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A Letter to Minnesota Governor Tim Pawlenty Regarding Reverse Mortgages

May 17, 2010

Emailing the MN Governor about reverse mortgage legislationFrom the time I first heard about the proposed reverse mortgage legislation in 2009, SF489, I have been writing to and in contact with MN Governor Pawlenty’s office.  This year even prior to having details of the bill I started contacting Governor Pawlenty’s office, sending emails regarding the suspected legislation.  After Friday evening May 14, 2010 when I finally found the details of the bill SF2430 I again sent Governor Pawlenty a message requesting a veto this time outlining with the details of the issues of the bill.  Following is the latest letter I sent to him requesting a veto.

Dear Governor Pawlenty,

After having time to review the reverse mortgage amendment to SF2430/HF2699 I want to provide the reasons why this reverse mortgage legislation should be vetoed.

Besides the facts I have pointed out previously:

  • This bill has not been transparent – the amendment was just added on the afternoon of May 14, 2010 with no prior knowledge of the details to those of us in the reverse mortgage industry.
  • This reverse mortgage legislation is controversial.  Any reverse mortgage legislation should not happen without a full hearing.
  • While it appears they pulled the language of suitability, this bill still contains some of the same language as the 2009 SF489/HF528 which was vetoed last year which would mean increased costs to reveres mortgage borrowers and/or cause some lenders to refrain from offering reverse mortgages in Minnesota.

The main issues include:

1.  Why should a lender receive a civil penalty an dhave to pay $1,000 for something a counselor does or doesn’t do?  Who and how is this going to be overseen?

The language of this is subjective setting up an opportunity for litigation and lenders may decide not to lend in the state if there is a risk of civil penalty for something they have no control over.

  • Implementing state laws that are different than the HUD requirements will make it more difficult for prospective borrowers to receive counseling.
    • Some of the counseling opportunities currently available to our Minnesota borrowers will no longer be an option as some of the counseling agencies may decide that with different regulations they will not provide counseling in the state.
  • Having the state oversee counseling different than the HUD requirements is likely to be costly for the state in seeing that these regulations are followed by counselors in the state as well as across the country.

2.  Adding the language for Lender default and forfeiture may mean lenders will choose not to loan with this requirement and HUD may choose not to insure the loans with these requirements.

3. Seven-day cooling off period; right of rescission will mean the loans will be more expensive for seniors and without the opportunity to waive the provision under certain circumstances such as foreclosure may mean that seniors could lose their home because the reverse mortgage could not be done timely.

  • It appears they changed the 10-day rescission period language to a seven-day cooling off period but it would have the same negative consequences as the 10-day rescission period.
  • Language is vague and subjective, i.e. “written commitment to make the reverse mortgage loan. “ What does “written commitment” mean?  This makes it more likely for litigation.

4.  This law would be additional costs to the state. While the bill may not be showing as a having a budget expenditure, there would be additional costs to the state in overseeing that state laws are followed versus the difference from the federal regulations.  If the loan becomes more expensive to seniors and/or lenders choose not to loan in the state more seniors are likely to lose their homes without the reverse mortgage option.  Consequently the foreclosures would increase and more housing would be needed for seniors and much of this would be born as state expense.

5.  All lenders do not have to abide by the state rules. Federal chartered banks do not have to abide by the state rules because they are federal chartered yet brokers and non-federal chartered banks and lenders would have to follow any state laws.  This would be a monopolistic-like advantage for the FDIC banks over other lenders. This obviously does not foster fair competition between all lenders and small business.

6.  Seniors can apply for and if they qualify can receive a conventional or home equity loan to refinance without all the regulations that are done with a reverse mortgage. Sometimes they may feel it is easier and less invasive to do so.  Unfortunately many who have taken a conventional or home equity loan run into problems making the required monthly payments then inquire about a reverse mortgage.  With the lower home values many times these seniors do not qualify for the reverse mortgage and then often face foreclosure and lose their homes.  Or they may just use credit cards to finance their retirement expenses then run into problems when they can’t make the payments.  There aren’t additional requirements for seniors to qualify for credit cards.  And there aren’t additional requirements for seniors to take out a car loan.  So why have such tight regulations on reverse mortgages when seniors can make other choices that could be more detrimental to them.

7.  Implementing this legislation is insulting to our seniors who have worked hard all of their lives – they are not children, they have lots of experience and knowledge – some that we could and should learn from – so why are we treating them like children?  They have the right to be educated on their options then decide what is right for their situation, not have legislators, counselors, or lenders make decisions for them.

Keep in mind that:  A reverse mortgage is a mortgage just like any other loan but has special terms for seniors 62 and older. And besides the special terms to benefit them to qualify and improve their life the reverse mortgage borrowers are already highly protected (see attached article)!  I would like to educate those making legislative decisions on the facts and terms of reverse mortgages then determine what legislation needs to be implemented for proprietary reverse mortgages.

Again, I ask that you veto the reverse mortgage legislation SF2430/HF2699 to protect Minnesota Seniors and the reverse mortgage businesses.

Thank you,

Beth Paterson
Executive Vice President
Prestige Mortgage LLC
Reverse Mortgages SIDAC
Security, Independence, Dignity and Control
The Experts Excelling In Service
Phone:  651-762-9648
Toll Free:  1-877-590-9648
Fax:  651-653-0878
Be sure to visit our website and
Blog for reverse mortgage facts and details:
www.RMSIDAC.com and
http://BethsReverseMortgageBlog.wordpress.com
Follow on http://Twitter.com/RMSIDAC

While Governor Pawlenty recognizes the issues as he stated in his 2009 veto letter, the unfortunate fact is that this legislation was not a stand alone bill but is attached to a foreclosure bill and without the line-item-veto authority may be signed into law.  If this is the case it will be very unfortunate for Minnesota seniors as well as the reverse mortgage industry.

© 2010 Beth Paterson http://BethsReverseMortgageBlog.wordpress.com 651-762-9648

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