The most sweeping financial reform since the Great Depression will change the way reverse mortgage lenders must protect consumers. Read about the new changes.

Wall Street Reform and Consumer Protection Act Will Affect Reverse Mortgages

A senior home owner can feel even safer now taking out a reverse mortgage against a primary residence. It is possible to enjoy all the benefits a reverse mortgage can offer: stay in the home for life, no monthly mortgage payments, and extra cash every month. The Wall Street Reform and Consumer Protection Act has passed and was signed it into law.

How the New Law Will Make Reverse Mortgages Safer

• It creates a new agency to police most financial products (including reverse mortgages) sold to consumers.
• It gives financial regulators power to shape the new law to meet the needs of consumers shopping for financing.
• The law further protects seniors from deceptive practices when applying for reverse mortgages. A new task force will study reverse mortgages to search for abuses and make recommendations.
• The sale of inappropriate annuities or other investments along with reverse mortgages will likely be prohibited.

Compliance of the new standards could be in required within 18 months.

Consumer Protections Already in Place

Because seniors are a vulnerable section of the population, powerful advocacy groups are continually fighting to improve consumer protections on reverse mortgage loans. Some of the protections that have been in place for some time will continue.

Total Annual Loan Cost Disclosure (TALC) - Reverse mortgage lenders are required by law to accurately give seniors applying for a reverse mortgage an estimate of the total cost of the loan. There are nine scenarios that must always be presented according to law. These nine scenarios give seniors a clear picture of how much the reverse mortgage they are considering is likely to cost.

Non-Recourse Loans - Nearly all reverse mortgages are non-recourse loans. That means that regardless of what happens to the value of the home as compared to the principal balance due the lender, only the home offered as collateral can be used to satisfy the debt.

Renee Morgan

Next: Which Is the Best Reverse Mortgage Payment Option? >>>