Guidance  Reverse Mortgage lending for banks, credit unions, and lenders

Date:	04/01/2014
Referenced Sources:	M.G.L. c. 167E, §7 M.G.L. c. 183, §67 M.G. L. c. 171, §65

In the Commonwealth, reverse mortgage loans must be made in accordance with programs which have been reviewed and approved by the Commissioner of Banks. Reverse mortgage loan programs submitted to the Division for approval must meet the requirements of M.G.L. c. 167E, §7. This provision applies to Massachusetts state-chartered banks and all other mortgagees pursuant to M.G.L. c. 183, §67. Massachusetts state-chartered credit unions seeking to make reverse mortgage loans must request approval of a program meeting the requirements set forth in M.G. L. c. 171, §65.

Before getting a reverse mortgage, consumers must complete a counseling session provided by an approved agency. As of March 31, 2024, reverse mortgage counseling can be provided via synchronous real-time video conference or telephone as authorized by Chapter 88.

Borrower protections to provide

These programs must provide for certain borrower protections such as:

• Mandatory participation in a reverse mortgage counseling session approved by the Commonwealth's Executive Office of Elder Affairs (List of Approved Counseling Services) . Verify receipt of the counseling certificate from each borrower.
• Seven day "cooling off" period following a consumer's acceptance of a commitment, during which a consumer cannot be required to close or proceed with the loan transaction.
• Required plain language disclosures of specific mortgage loans terms.
• No prepayment penalties or restrictions permitted.
• Disclosure requirement and acknowledgment of contingencies which could force a sale of the property securing the loan.
• Inclusion of a disclosure statement that a reverse mortgage loan has estate and tax planning consequences and may affect eligibility for government benefits and that applicants are advised to seek appropriate advice.

License requirements:

In addition to receiving an approval of its reverse mortgage loan program under the above statutory provisions, a lender must hold a valid mortgage lender license, or qualify for an exemption from licensing under G.L. c. 255E, §2, in order to make reverse mortgage loans.

Entities intending to broker reverse mortgage loans must hold a valid mortgage broker license, or qualify for an exemption, in the Commonwealth and are limited to acting in the capacity of a broker for reverse mortgage programs offered by lenders which are approved by the Commissioner of Banks. Loan originators of reverse mortgage loans must be appropriately licensed pursuant to G. L. c. 255F, added by Chapter 206 of the Acts of 2007. See the Division's Approved Reverse Mortgage Lender List www.mass.gov/dob.

Reverse Mortgage program requirements

• Banks, credit unions, and lenders which partner with Homeowner Options for Massachusetts Elders (HOME) do not need to obtain a separate approval of a reverse mortgage loan program as the HOME programs have been reviewed and approved by the Division.
• Banks, credit unions, and lenders closing the loans in their name need to submit a filing for approval of a reverse mortgage loan program.
• Please be advised that Chapter 206 of the Acts of 2007, see G. L. c. 183, §6D, requires that every mortgage and assignment of mortgage secured by residential property, in which a mortgage broker is involved, must contain on it the name, address and license number of the mortgage broker. In addition, mortgage loans closed on or after July 1, 2008 must also contain the name, address and license number of mortgage loan originator, if applicable.
• A creditor must provide all disclosures required in accordance with the Division's regulation 209 CMR 32.33 and the Truth in Lending Act's implementing regulation, Regulation Z.These disclosures must be provided at least three business days prior to the consummation of a closed end transaction or the first transaction of an open end transaction. Click on the links below to learn more about these disclosures.
  • 209 CMR 32.33
  • Regulation Z
• Real Estate Settlement Procedures Act (RESPA).  RESPA and its implementing regulation, Regulation X requires that borrowers with loans secured with a mortgage placed on a one-to-four family residential property receive certain disclosures at or before settlement. A few of these disclosures reflect the costs associated with the settlement, outline lender servicing and escrow account practices and describe business relationships between settlement service providers.  Learn more about RESPA.

Process for approval

Please complete the Division of Banks Reverse Mortgage Program Application form to initiate the application review process. Please be advised that entities that are not approved to make reverse mortgages in the Commonwealth must cease from making such loans until a written approval is obtained. Contact the Division's Licensing Unit at   [phone] or via email at [e-mail] if you have questions.

The following list provides an overview of some of the information that must be submitted with the application:

• A detailed explanation of the type of program to be offered, including but not limited to whether the loan will be open end or closed and whether it will be a recourse or non recourse loan;
• An explanation of the interest rate and method of calculation;
• All preliminary disclosures provided to reverse mortgage borrowers including:
   
  • A sample commitment letter indicating that the reverse mortgage borrower shall not be bound for 7 days after his acceptance, in writing, of the lenders written commitment; and
  • A written statement that can be signed by the borrower, acknowledging receipt of the disclosures identifying all contractual contingencies that could force the sale of the real estate;
  • A provision permitting the prepayment of a loan at any time without a penalty; and
  • A statement notifying borrowers that that the mortgage has tax and estate planning consequences and may affect the levels of, or eligibility for, certain government benefits, grants, pensions and that the borrowers should also be advised to explore those matters with appropriate authorities.
• A copy of the closing documents to be signed at settlement. The documents should include a copy of the note, mortgage, and all disclosures.

Please be advised that the preceding information is not a comprehensive list of all documents that should be provided with the application for approval. Lenders seeking approval of a reverse mortgage program should review Massachusetts General Laws, Chapter 167E §7, which provides a detailed description of the statutory requirements.

Process for amendments

• Lenders are required to file an amendment to their reverse mortgage loan program with the Division if they are seeking to offer a reverse mortgage loan product not included in its previously approved program. For example, this would apply to the Home Equity Conversion Mortgage ("HECM") for Purchase loan and any proprietary reverse mortgage loan product.
• Information which addresses the specific requirements listed in the preceding section above must be submitted for each loan product.

Industry Letter - Important Information on Changes to Massachusetts Reverse Mortgage Counseling Requirements Effective August 1, 2014

Reverse Mortgage Loans: What Borrowers Need to Know

Approved Reverse Mortgage Lenders and Loan Programs

Industry Letter on Recent HUD Changes to Home Equity Conversion Mortgage (HECM)- Reverse Mortgage Mortgagee Letters 2013-27 and 2013-28

Other Helpful Resources

Reverse Mortgage In Person Counseling Guidance