Reverse Mortgage Act.

  1. Law
  2. Illinois Compiled Statutes
  3. PROPERTY
  4. Reverse Mortgage Act.

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(765 ILCS 945/1)

Sec. 1. Short title. This Act may be cited as the Reverse Mortgage Act.

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/5)

Sec. 5. General definitions. As used in this Act, unless the context otherwise requires:

"Borrower" means a natural person who seeks or obtains a reverse mortgage.

"Business day" means any calendar day except Saturday, Sunday, or a State or federal holiday.

"Homestead property" means the domicile and contiguous real estate owned and occupied by the borrower. "Homestead property" includes a manufactured home as defined in subdivision (53) of Section 9-102 of the Uniform Commercial Code that is real property under Section 5-35 of the Conveyance and Encumbrance of Manufactured Homes as Real Property and Severance Act.

"Lender" means a natural or artificial person who transfers, deals in, offers, or makes a reverse mortgage. "Lender" includes, but is not limited to, creditors and brokers who transfer, deal in, offer, or make reverse mortgages. "Lender" does not include purchasers, assignees, or subsequent holders of reverse mortgages.

"Real property" includes a manufactured home as defined in subdivision (53) of Section 9-102 of the Uniform Commercial Code that is real property under Section 5-35 of the Conveyance and Encumbrance of Manufactured Homes as Real Property and Severance Act.

"Reverse mortgage" means a non-recourse loan, secured by real property or a homestead property, that complies with all of the following:

  • (1) Provides cash advances to a borrower for the purchase of the home or based on the equity in a borrower's owner-occupied principal residence, provided that it is a residence with not more than 4 units.
  • (2) Requires no payment of principal or interest until the entire loan becomes due and payable.

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/10)

Sec. 10. Reverse mortgages.

(a) Reverse mortgage loans shall be subject to all of the following provisions:

  • (1) Payment, in whole or in part, shall be permitted without penalty at any time during the term of the mortgage.
  • (2) A reverse mortgage may provide for an interest rate that is fixed or adjustable and may provide for interest that is contingent on appreciation in the value of the property.
  • (3) If a reverse mortgage provides for periodic advances to a borrower, the advances may not be reduced in amount or number based on any adjustment in the interest rate.
  • (4) A reverse mortgage may be subject to any additional terms and conditions imposed by a lender that are required under the provisions of the federal Housing and Community Development Act of 1987 to enable the lender to obtain federal government insurance on the mortgage if a loan is to be insured under that Act.

(b) The repayment obligation under a reverse mortgage is subject to all of the following:

  • (1) Temporary absences from the home not exceeding 60 consecutive days shall not cause the mortgage to become due and payable.
  • (2) Temporary absences from the home exceeding 60 days, but not exceeding one year, shall not cause the mortgage to become due and payable, provided that the borrower has taken action that secures the home in a manner satisfactory to the lender.

(c) A reverse mortgage shall become due and payable upon the occurrence of any of the following events, unless the maturity date has been deferred under the Federal Housing Administration's Home Equity Conversion Mortgage Program:

  • (1) The property securing the loan is sold.
  • (2) All borrowers cease to occupy the home as a principal residence.
  • (3) A fixed maturity date agreed to by the lender and the borrower is reached.
  • (4) Default by the borrower in the performance of its obligations under the loan agreement.
  • (5) The death of the borrower or, for homestead properties in joint tenancy, the death of the last surviving joint tenant who had an interest in the property at the time the loan was initiated.

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/15)

Sec. 15. Reverse mortgage disclosures.

(a) The Office of the Attorney General shall develop the content and format of an educational document providing independent consumer information regarding reverse mortgages, potential alternatives to reverse mortgages, and the availability of independent counseling services, including services provided by nonprofit agencies certified by the federal government to provide required counseling for reverse mortgages insured by the U.S. Federal Government. The document shall also include a statement that the terms of a reverse mortgage may adversely affect the applicant's eligibility to obtain a tax deferral under the Senior Citizens Real Estate Tax Deferral Act. The document shall be updated and revised as often as deemed necessary by the Office of the Attorney General.

