Oregon’s legislature continues to add state level regulations to the Home Equity Conversion Mortgage (“HECM,” more commonly known as a reverse mortgage) marketplace. In 2015, the state imposed a series of content and presentation requirements on any “advertisement, solicitation, or communication” HECM lenders used to induce potential borrowers to apply for a HECM loan. When the clock strikes midnight on January 1, 2018, Oregon House Bill 2562 will usher in further requirements and HECM lenders need to be ready for them.
Contents of Tax and Insurance Disclosure
Oregon Revised Statute 86A.196 already required advertisements for a HECM to notify potential borrowers that they would continue to be liable for taxes and insurance and that failure to pay these sums would bring the loan immediately due. Under the new law, the ads must also disclose the potential consequences of a tax or insurance delinquency: tax liens or even foreclosure.
No Longer Just Originators
Additionally, the revised statute imposes new disclosure requirements related to taxes and insurance on HECM servicers. Come January 1, 2018, lenders—a term the statute does not define—must send an annual notice to every person with whom it has a HECM contract. The notice must contain the same information regarding taxes and insurance, including the consequences of delinquency, that originators must include in their advertisements. The statute also specifies what mailing address to use as well as when the notice should be sent.
Not All Entities Affected
The law does spare some lenders this burden. All lenders defined as a financial institution under Oregon’s Bank Act or as a licensee under Oregon’s Consumer Finance Act are exempted from compliance with either the origination or servicing requirements, while lenders holding a contract with loans that include a reserve account for taxes are excluded from the annual notice requirement.
While affected originators will need to review their ad copy to ensure the new disclosures are included, covered servicers will need to act soon to examine their processes and procedures and tracking systems to ensure that their Oregon portfolio receives the new required annual notice, where required.