Reverse Mortgage Rules by State (and D.C.)

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Reverse Mortgage Rules by State (and D.C.)

In addition to state rules that control how reverse mortgage loans are handled within each state, there are also federal statutes that regulate these loans in 24 states plus the District of Columbia. For home equity conversion mortgages that are guaranteed by the federal government, many state laws are identical to those of the federal government (HECMs).Others could apply to nonfederal reverse mortgage loans including proprietary and single-purpose reverse mortgages.

In other instances, state law supplements or supersedes federal law. State law codes vary in where state-level reverse mortgage regulations may be found. They are sometimes included in a list of banking legislation. Sometimes they may be found in mortgage or real estate regulations. Reverse mortgage regulations were first defined in Texas in 1997 as part of a state constitution amendment.

Key Takeaways

  • In 24 states plus the District of Columbia, reverse mortgage loans are governed by state-level rules that provide extra assistance.
  • Many state rules that pertain to nonfederal reverse mortgage loans, such as single-purpose and proprietary reverse mortgages, are modeled after federal standards.
  • State legislation may also supplement federal law or handle areas of reverse mortgage loans that are not covered by federal regulation.
  • State rules governing banks, mortgages, loans, and even public utilities include provisions for reverse mortgages.

States (and D.C.) with Proprietary Reverse Mortgage Laws

The proprietary reverse mortgage laws of the states and the District of Columbia are listed below, along with a short summary of what each legislation addresses.

Arizona 2021 Title 6 — Banks and Financial Institutions Chapter 17 — Reverse Mortgages

The Arizona Act covers obligations for financial advice, disclosures, provisions, terms of repayment, borrower responsibility, unlawful acts, methods of enforcement, and lien priority.

Arkansas 2020 Title 23 — Public Utilities and Regulated Industries Subtitle 2 — Financial Institutions and Securities Chapter 54 — Reverse Mortgage Protection Act

The law is applicable to loans made after January 1, 2006. Reverse mortgages, how loan funds are handled, mandatory disclosures, lien priority, default processes, and remedies for borrowers if the lender does not deliver proceeds are all covered by legislation.

California 2021 California Code Civil Code — CIV Division 3 — Obligation Part 4 — Obligations Arising from Particular Transaction Title 4 — Loan Chapter 8 — Reverse Mortgages

California’s civil code typically adheres to federal law, although it departs from it by establishing the following terms for repayment:

  • Your reverse mortgage will not become instantly due and payable if you leave the house for less than 60 days in a row.
  • If you are gone for more than 60 straight days but less than a year, your mortgage will also not become due and payable, provided that you have adequately secured and safeguarded the house in accordance with the loan conditions and to the satisfaction of your lender.
  • The statute of limitations for written loan contracts, which, absent any other legal requirement, starts on the day your reverse mortgage loan becomes due and payable as specified in the loan agreement, governs your lender’s ability to collect the revenues from your reverse mortgage loan.
  • Any interest rate or other costs that begin after your loan becomes due and payable and cease until your loan has been fully repaid must be disclosed by your lender in the loan agreement.
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Colorado 2020 Colorado Revised Statutes Title 11 — Financial Institutions Article 38. Reverse Mortgages

The article’s goal is to clearly exclude lenders and borrowers of reverse mortgages from complying with unwarranted legislative requirements while nevertheless authorizing reverse mortgages. Prepayment, liens, interest, lender default, payback, the inapplicability of associated legislation, disclosures, how proceeds are treated, and counseling obligations are among the subjects discussed.

Connecticut 2020 Connecticut General Statutes Title 36a — The Banking Law of Connecticut Chapter 665 — Powers, Loans, and Investments Section 36a-267 — Reverse Annuity Mortgage Loans. Counseling, Certification Requirements. Penalties for Violations.

According to the law, the lender must inform the borrower of the need for counseling and confirm that it has really taken place. Penalties are also included for infractions.

Delaware 2014 Delaware Code Title 5 — Banking Chapter 21. Mortgage Loan Brokers § 2118. Reverse mortgages

The law defines an independent counseling agency, specifies how reverse mortgage loan earnings are distributed, and stipulates that no charge other than the regular fees listed in the law may be taken.