(b) Lenders are required to provide each borrower a document regarding the availability of counseling services that shall be in at least 12-point font, containing contact information (including agency name, address, telephone number, and, if applicable, website) for agencies approved by the U.S. Department of Housing and Urban Development (HUD) to conduct reverse mortgage counseling. The agencies included on the list shall be in accordance with requirements for the Federal Housing Administration's Home Equity Conversion Mortgage Program. This document shall contain the following statement:

"IMPORTANT NOTICE: Under Illinois law, reverse mortgages are non-recourse loans secured by real or homestead property. Reverse mortgages insured by the U.S. Federal Government, known as Home Equity Conversion Mortgages or HECM loans, require people considering reverse mortgages to get counseling prior to submitting a completed application for the loan from an agency approved by the U.S. Department of Housing and Urban Development (HUD) to conduct reverse mortgage counseling.

The purpose of the counseling is to help the prospective borrower understand the financial implications, alternatives to securing a reverse mortgage, borrower obligations, costs of obtaining the loan, repayment conditions, and other issues. Counseling can also be a benefit to people considering reverse mortgages not insured by the federal government. There are advantages to receiving this counseling in person, as this method allows for greater participation by the prospective borrower, and also allows the counselor to more accurately determine the prospective borrower's understanding of the program. However, counseling can also be conducted over the telephone.

In accordance with federal requirements, Illinois State law requires reverse mortgage lenders to provide potential reverse mortgage borrowers with a list, including contact information, of agencies that are approved by HUD to conduct reverse mortgage counseling. Contact information for additional approved counseling agencies is available from HUD or your lender.".

(c) At the time of the initial inquiry regarding a reverse mortgage or, if not practically feasible, after the borrower makes a request to apply for a reverse mortgage, a lender shall provide to the borrower the documents described in subsections (a) and (b) of this Section.

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/20)

Sec. 20. Reverse mortgages cooling-off period.

(a) Any written commitment provided by the lender to the borrower must contain the material terms and conditions of the reverse mortgage. That commitment may be subject to a satisfactory appraisal and the borrower meeting standard closing conditions.

(b) A borrower shall not be bound for 3 full business days after the borrower's acceptance, in writing, of a lender's written commitment to make a reverse mortgage loan and may not be required to close or proceed with the loan during that time period. A borrower may not waive the provisions of this subsection (b).

(c) At the time of making a written commitment, the lender shall provide the borrower a separate document in at least 12-point font that contains the following statement: "IMPORTANT NOTICE REGARDING THE COOLING-OFF PERIOD: Illinois State law requires a 3-day cooling-off period for reverse mortgage loans, during which time a potential borrower cannot be required to close or proceed with the loan. The purpose of this requirement is to provide potential borrowers with 3 business days to consider their decision whether to secure a reverse mortgage or not. Potential borrowers may want to seek additional information from a reverse mortgage counselor during this 3-day period. The 3-day cooling-off period cannot be waived.".

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/25)

Sec. 25. Reverse mortgages; restriction on cross-selling. No lender may:

  • (1) require the purchase of an annuity, investment, life insurance, or long-term care insurance product as a condition of obtaining a reverse mortgage loan; however, nothing in this paragraph shall preclude a lender from requiring the borrower to purchase property and casualty insurance, title insurance, flood insurance, or other products meant to insure or protect the value of the home or the lender's lien and that are customary for residential mortgage or reverse mortgage transactions on the borrower's residence securing the reverse mortgage loan;
  • (2) enter into any agreement to make a reverse mortgage loan that obligates the borrower to purchase an annuity, investment, life insurance, or long-term care insurance product;
  • (3) offer an annuity to the borrower before the closing of the reverse mortgage or before the expiration of the right of the borrower to rescind the reverse mortgage agreement;
  • (4) refer the borrower to anyone for the purchase of an annuity before the closing of the reverse mortgage or before the expiration of the right of the borrower to rescind the reverse mortgage agreement; or
  • (5) provide marketing information or annuity sales leads to anyone regarding the prospective borrower or borrower before the closing of the reverse mortgage or before the expiration of the right of the borrower to rescind the reverse mortgage loan.

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/30)

Sec. 30. Reverse mortgages; restriction on distribution of loan proceeds. No person, other than a borrower's spouse or partner, who directly or indirectly facilitates, processes, negotiates, assists, encourages, arranges, or otherwise induces consumers to take out a reverse mortgage with a lender may receive any portion of the loan proceeds for any service or product, including for services that fall under the Home Repair and Remodeling Act, other than that for bona fide fees for origination of the loan. This Section shall not prohibit disbursements of loan proceeds in compliance with guidelines, including uses defined as mandatory obligations, under the Federal Housing Administration's Home Equity Conversion Mortgage Program, nor shall it prohibit a borrower from using the loan proceeds to purchase products or services from a lender that is a financial institution in the ordinary course of the financial institution's business.

