(Washington, DC) —Commissioner Thomas E. Hampton of the District of Columbia Department of Insurance, Securities and Banking (DISB) today announced that the agency will be adopting a comprehensive set of new examination guidelines designed specifically for reviewing the business practices and operations of District licensed lenders and brokers selling reverse mortgage loans to seniors.
The guidelines were developed by the Conference of State Bank Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR), and they apply to state-licensed mortgage lenders and brokers. DISB expects to begin using the Reverse Mortgage Examination Guidelines (RMEGs) early 2009.
“These guidelines will help our examiners identify those licensees who exhibit abusive lending practices, violate consumer protection or fair lending laws, and engage in unfair or deceptive acts or practices, particularly against our seniors, and enable us to take action against them,” Commissioner Hampton said.
A reverse mortgage loan is a loan secured by a lien on residential real estate in which the homeowner is not required to make payments on the loan until the homeowner ceases to live on the property. Typically, a homeowner at least 62 years of age is eligible for a reverse mortgage loan.
Several concerns have been made that the complexity of reverse mortgage loan transactions coupled with aggressive marketing campaigns, have put some homeowners at risk.
“The substantial real estate equity held by senior homeowners makes these consumers more vulnerable to ‘equity stripping’ scams or other fraud and abuse, such as the simultaneous sale of unsuitable investments or deceptive sales practices,” Commissioner Hampton added.
The RMEGs are a comprehensive set of guidelines covering all aspects of operations from policies and procedures to marketing, underwriting, quality control and servicing of a reverse mortgage portfolio. The RMEGs take a two-pronged approach of regulatory compliance and sound management practices to achieve the dual goal of consumer protection and institutional stability.