Reverse Mortgage Rules by State

In addition to Federal laws regulating reverse mortgage loans, 24 states plus the District of Columbia have their own regulations in the form of laws that govern how these loans are handled within that state. Many state-level regulations mirror those of the Federal government for federally backed home equity conversion mortgages (HECMs). Others may apply to non-federal reverse mortgage loans such as single-purpose reverse mortgages and proprietary reverse mortgages.

In other cases, state law expands on or goes beyond Federal law. Where state-level reverse mortgage rules appear in state law codes varies. Sometimes they are listed as part of banking laws. Other times they appear among real estate or mortgage rules. The state of Texas uniquely codified reverse mortgage law as an amendment to the state constitution in 1997.

Key Takeaways

  • State-level laws provide additional guidance regarding reverse mortgage loans and are found in 24 states, plus the District of Columbia.
  • Many state-level laws mirror Federal regulations but apply to non-Federal reverse mortgage loans, i.e., single-purpose and proprietary reverse mortgages.
  • State laws also sometimes expand on Federal law or deal with other aspects of reverse mortgage loans not addressed by Federal regulation.
  • State-level reverse mortgage law appears in state regulations in a variety of places including banking, mortgage or loans, or even under public utilities.

States With Proprietary Reverse Mortgage Laws

Here are states with proprietary reverse mortgage laws including a brief description of what each state’s laws cover.

Arizona 2021 Title 6 – Banks and Financial Institutions Chapter 17 – Reverse Mortgages

The Arizona statute includes financial counseling requirements, disclosures, provisions, repayment conditions, borrower’s liability, prohibited practices, enforcement procedures, and lien priority.

Arkansas 2020 Title 23 – Public Utilities and Regulated Industries Subtitle 2 – Financial Institutions And Securities Chapter 54 – Reverse Mortgage Protection Act

The Act applies to loans enacted after Jan. 1, 2006. Legislation includes provisions for reverse mortgages, how loan proceeds are treated, required disclosures, lien priority, default procedures, and remedies for borrowers in the event the lender fails to provide proceeds.

California 2021 California Code Civil Code – CIV Division 3 – Obligation Part 4 – Obligations Arising From Particular Transaction Title 4 – Loan Chapter 8 – Reverse Mortgages

California civil code follows federal rules generally but deviates from federal guidelines by specifying the following repayment conditions:

  • Being absent from the home for 60 consecutive days or less will not cause your reverse mortgage to be immediately due and payable.
  • Your mortgage will likewise not be due and payable if you are absent for more than 60 consecutive days but less than one year provided you have secured and protected the home to the satisfaction of your lender, as specified in loan documents.
  • Your lender’s right to collect reverse mortgage loan proceeds is subject to the applicable statute of limitations for written loan contracts which, barring any other provision of law, begins on the date that your reverse mortgage loan becomes due and payable as stated in the loan agreement.
  • Your lender must disclose in the loan agreement any interest rate or other fees that apply once your loan becomes due and payable and end when your loan has been repaid in full.

Colorado 2020 Colorado Revised Statutes Title 11 – Financial Institutions Article 38. Reverse Mortgages

The purpose of the article is to authorize reverse mortgages and expressly relieve reverse mortgage lenders and borrowers from compliance with inappropriate statutory requirements. Topics covered include prepayment, liens, interest, lender default, repayment, the inapplicability of related statutes, disclosures, treatment of proceeds, and counseling requirements.

Connecticut 2020 Connecticut General Statutes Title 36a – The Banking Law of Connecticut Chapter 665 – Powers, Loans, and Investments Section 36a-267 – Reverse annuity mortgage loans. Counseling, certification requirements. Penalties for violations

Statute requires lender to advise borrower of counseling requirements, verify counseling has taken place, and provides penalties for violations.

Delaware 2021 Delaware Code Title 5 – Banking Chapter 21. Mortgage Loan Brokers § 2118. Reverse mortgages

Statute establishes a definition for an independent counseling agency, how reverse mortgage loan proceeds are disbursed, and states that no fee shall be accepted except standard specified fees named in the statute.

Hawaii 2021 Hawaii Revised Statutes Title 28. Property 506. Mortgages of Real Property or Fixtures 506-10 Reverse mortgage loan

Statute requires counseling prior to application for a reverse mortgage and certification that counseling has taken place. Establishes penalties for violations of this statute. Defines reverse mortgage.

