Reverse Mortgage
The staff of the North Carolina Office of the Commissioner of Banks has prepared the following answers to some of the more frequently asked questions regarding North Carolina’s Reverse Mortgage Act.
Q: What is a Reverse Mortgage?
A: Reverse mortgage loan or loan. – A loan for a definite or indefinite term (i) secured by a first mortgage or first deed of trust on the principal residence of the mortgagor located in North Carolina, (ii) the proceeds of which are disbursed to the mortgagor in one or more lump sums, or in equal or unequal installments, either directly by the lender or the lender's agent, and (iii) that requires no repayment until a future time, upon the earliest occurrence of one or more events specified in the reverse mortgage loan contract.
Q. Who is eligible for a Reverse Mortgage?
A. A natural person 62 years of age or older who occupies and owns, in fee simple individually, or with another borrower as tenants by the entireties or as joint tenants with right of survivorship, an interest in residential real property securing a reverse mortgage loan, and who borrows money under a reverse mortgage loan.
Q. Who is authorized to conduct business as a Reverse Mortgage Lender?
A. The North Carolina Housing Finance Agency, any lender authorized to engage in business as a bank, savings institution, or credit union under the laws of this State or of the United States, or any other person, firm, or corporation authorized to make reverse mortgage loans by the Commissioner of Banks.
Q. Can Mortgage Brokers make Reverse Mortgage Loans?
A. No. Only licensed or approved mortgage lenders are allowed to make reverse mortgage loans.
Q. WHAT ARE THE REQUIREMENTS FOR A Reverse Mortgage Lenders’ license?
A. In general, an applicant/licensee must:
a. Be licensed as a lender under the Mortgage Licensing Act (Article 19B) unless Exempt.*
b. Have and maintain a $500,000 net worth.
c. Obtain and maintain a $100,000 surety bond.
d. Submit form RM56 with the initial fee of $750
e. Be in good standing (No outstanding complaints and No unsatisfactory examination rating)
* An Exempt entity should submit forms MLA04 and RM57 (e.g. banks, credit unions, savings institutions)**
Q. What is the application fee to apply as a Reverse Mortgage Lender?
A. $500 application fee; $250 annual registration fee = total of $750.
Q. What forms are needed to apply for approval as an Exempt Reverse Mortgage Lender?
A. An exempt entity should submit:
a. Form MLA04 - Claim of Exemption from the Mortgage Lending Act (found under forms & fees)
b. Form RM57 - Notice of Intent to Make Reverse Mortgage Loans (found under reverse mortgages)
Q. What form is required to add a branch office in NC to conduct reverse mortgage business?
A. A licensee should submit schedule B of form RM56 to add an approved branch location.
Q. How may I obtain a renewal application?
A. Renewal notices will be sent to each licensee on or before December 31 each year and must be completed and returned by March 31 with a copy of the most recent audited financial statement.
Q. How may I find out if a company is approved in North Carolina as Reverse Mortgage Lender?
A. A complete list of currently approved reverse mortgage lenders is listed on the website at www.nccob.org (see reverse mortgage)
Q. I am already licensed under the Mortgage Licensing Act; will my company need a separate surety bond to act as a reverse mortgage lender?
A. Yes, a surety bond of $100,000 is needed to become an approved reverse mortgage lender. The surety bond form is a part of the application package.
Q. Does the Reverse Mortgage Act require a mortgage loan originator to be licensed under both the Reverse Mortgage Act and the Mortgage Lending Act?
A. No. Mortgage Loan Originators are only licensed under the Mortgage Licensing Act. If a mortgage loan originator would like to engage in the business of reverse mortgage lending they must be licensed as a mortgage loan originator and employed under the Mortgage Licensing Act with a licensed lender. The Reverse Mortgage Act only requires the company to be licensed. There is no reverse mortgage loan originator license.
Q. Is telephone counseling permissible under the reverse mortgage act?
A. Given the complexity of reverse mortgage products, and the potential vulnerability of many clients, one of those standards is that counseling for reverse mortgages is to be performed face-to-face, rather than by telephone. Exceptions are made only in very rare circumstances when the client is physically unable to go to a counselor, and no counselor is able to provide a home visit for the client. Counselors are required to accept counseling requests only from homeowners or their legal representatives, not from lenders.
Q. Are there any education requirements prior to becoming an approved reverse mortgage lender?
A. No. There are no education requirements. However, it is highly recommended that each individual working with reverse mortgages complete training offered by a HUD representative. Visit the www.hud.gov website for training opportunities. Q. Does my loan originators need to be individually bonded to conduct reverse mortgage lending?
A. The North Carolina Office of the Commissioner of Banks does not require individual mortgage loan originators to be bonded. A surety bond is required of each approved non bank reverse mortgage lender.
Q. Where can I find the Reverse Mortgage Act online so that I may better understand the law and thereby assure compliance?
A. The Reverse Mortgage Act entitled Article 21 and the Administrative code entitled SUBCHAPTER 03K - REVERSE MORTGAGES can be found on the NC Commissioner of Banks website at www.nccob.org
Q. What are loan disclosures as it relates to reverse mortgage lending? Is this a Federal guideline or NC specific?
A. Loan disclosures should follow the Federal guidelines and NC specific statutes and administrative rules.
04 NCAC 03K .0501 REVERSE MORTGAGE LENDER APPLICATION DISCLOSURE
(a) Authorized lenders shall disclose to the borrower all terms and conditions of the reverse mortgage loan in accordance with the Truth In Lending Act, RESPA, and Regulation Z, and any other applicable federal or state laws and regulations, including Total Annual Loan Cost. (see N.C.G.S. 53-264)
Q. May I transfer/sell a reverse mortgage loan?
A. If both entities are: under the Mortgage Licensing Act (Article 19B) and the Reverse Mortgage Act (Article 21) licensed and approved, respectively, with the state of NC, they may fund these loans.
Since both entities are listed and approved by the NC Commissioner of Banks as Reverse Mortgage Lenders each may make reverse mortgages. If after closing, the lender wishes to transfer or assign the reverse mortgage loan to another lender; it is permissible to do so. During this process, there shouldn’t be any additional fees charged to the consumer and no YSP or other premium paid to the lender/assignor by the assignee in the transfer.
Q. May a reverse mortgage lender originate, and process a loan while having another exempt entity underwrite, fund and close a reverse mortgage?
A. No. The Reverse Mortgage Act does not allow for brokering of reverse mortgages only the making and servicing of such loans by those who are approved.
10/22/2009