Be it enacted by the Senate and House of Representatives
in General Court assembled, and by the authority of the same,
SECTION 1. Subsection B of section 2 of chapter 167E of the General Laws, as appearing in the 1988 Official Edition, is hereby amended by inserting after paragraph 14 the following paragraph:-
14A. Reverse Mortgage Loans. - A reverse mortgage loan not exceeding eighty percent of the value of the real estate to the owner of such real estate improved with a dwelling designed to be occupied by not more than four families; provided, however, that each such owner shall be at least sixty years of age, shall own the property and shall occupy the mortgaged real estate in whole or in part. The maximum sum for a loan of this class shall be determined by the commissioner by regulation. The proceeds from such loan shall be advanced to the mortgagors, either directly or indirectly, in installments at agreed upon times between the lender and the mortgagors. Such proceeds together with unpaid interest, if any, shall be repaid at the end of a term not to exceed ten years. The aggregate balance of such loans made or acquired by any corporation shall not exceed ten percent of its deposits.
Before any bank undertakes to make reverse mortgage loans, it shall submit to the commissioner for his approval a general plan and any subsequent amendments under which such loans are to be made. The said plan shall provide that:
(1) a loan applicant shall not be bound for seven days after the loan commitment is made;
(2) the bank shall obtain a statement signed by the borrower acknowledging disclosure of all contractual contingencies which could force a sale of the mortgaged real estate;
(3) the instrument shall provide for prepayment without penalty at any time during the term of the loan; and
(4) interest rates shall be fixed at loan origination.
Any such plan submitted shall include a copy of the form of the note and mortgage deed that will be utilized for such loans, a detailed description of how the plan will function, and such other information as the commissioner may require.
Prior to making any such loan, a bank shall provide a prospective borrower with written materials explaining in plain language the type of mortgage being offered and its specific terms including but not limited to:
(a) a schedule and explanation of payments to the borrower and whether or not property taxes and insurance premiums are to be deducted;
(b) a schedule of outstanding debt over time;
(c) repayment date, if a fixed term loan;
(d) method of repayment and schedule, if any;
(e) all contractual contingencies, including lack of home maintenance and other default provisions, which may result in a forced sale of the mortgaged property;
(f) interest rate, annual percentage rates and total interest payable on the loan;
(g) initial loan fees and charges;
(h) description of prepayment and refinancing features; and
(i) inclusion of a statement that such mortgages have tax and estate-planning consequences and may affect levels of, or eligibility for, certain government benefits, grants or pensions, and that applicants are advised to explore such matters with appropriate authorities.
A bank shall not make a reverse mortgage loan subject to this section until the prospective borrower has completed a home equity conversion counseling program which shall include instruction on reverse mortgage loans and which shall be approved by the executive office of elder affairs. For the purposes of providing the counseling required by this section, the said executive office of elder affairs shall establish and maintain a list of approved counseling programs and shall make such list available to all banks and to the public.
Notwithstanding the foregoing provisions, any bank which makes or seeks to make reverse mortgage loans pursuant to this section may add such additional terms or conditions as required by the provisions of the Housing and Community Development Act, 12 USC 1715z-20 to obtain federal insurance for such reverse mortgage loans, if such loans are to be insured by the Secretary of Housing and Urban Development or his designee pursuant to said act.
For the purposes of this paragraph a "reverse mortgage loan" shall mean a mortgage loan in which proceeds are advanced to the mortgagor in installments, either directly or indirectly, and which together with unpaid interest, if any, is to be repaid at the end of a term not to exceed ten years.
SECTION 2. Section 37 of chapter 171 of the General Laws, as so appearing, is hereby amended by striking out, in line 5, the words "and 10" and inserting in place thereof the following:- , 10 and 14A.
SECTION 3. Chapter 183 of the General Laws is hereby amended by adding the following section:-
Section 67. No mortgagee shall make a reverse mortgage loan on residential property except in accordance with the provisions of paragraph 14A of subsection B of section two of chapter one hundred and sixty-seven E. For the purposes of this section, the term "residential property" shall mean a one-to-four family dwelling owned and occupied in whole or in part by the mortgagor and located in the commonwealth.