner in an amount established by rule. If the Commissioner approves the application, the Commissioner shall designate the applicant as an authorized lender.
Holding only a license under the Tennessee Residential Lending, Brokerage and Servicing Act (“TRLBSA”) is not sufficient if a lender wishes to make reverse mortgages in Tennessee. If a lender will make reverse mortgages in Tennessee, it must also hold a HECMA approval issued by the Commissioner. Failure to do so could result in reverse mortgage loans being declared void, in addition to administrative penalties.
Previously, HECMA regulations governing reverse mortgage approval in Tennessee merely stated that no person, firm or corporation shall engage in the business of making reverse mortgage loans, without such person, firm or corporation having first been designated by the Commissioner as an authorized lender.
The new regulations now state that, specifically, any person, firm, or corporation (other than a bank, savings institution, or credit union) that wishes to originate reverse mortgages in Tennessee must submit an application to the Commissioner that includes the following:
- A nonrefundable application fee of $500.
- A copy of the applicant’s license or registration (if applicable) under the TRLBSA.
- The name and complete business address or addresses of the applicant.
- Evidence that the applicant is an approved HUD lender.
- A current audited financial statement.
- If the applicant is a corporation, a copy of its charter and bylaws.
- A copy of the applicant’s lending policies.
- A resume for each of the applicant’s executive officers including the officers’ date of birth.
- A statement as to whether the applicant or any employee of the applicant has been convicted of a felony and, if so, supporting details.
- A copy of the information to be provided to the borrowers by the lender pursuant to Tenn. Code Ann. § 47-30-109 and Tenn. Comp. R. & Reg. 0180-24-.05.
- A sworn, notarized, statement as to the accuracy of the information provided in the application. Such statement shall contain the following or similar language: Having been duly sworn, and under the penalty of perjury, I hereby certify that the information provided to the commissioner in this application is truthful, complete, and correct.
The new regulation, which is effective April 17, 2017, is codified at Tenn. Comp. R. & Reg. 0180-24-.04 and is available here: http://publications.tnsosfiles.com/rules/0180/0180-24.20170417.pdf.
(Editor’s note: Weiner Brodsky Kider, PC serves as outside legal counsel to the National Reverse Mortgage Lenders Association.)