Hawaii 2021 Hawaii Revised Statutes Title 28. Property 506. Mortgages of Real Property or Fixtures 506-10 Reverse Mortgage Loan

The law stipulates that counseling must be completed and certified before submitting an application for a reverse mortgage. It also defines reverse mortgages and lays out the consequences for breaking this law.

Indiana 2021 Indiana Code Title 24. Trade Regulation Article 4.4. First Lien Mortgage Lending Chapter 2. Miscellaneous 24-4.4-2-503. Reverse Mortgages; Pamphlet; Counseling Required for Debtor

for HECMs and other reverse mortgages, counseling is necessary. defines the counseling agency and contains confirmation of the counseling needs that must be met before a reverse mortgage application may be approved.

Louisiana 2018 Louisiana Laws Revised Statutes Title 6 — Banks and Banking — RS 6:1101–1104 Reverse Mortgages

Establishes regulations for reverse mortgages, such as counseling, outlines a cooling-off period for commitments, and outlines the obligations of lenders to senior citizens.

Maryland 2020 Maryland Statutes Commercial Law Title 12 — Credit Regulations Subtitle 12 — Reverse Mortgage Loans Act

Defines the requirements for payment plans, calls for conformity to federal law, emphasizes the application of certain federal rules (uninsured loans), lists the requirements for reverse mortgage buyers, lists counseling requirements, and specifies the consequences for breaches of the act.

Minnesota 2015 Minnesota Statutes Chapters 245–267 — Public Welfare and Related Activities Chapter 256 — Human Services Section 256.99 — Reverse Mortgage Proceeds Disregarded

establishes that money received from a reverse mortgage loan cannot be used to evaluate your eligibility for federal or state low-interest loans or grants, general assistance, Minnesota supplementary assistance, general assistance, general assistance medical care, or medical assistance. The implementation of this portion of Minnesota law is not time-limited.

Missouri 2021 Missouri Revised Statutes Title XXIX — Ownership and Conveyance of Property Chapter 443 — Mortgages, Deeds of Trust, and Mortgage Brokers — Reverse Mortgage Act

Lists rules that apply to reverse mortgages, including restrictions on how revenues from these loans may be used, ceilings on future loans, bans on balloon payments, and other activities that are specifically mentioned. describes how payments received are handled (they are not treated as income) and the counseling requirements.

North Carolina 2021 North Carolina General Statutes Chapter 53 — Regulation of Financial Services Article 21 — Reverse Mortgages

Laws address the authority and procedures governing reverse mortgage loans, the application of rules, interest, taxes, insurance, and assessments, loan renegotiation, limits on borrowers’ liability, disclosures of loan terms, information required of lender, effects of lender’s default, repayment of borrower’s default, time for starting foreclosure, counseling requirements, prohibitions, requirement for contracts for shared appreciation or shared value, commissioner’s appointing authority, and commissioner’s appointing authority.

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Nebraska 2021 Nebraska Revised Statutes Chapter 45 — Interest, Loans, and Debt 45-1068 — Reverse-Mortgage Loan; Rules Governing; How Made or Acquired; Charges Authorized; Forfeiture by Lender

Rules specify the definition of a reverse mortgage, the terms for repayment and interest computation, the unrestricted use of proceeds, the loan origination charge (2%), and the consequences for lenders who fail to advance funds.

New York 2021 New York Laws RPP — Real Property Article 8 — Conveyances and Mortgages 280 Reverse Mortgages

This page covers laws pertaining to federal HECMs, federal HECM default and foreclosure restrictions, reverse mortgage loans for individuals age 60 or older, individuals age 70 or older, and any other applicable laws.

Rhode Island 2021 Rhode Island General Laws Title 34 — Property Chapter 34-25.1 — Reverse Mortgages

Laws cover the following topics: priority of reverse mortgages over encumbrances not previously recorded; relinquishment of security as to additional future advances—stipulation as to amount due; discharge of reverse mortgage; mortgages to which this chapter applies; requirements for reverse mortgage loans; mortgagees authorized to take out reverse mortgages; required counseling; pre-closing disclosures; annual account statements and other required disclosures; three-day cooling-off period; and rules for reverse mortgage discharge.

South Carolina 2020 South Carolina Code of Laws Title 29 — Mortgages and Other Liens Chapter 4 — Reverse Mortgages

These laws establish the definition of reverse mortgages, the regulations controlling them, the fact that they are permitted regardless of previous mortgage transactions, the exclusion of reverse mortgage revenues from means-testing programs, and the need of counseling.

