What a difference a week makes.
After appearing stalled in the House of Representative following a unanimous passage in the Senate, a bill that would provide some protections to potential reverse mortgage recipients passed in the House under the aegis of a different bill by a 116 to 0 vote last Thursday. The Senate concurred with the House's decision.
For those who may not remember, a reverse mortgage is a federally-supported product available to homeowners ages 62 or older that allows them to cash in the equity on their homes and continue to live in them without having to pay. (There are insurance and tax implications to the loan.) The mortgage becomes due when the mortgage holder either dies or moves to another home.
Key provisions in the legislation include making the Illinois Attorney General responsible for creating a consumer education brochure to be made available by lenders and brokers to potential borrowers. The Attorney General's office will have enforcement authority for reverse mortgages under the Consumer Fraud and Deceptive Business Practices Acts.
"Reverse mortgages are complex loans that should be taken out only after a consumer has had an opportunity to carefully consider his or her financial future and consult with a qualified housing counselor," Madigan said in a statement.
Other provisions allow for that careful consideration.
The bill also contains a three-day "cooling off period" from the time the lender makes a written commitment to make a reverse mortgage. During that time the borrower cannot be required to close or proceed with the loan, according to the legislation.
The bill also restricts, under most circumstances, the distribution of loan proceeds to the borrower in order to prevent anyone with a financial conflict of interest from gaining a financial benefit from the reverse mortgage loan.
Bob Palmer, policy director of non-profit organization Housing Action Illinois, the group that developed the legal framework, explained that those two parts of the law were intended to deal with people like Mark Diamond.
I worked in January with the team at The Chicago Reporter on a story about Diamond, a Chicago businessman who has been accused in many lawsuits of carrying out a reverse mortgage/home repair scam that targeted elderly black seniors on the city's South and West Sides.
Lillie Williams, an 88-year-old woman who purchased her home with her sister Ethel Winters in the North Lawndale neighborhood in 1973, alleged that Diamond and his associates victimized her by pressuring her to purchase the mortgage quickly, charging high closing costs, taking nearly all of the money from the reverse mortgage to do home repairs he did not complete.
The FBI raided Diamond's office in the Logan Square neighborhood in March.
Diamond declined request for comment. Dennis Both, his lawyer, referred me to court documents.
Palmer explained that the bill, if signed, would allow Illinois to join the ranks of states like California, Massachusetts and Utah that also have passed reverse mortgage legislation. The number of states taking up the issue could grow, Palmer said, as Baby Boomers continue to age, he said.
"It accomplished what we wanted in additional consumer education resources," said Palmer. "People considering reverse mortgage will have a better idea of the benefits, but also the risks."
He expressed optimism that Gov. Bruce Rauner would sign the legislation since it was passed on a bipartisan basis, but the Rev. Robin Hood, Williams' nephew and founder of the Illinois Anti-Foreclosure Coalition, was not convinced.
"I hope this doesn't get caught up in the chaos of the budget," Hood said. "Since this bill doesn't reflect any money coming from the state, it should easily be signed by the governor.
"It should not be used as leverage because seniors need to be protected immediately," said Hood, who encouraged seniors and others to call Art Turner (D-9), the bill's alternate chief sponsor, and urge him to advance the legislation.
Rauner spokeswoman Catherine Kelly said the governor takes seriously any legislation that crosses his desk.
Sen. Jacqueline Collins (D-16), who introduced the legislation in the Senate, said the ultimate success of the law will be determined by how informed the public is about these new protections.
"The legislation will be effective to the degree to which the public is educated about the changes," she said, calling on housing advocates as well as local and state politicians to do that work.
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