§ 34-25.1-7 - Reverse mortgage loan requirements.
SECTION 34-25.1-7
§ 34-25.1-7 Reverse mortgage loanrequirements. – (a) A reverse mortgage loan shall comply with all of the following requirements:
(1) Reverse mortgages may be written over any period in useby lending institutions, with the outstanding balance due and payable upon thefirst to occur of the maturity of the loan or the mortgagor's defaultthereunder which cause the entire loan to become due and payable. A reversemortgage loan may provide for a fixed or adjustable interest rate orcombination thereof, including compound interest. Interest on a reversemortgage loan shall be accumulated and due upon the first to occur of thematurity of the loan or the mortgagor's default thereunder which cause theentire loan to become due and payable.
(2) Prepayment, in whole or in part, shall be permittedwithout penalty. Notwithstanding the foregoing, where a mortgagee has waivedall of the usual fees associated with a reverse mortgage loan, a mortgagee mayimpose a prepayment penalty in accordance with the provisions of Rhode Islandgeneral laws § 34-23-5, and shall provide that: (i) the prepayment penaltywill be calculated as a percentage of the available credit commitment as statedin the reverse mortgage loan documents, which penalty shall not exceed thetotal of the usual fees that were initially absorbed by the mortgagee; and (ii)for a prepayment penalty imposed under the provisions of Rhode Island generallaws subsection 34-23-5(b), the amount of the prepayment penalty shall notexceed the total of the usual fees that were initially absorbed by themortgagee, reduced on a prorate basis by the percentage of the months remainingin the prepayment penalty term to the full prepayment penalty term. A mortgageemay not impose a prepayment penalty under this subsection if the prepayment iscaused by the occurrence of any event specified in Rhode Island general lawssubdivisions 34-25.1-7(5)(ii), (iii), (iv) or (v).
(3) If a reverse mortgage loan provides for periodic advancesto a borrower, these advances shall not be reduced in amount or number based onany adjustment in the interest rate.
(4) A lender that is found by an appropriate court to havefailed, beyond any applicable notice or cure periods, to make loan advances asrequired in the loan documents, shall forfeit to the borrower treble the amountwrongfully withheld plus interest at the legal rate.
(5) The reverse mortgage loan may become due and payable uponthe occurrence of any one of the following events:
(i) The home securing the loan is sold or title to the homeis otherwise transferred.
(ii) All mortgagors cease occupying the home as a principalresidence, except as provided in subdivision (6).
(iii) For a period of longer than twelve (12) consecutivemonths, a mortgagor fails to occupy the property because of physical or mentalillness and the property is not the principal residence of at least one othermortgagor.
(iv) Any fixed maturity date agreed to by the lender and themortgagor occurs.
(v) An event occurs which is specified in the loan documentsand which jeopardizes the lender's security.
(6) Repayment of the reverse mortgage loan shall be subjectto the following additional conditions:
(i) Temporary absences from the home not exceeding onehundred twenty (120) consecutive days shall not cause the mortgage to becomedue and payable.
(ii) Extended absences from the home exceeding one hundredtwenty (120) consecutive days, but less than one year, shall not cause themortgage to become due and payable if the mortgagor has taken prior actionwhich secures and protects the home in a manner satisfactory to the lender, asspecified in the loan documents.
(iii) The lender's right to collect reverse mortgage loanproceeds shall be subject to the applicable statute of limitations for writtenloan contracts. Notwithstanding any other provision of law, the statute oflimitations shall commence on the date that the reverse mortgage loan becomesdue and payable as provided in the loan agreement.
(iv) The lender shall prominently disclose in the loanagreement any interest rate or other fees to be charged during the period thatcommences on the date that the reverse mortgage loan becomes due and payable,and that ends when repayment in full is made.
(7) A lender shall not require an applicant for a reversemortgage to purchase an annuity as a condition of obtaining a reverse mortgageloan. A reverse mortgage lender or a broker arranging a reverse mortgage loanshall not:
(i) Offer an annuity to the mortgagor prior to the closing ofthe reverse mortgage or before the expiration of the right of the mortgagor torescind the reverse mortgage agreement.
(ii) Refer the mortgagor to anyone for the purchase of anannuity prior to the closing of the reverse mortgage or before the expirationof the right of the mortgagor to rescind the reverse mortgage agreement.
(8) Notwithstanding anything in chapter 34-25.1 to thecontrary, the fees, costs and payments that may be charged in connection withthe origination and closing of a reverse mortgage loan shall not be other thanthe following and only may be charged provided they are properly disclosed tothe mortgagor(s) as required in chapter 34-25.1:
(i) An application fee, which may be collected prior toclosing, shall be designated as such and shall not be a percentage of theprincipal amount of the loan or amount financed, and shall be reasonablyrelated to the services to be performed;
(ii) a loan origination fee;
(iii) The cost of document preparation which is reasonablyrelated to the services provided;
(iv) The cost of appraising or surveying the property;
(v) The cost of a title examination, an abstract of title ortitle insurance;
(vi) The cost of a tax search for tax liens existing at thetime of closing if such search is not included in the title examination;
(vii) The payment to discharge any existing liens on the realproperty securing the loan;
(viii) The cost of recording the reverse mortgage loan;
(ix) The cost of actual attorneys' fees charged to the lenderin connection with the closing of such loan;
(x) The cost of a credit report;
(xi) The cost of a flood zone search;
(xii) The cost of an inspection to be paid in connection withthe origination of the loan but not subsequent to the loan closing;
(xiii) The payment for any repairs contracted for at orbefore the loan closing irrespective of whether such repairs are completed atthe time of closing and/or whether the funds are held in escrow;
(xiv) The cost of purchasing mortgage insurance;
(xv) The payment of real estate taxes and property insurance;and
(xvi) such other costs as shall be permitted to be charged bythe director of the department of business regulation.
(9) Any reverse mortgage made in this state prior to July 14,2006, the effective date of P.L. 2006, chapter 625, § 1, shall be deemedin compliance with chapter 34-25.1 as in effect as of July 14, 2006 if madepursuant to the provisions of § 255 of the National Housing Act and theregulations thereunder.
(10) With the exception of subsections 34-25.1-7(a)(4),34-25.1-7(a)(6)(iii), 34-25.1- 7(a)(7), and 34-25.1-7(a)(9), § 34-25.1-7shall not apply to: (i) any national bank, federal savings bank or financialinstitution (as defined in § 19-1-1) that is insured by the FederalDeposit Insurance Corporation or to the wholly owned subsidiary of any of theforegoing; or: (ii) any reverse mortgage loan that is subject to and thatcomplies with 12 U.S.C. § 1715z-20 and the federal regulations promulgatedwith respect thereto (including without limitation 24 CFR Part 206).