South Dakota 2021 South Dakota Codified Laws Title 54 — Debtor and Creditor Chapter 12 — Reverse Mortgage Loans

Codified laws include a definition of reverse mortgages, a set of guidelines for reverse mortgage loans, and details about loan payments and the management of unused reverse mortgage funds.

Tennessee 2020 Tennessee Code Title 47 — Commercial Instruments and Transactions Chapter 30 — Home Equity Conversion Mortgages

The code establishes approved lenders, mandates lender compliance, specifies interest payments, permits the borrower to be required to pay certain taxes, premiums, and assessments, and establishes fees, the computation of the outstanding loan amount, and prepayment procedures. Calculating the amount owed by the borrower, the loan’s due date, and debt collection are other concerns. Also included are the obligations of the lender, such as the need for an annual statement of accounts, and what occurs in the event of a default. The terms and circumstances of borrower default, notification of foreclosure, and the exclusion of future loans from the provisions of Chapter 28 of this law are all addressed. Finally, the codes examine Fannie Mae reverse mortgage loans and specify banned behaviors, infractions, and the code’s legislative objective.

Texas 1997 Amendment to Texas Constitution — Section 50 — Homestead; Protection from Forced Sale; Mortgages, Trust Deeds, and Liens

A 1997 amendment to the Texas Constitution that was prepared and approved codifies the state’s reverse mortgage regulations. The amendment is a detailed piece of legislation that outlines the procedures and circumstances under which a reverse mortgage may be created in the state of Texas.

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Utah 2021 Utah Code Title 57 — Real Estate Chapter 28 — Utah Reverse Mortgage Act

Definitions, disclosures, counseling requirements, expenses and payback, a cooling-off period, and details concerning reverse mortgage loans that are federally insured are all included in the Utah Code as requirements and conditions for a reverse mortgage loan.

Vermont 2021 Vermont Statutes Title 8 — Banking and Insurance Chapter 200 — Consumer Protection — Subchapter 7: Reverse Mortgages

The state of Vermont’s laws define reverse mortgages, mandate counseling, prohibit the mandatory purchase of an annuity with loan proceeds, and limit the ability of reverse mortgage lenders to issue these loans to those who have received federal approval.

West Virginia 2021 West Virginia Code Chapter 47. Regulation of Trade Article 24. The Reverse Mortgage Enabling Act

According to the West Virginia Code, reverse mortgages are defined, general guidelines are listed, applicable statutes and laws are excluded, borrowers are exempt from the use of reverse mortgage proceeds for public benefit programs, counseling is required, reverse mortgage loans are under the control of the commissioner of banking, and anyone making a reverse mortgage in accordance with federal regulations is exempt from the code.

Wisconsin 2021 Wisconsin Statutes & Annotations Chapter 138 — Money and Rates of Interest. 138.058 — Reverse Mortgage Loans

defines how reverse mortgage revenues are handled with respect to public benefits and permits lenders to file reverse mortgages that comply with federal standards.

Washington, D.C., 2021 District of Columbia Code Title 42 — Real Property Chapter 27 — Housing Finance Agency Subchapter III — Operations of the Agency § 42–2703.07a. Reverse Mortgage Foreclosure Prevention Program

For homeowners with reverse mortgages who fall behind on their property taxes and other debts, the law establishes a scheme to avoid foreclosure.

Which state has the most reverse mortgages?

Since 2016, California has led the nation in the overall amount of reverse mortgage loans with 11,921 loans in total. Florida, Colorado, Texas, Arizona, Washington, Utah, Oregon, New York, and North Carolina made up the remaining top 10 in that order.

How many states have their own reverse mortgage laws?

Although many state laws match federal reverse mortgage rules, at least 24 states and the District of Columbia have their own reverse mortgage laws.

What are the three types of reverse mortgages?

The Bottom Line

24 states, as well as the District of Columbia, have their own rules regarding reverse mortgages. Some add to HECM federal restrictions, while others are exclusive to proprietary or one-time use reverse mortgages. Without reviewing the specific legislation in your state, do not assume that the national restrictions for reverse mortgages will apply identically to the one you may be contemplating.

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