A reverse mortgage can help seniors stay in their homes longer by allowing them to borrow money against the value of their home to supplement their retirement income. But a New Jersey lawmaker wants to make sure borrowers know the consequences before signing the documents.
Assemblyman Dan Benson says his bill requires a lender to make sure a borrower learns about specific issues and terms of a reverse mortgage before a final application is accepted.
"They may not understand that they have to maintain the house and if a catastrophic event occurs that's not covered by insurance, that can be a significant expense. If they find that they have to move for health or family reasons, that may now have an issue depending on what the equity is in the house."
Benson says having the complete picture of a reverse mortgage will help seniors make an informed decision.
"What a lot of folks may not understand is that a lot of the municipal programs that help seniors maintain their homes with low-interest loans, or zero-interest loans, or even forgivable loans, they're not eligible if they take a reverse mortgage. I've had a constituent who was interested in getting help with paying for replacing her roof. She would have been eligible but for the fact that she had a reverse mortgage on her property."
The legislation includes a thousand dollar civil penalty for failure to comply with its requirements.