New law aims to protect, inform seniors seeking reverse mortgages
From Illinois Business Journal news services
SPRINGFIELD – A bill designed to thwart reverse mortgage scams was signed this month by the governor.
Sponsored among others by state Sen. Jacqueline Y. Collins, D-Chicago, and state Rep. Jay Hoffman, D-Swansea, the measure was sought in the wake of problems in Chicago, where one scammer, over a period of many years, allegedly tricked senior citizens into taking out reverse mortgages to finance home improvements that were never completed. The state attorney general is pursuing action in that case.
“A reverse mortgage is a complicated financial product that can leave homeowners and their families vulnerable to scams and unable to pay when the loan comes due,” Collins said. “This legislation requires lenders to provide potential borrowers with accurate information about the product, a list of counselors they can contact if they need help and the opportunity to reconsider within three days of signing the paperwork.”
Collins worked with Attorney General Lisa Madigan, Housing Action Illinois and other advocates on Senate Bill 1281, which ensures potential borrowers are informed about the risks of reverse mortgages and also prohibits someone who facilitates a reverse mortgage from accepting any of the proceeds in exchange for services.
The legislation also prevents conflicts of interest by banning lenders from receiving compensation in exchange for trying to sell borrowers on other financial products, such as life insurance policies and investments.
The law takes effect July 1, 2016.