State Legislation: How Texas is Aiming to Regulate Reverse Mortgages


Codified guidelines on the federal government’s Home Equity Conversion Mortgage (HECM) program can often arrive unexpectedly or with little warning about a new policy that may be issued by the U.S. Department of Housing and Urban Development (HUD) or the Federal or Housing Administration ( FHA). The federal government, of course, has many major problems that can often take a greater share of the political and legislative range when compared to the weight the HECM can have on the development of the nation, but this is not always the case when it comes to legislature State level bodies.

State lawmakers can often quickly turn their attention to the way the reverse mortgage industry works in their territories, and there is often very little lack of state law targeting reverse mortgages in any way. Sometimes this state legislation – even if well intended by a state legislature – can conflict or conflict with state guidelines, which requires industry input to make business viable for reverse mortgage companies in a given area remains.

This is where the State and Local Committee of the National Reverse Mortgage Lenders Association (NRMLA) comes in, which meets regularly or as needed to decide whether or not state reverse mortgage laws require some type of industry intervention. Recently, committee members at the NRMLA Virtual Policy Conference reviewed the active legislation in several states that would affect the way the reverse mortgage business works there. One of the states recently checked was Texas.

Texas House Bill 1129: False, misleading, or misleading advertising on a reverse mortgage

Texas House Bill (HB) 1129 is a statute that relates to “false, misleading, or fraudulent advertising relating to a reverse mortgage loan agreement,” as the text states. Essentially, it aims to define the parameters of what should be classified as fraudulent advertising, while also listing that any material that violates the proposed law is a violation of the Texas Code of Business and Commerce as a fraudulent trading practice would represent.

According to Scott Norman, co-chair of NRMLA and vice president of Finance of America Reverse (FAR), vice president of field retail and director of government relations. Norman is very experienced in the regulatory affairs of the state’s reverse mortgage loans as he has helped get reverse mortgage approval in the state origin the first reverse mortgage in Texas itself.

NRMLA supports all laws aimed at strengthening consumer protection for seniors involved in the reverse mortgage business, but the original version of this Texan bill required active dialogue, says Norman.

“The problem with this legislation, frankly, is that it was too open, and it really is [did not] have a start time or a stop time, ”Norman explained at the NRMLA Virtual Policy Conference. “And theoretically [a borrower] could – in 10 years – come back and say, ‘This and that said something to me, which I think is a bit confusing, and I feel like I’ve been hurt. So what we’re working on [is putting] jointly an amendment to House Bill 1129 to limit the scope of what they are trying to do. “

Part of the association’s efforts is to keep the consumer protection language included in the bill, but give it a clearer point to work with while ensuring that seniors are protected from misleading advertising practices. This can include mailers trying to use some time sensitivity when taking out a reverse mortgage; Advertising with images of eagles reminiscent of a government document; or to describe a reverse mortgage as a kind of government benefit, which it doesn’t.

“[Such practices are] How we get such legislation is certainly well-intentioned, but we don’t just have to stick to what the federal guidelines allow – and certainly the NRMLA has a lot of guidelines that they like to work with – so we’re really trying to narrow it down “Explains Norman. “We have no problem with the idea of ​​a consumer law, we have a problem with the idea that it is so completely open that anyone can say anything and anyone can cry anytime, even 5-10 years later.”

The latest draft of HB 1129 was submitted with the full approval of the Board of Pensions, Investments and Financial Services of the Texas Legislature and has yet to be voted on in the Austin State House plenary.

SB 362: Settlement of a reverse mortgage after the death of the “last surviving” borrower

Texas Senate Bill (SB) 362 is a bill relating to “the satisfaction of a reverse mortgage loan after the death of the last surviving borrower,” as the last bill dated.

“This section only applies to an heir who is an immediate family member of a borrower,” the invoice states. “Upon the death of the last surviving borrower of a reverse mortgage loan secured by the borrower’s home, the lender shall allow an heir who inherits the home no later than six months after the date of the borrower’s death to satisfy the loan prior to the foreclosure of the Residence.

Although well-intentioned, says Norman, the text as contained in the proposed bill would run counter to federal guidelines and require dialogue from the trade association with lawmakers, says Norman.

“So it comes into a little conflict with federal guidelines,” explains Norman. “Basically, we have six months before the lender or servicer can do anything about the death of the borrower. What they are essentially trying to do is make sure that the family does not lose their equity and the ability to live in the house, borrows that equity and uses it to build wealth. “

Laws like this have surfaced multiple times in other states in the past, and while the idea of ​​the association isn’t considered a bad one, the way the legislation is drafted in this case might make it for reverse mortgage compliance employees Making this difficult to parse between state and federal regulations for the industry, Norman explains.

“It’s something that we either all discuss together or work on an alternative language,” he says.

According to the latest information from the Texan legislature, the bill has been submitted to the state’s Natural Resources and Economic Development Committee and has yet to be voted on.