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/35)

Sec. 35. Reverse mortgages; certification requirements.

(a) No reverse mortgage commitment may be made unless all lenders involved in brokering and making the reverse mortgage loan certify, in writing, that:

  • (1) the borrower has received from the lender the educational document prepared by the Office of the Attorney General required in subsection (a) of Section 15 and the document required in subsection (b) of Section 15 regarding the availability of counseling services on reverse mortgages;
  • (2) the borrower has received from the lender, at the time a written commitment was made to the applicant to provide a reverse mortgage loan, the disclosure document required in Section 20 regarding the 3-day cooling-off period and that at least 3 business days have passed since the document was provided; the certification shall also include the date the cooling-off period disclosure was provided;
  • (3) the reverse mortgage loan does not include any current or future requirement for the applicant to purchase an annuity, investment, life insurance, or long-term care insurance product; however, nothing in this paragraph (3) shall preclude a lender from requiring the borrower to purchase property and casualty insurance, title insurance, flood insurance, or other such products meant to insure or protect the value of the home or the lender's lien and that are customary for residential mortgage or reverse mortgage transactions;
  • (4) no offer of an annuity was made to the borrower before the closing of the reverse mortgage or will be before the expiration of the right of the borrower to rescind the reverse mortgage loan;
  • (5) the borrower was not referred to anyone for the purchase of an annuity before the closing of the reverse mortgage or will be before the expiration of the right of the borrower to rescind the reverse mortgage loan;
  • (6) the borrower was not provided marketing information or annuity sales leads to anyone regarding the prospective borrower or borrower before the closing of the reverse mortgage or will be before the expiration of the right of the borrower to rescind the reverse mortgage loan; and
  • (7) to their knowledge, no person, other than a borrower's spouse or partner, who directly or indirectly facilitates, processes, negotiates, assists, encourages, arranges, or otherwise induces consumers to take out a reverse mortgage with a lender has received or will receive any portion of the loan proceeds for any service or product, including for services that fall under the Home Repair and Remodeling Act, other than that for bona fide fees for origination of the loan.

This Section shall not prohibit disbursements of loan proceeds in compliance with guidelines under the Federal Housing Administration's Home Equity Conversion Mortgage Program, including uses defined as mandatory obligations, nor shall it prohibit a borrower from using the loan proceeds to purchase products or services from a lender that is a financial institution in the ordinary course of the financial institution's business.

(b) The lender shall maintain the certification in an accurate, reproducible, and accessible format for the term of the reverse mortgage.

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/40)

Sec. 40. Enforcement.

(a) Any violation of this Act shall also be considered an unlawful practice under the Consumer Fraud and Deceptive Business Practices Act. Only the Attorney General may enforce violations of this Act. The Attorney General shall only find a violation of this Act if the conduct constitutes a pattern or practice.

(b) Any violation of this Act by a licensee or residential mortgage licensee under the Residential Mortgage License Act of 1987 shall also be considered a violation of the Residential Mortgage License Act of 1987.

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/900)

Sec. 900. (Amendatory provisions; text omitted).

(Source: P.A. 99-331, eff. 1-1-16; text omitted.)

 

(765 ILCS 945/905)

Sec. 905. The Illinois Banking Act is amended by repealing Sections 5a, 6.1, and 6.2.

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/910)

Sec. 910. The Savings Bank Act is amended by repealing Section 1010.

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/915)

Sec. 915. (Amendatory provisions; text omitted).

(Source: P.A. 99-331, eff. 1-1-16; text omitted.)

 

(765 ILCS 945/920)

Sec. 920. The Illinois Credit Union Act is amended by repealing Sections 46.1 and 46.2.

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/925)

Sec. 925. (Amendatory provisions; text omitted).

(Source: P.A. 99-331, eff. 1-1-16; text omitted.)

 

(765 ILCS 945/930)

Sec. 930. The Residential Mortgage License Act of 1987 is amended by repealing Section 5-5.

(Source: P.A. 99-331, eff. 1-1-16.)

 

(765 ILCS 945/935)

Sec. 935. (Amendatory provisions; text omitted).

(Source: P.A. 99-331, eff. 1-1-16; text omitted.)


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