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New reverse mortgage law requires both sides to bring an attorney

A bill passed in the New York legislature focused on protecting against deceptive practices by reverse mortgage lenders is headed for the Governor’s desk. By reinforcing what many lenders in the business are already doing, lawmakers aim to formalize rules that will prevent borrowers from scams by unscrupulous lenders.

What do we mean by “reverse” mortgage?

A reverse mortgage is a loan available to those who are 62 or older with considerable home equity. The homeowner can borrow funds either as a lump sum, line of credit or a fixed monthly payment, against the value of their home. Many of these loans are federally insured; however, several scams using phrases like “government insured” and “public service announcement” caused concern for lawmakers in recent years.

Both lenders and borrowers must bring their own attorney

In addition to restrictions on marketing language for reverse mortgage loans, the new bill requires both borrowers and lenders to be represented by an attorney. Plus, at least one attorney must be present for the closing.

Protecting reverse mortgage borrowers from deceptive practices

Proponents of the bill circulated a memo to other lawmakers, saying:

“Inadequate regulation of this industry resulted in a sharp uptick in defaults in 2016, as more seniors fell into foreclosure on these products, losing not only their homes but also their most significant financial assets.”

Someone’s home is often their most valuable asset. When it comes to transactions involving real property, those who consult with an experienced real estate attorney can better understand their options. And for reverse mortgages, that counsel will soon be required by law. 

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