Indiana 2021 Indiana Code Title 24. Trade Regulation Article 4.4. First Lien Mortgage Lending Chapter 2. Miscellaneous 24-4.4-2-503. Reverse Mortgages; Pamphlet; Counseling Required for Debtor

Requires counseling for home equity conversion mortgages and other reverse mortgages. Defines counseling agency and includes certification of counseling requirements before an application for a reverse mortgage can be accepted.

Louisiana 2018 Louisiana Laws Revised Statutes TITLE 6 – Banks and Banking – RS 6 1101-1104 Reverse Mortgages

Establishes reverse mortgage requirements, including counseling, defines a commitment cooling-off period, and lists lender duties to elders.

Maryland 2020 Maryland Statutes Commercial Law Title 12 – Credit Regulations Subtitle 12 – Reverse Mortgage Loans Act

The Act defines payment-plan requirements, requires adherence to Federal law, notes inapplicability of certain federal provisions (uninsured loans), lists requirements for purchasers of reverse mortgages, lists counseling requirements, and defines penalties for violations of the Act.

Minnesota 2021 Minnesota Statutes Chapters 245-267 – PUBLIC WELFARE AND RELATED ACTIVITIES Chapter 256 – HUMAN SERVICES Section 256.99 – REVERSE MORTGAGE PROCEEDS DISREGARDED

Establishes that proceeds from a reverse mortgage loan cannot be used to determine your eligibility for medical assistance, Minnesota supplemental assistance, general assistance, general assistance medical care, or any federal or state low-interest loan or grant. There is no time limit on the application of this section of Minnesota law.

Missouri 2021 Missouri Revised Statutes Title XXIX – Ownership and Conveyance of Property Chapter 443 – Mortgages, Deeds of Trust, and Mortgage Brokers – Reverse Mortgage Act

The Act lists regulations that apply to reverse mortgages—that reverse mortgages may be made regardless of certain other transactions including limited use of reverse mortgage proceeds, limits on future loans, prohibitions on balloon payments, and other named transactions. Describes treatment of payments received (not taxable as income), and counseling requirements. 

North Carolina 2021 North Carolina General Statutes Chapter 53 – Regulation of Financial Services Article 21 – Reverse Mortgages

Statutes cover authority and procedures governing reverse mortgage loans, application of rules, interest, taxes, insurance, and assessments, renegotiation of loan, limits on borrowers’ liability, disclosures of loan terms, information required of lender, effects of lender’s default, repayment of borrower’s default, time for initiation of foreclosure, counseling requirements, prohibitions, requirement for contracts for shared appreciation or shared value, commissioner’s authority to enforce; penalties, and appeals procedure.

Nebraska 2021 Nebraska Revised Statutes Chapter 45 – Interest, Loans, and Debt 45-1068 – Reverse-mortgage loan; rules governing; how made or acquired; charges authorized; forfeiture by lender

Rules define a reverse mortgage, list repayment rules and interest calculation, stipulate no limit on use of proceeds, define loan origination fee (2%), and penalty for lenders who fail to advance proceeds.

New York 2021 New York Laws RPP – Real Property Article 8 – Conveyances and Mortgages 280 Reverse Mortgages

Laws regarding reverse mortgage loans for persons 60 years of age or older, persons 70 years of age or older, Federal Home Equity Conversion Mortgages, and Federal Home Equity Conversion Mortgage Default and Foreclosure Regulations are all covered under this article.

Rhode Island 2021 Rhode Island General Laws Title 34 – Property Chapter 34-25.1 – Reverse Mortgages

Laws cover priority of reverse mortgages over encumbrances not previously recorded, relinquishment of security as to additional future advances—stipulation as to amount due, discharge of reverse mortgage, mortgages to which this chapter applies, reverse mortgage loan requirements, mortgagees authorized to take reverse mortgages, required counseling, pre-closing disclosures, annual account statements and other required disclosures, 3-day cooling off period, rules for attorneys-in-fact and guardians, ability of agencies to promulgate additional regulations, rules for property held in name or trust, and notice that the laws shall be liberally interpreted to ensure borrowers are fully aware of the ramifications of taking out a reverse mortgage.

South Carolina 2020 South Carolina Code of Laws Title 29 – Mortgages and Other Liens Chapter 4 – Reverse Mortgages

These laws define reverse mortgages, list rules governing same, specify that reverse mortgages are authorized without regard to other types of mortgage transactions, exempt reverse mortgage proceeds from consideration for means-tested programs, and provide for mandatory counseling.

South Dakota South Dakota Codified Laws Title 54 – Debtor and Creditor Chapter 12 – Reverse Mortgage Loans

Codified laws define reverse mortgages, list rules for reverse mortgage loans, and specify how loan payments are made and how to handle undisbursed reverse mortgage funds.

Tennessee 2020 Tennessee Code Title 47 – Commercial Instruments and Transactions Chapter 30 – Home Equity Conversion Mortgages

The code defines authorized lenders; requires lender compliance; defines interest payments; authorizes requirement that borrower may have to pay certain taxes, premiums, and assessments; defines fees, calculation of outstanding loan balance, and how to handle prepayment. Additional topics include calculation of the amount owed by the borrower, when loan is due, and enforcement of debt. Lender requirements including an annual statement of account and what happens when the lender defaults are also covered. Terms and conditions of borrower default are covered as well as notice of foreclosure, that future advances are exempted from Chapter 28 of this code. Finally, the codes lists prohibited acts, violations, and legislative intent of the code, and discusses Fannie Mae Reverse Mortgage Loans.

Texas 1997 Amendment to Texas Constitution – Section 50 – Homestead; Protection From Forced Sale; Mortgages, Trust Deeds, and Liens

Reverse mortgage law in Texas is codified in the Texas Constitution via an amendment written and passed in 1997. The amendment lists all requirements and conditions under which a reverse mortgage may be written in the state of Texas and is extensive law.

Utah 2021 Utah Code Title 57 – Real Estate Chapter 28 – Utah Reverse Mortgage Act

Utah code lists all requirements and conditions for a reverse mortgage loan including definitions, disclosures, counseling requirements, costs and repayment, a cooling-off period, and information about Federally insured reverse mortgage loans.

Vermont 2021 Vermont Statutes Title 8 – Banking and Insurance Chapter 200 – Consumer Protection – Subchapter 7: Reverse Mortgages

Statutes define reverse mortgages, require counseling, ban a required purchase of an annuity with loan proceeds, and stipulate that only federally approved reverse mortgage lenders may write a reverse mortgage in the state of Vermont.

West Virginia 2021 West Virginia Code Chapter 47. Regulation of Trade Article 24. The Reverse Mortgage Enabling Act

West Virginia code defines reverse mortgages, lists general rules, specifies the inapplicability of related statutes and law, exempts borrowers from the consideration of reverse mortgage proceeds for public benefit programs, provides for mandatory counseling, places reverse mortgage loans under the authority of the commissioner of banking, and states that anyone making a reverse mortgage under federal regulations is exempt from this code.

Wisconsin 2021 Wisconsin Statutes & Annotations Chapter 138 – Money and rates of interest. 138.058 – Reverse mortgage loans

Allows lenders to enter reverse mortgages that meet federal requirements and specifies how reverse mortgage proceeds are treated with regard to public benefits.

Washington, D.C., 2021 District of Columbia Code Title 42 – Real Property Chapter 27 – Housing Finance Agency Subchapter III – Operations of the Agency § 42–2703.07a. Reverse Mortgage Foreclosure Prevention Program

Statute creates a reverse mortgage foreclosure prevention program to assist homeowners with reverse mortgages who get behind in property taxes and other financial obligations.

Which State Has the Most Reverse Mortgages?

California had 11,921 total reverse mortgage loans in 2020 and has been first in the number of reverse mortgages since 2016. The rest of the top 10 in order were: Florida, Colorado, Texas, Arizona, Washington, Utah, Oregon, New York, and North Carolina.

How Many States Have Their Own Reverse Mortgage Laws?

At least 24 states plus the District of Columbia have proprietary reverse mortgage laws, though many state laws mirror federal reverse mortgage statutes.

What Are the Three Types of Reverse Mortgages?

The three types of reverse mortgage loans are: (1) Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration (FHA); (2) proprietary reverse mortgage loans that are not FHA-insured; and (3) single-purpose reverse mortgage loans offered and insured by state and local governments and non-profit organizations.

The Bottom Line

Twenty-four states and the district of Columbia have their own reverse mortgage regulations. Some expand on federal regulations for HECMs and others apply to proprietary or single-use reverse mortgages. Don’t assume that what you read about national regulations for reverse mortgages will exactly apply to the one you may be considering without checking your state’s particular rules.