Banking Division   www.vermontbanking.info Thomas J. Candon, Deputy Commissioner Main: 802-828-3307    Consumer/Mortgage Assistance: 1-888-568-4547

Reverse Mortgage Information

Information for Consumers:
What is a Reverse Mortgage?
Top Ten Things to Know about Reverse Mortgages
Vermont's Legal Protections for Reverse Mortgage Borrowers

References for Lenders, Industry Members:
How to Obtain Approval for Reverse Mortgage Counseling by Telephone
Counselors Approved for Telephone Counseling

Information for Consumers:

What is a Reverse Mortgage?
A reverse mortgage is a home loan that converts a portion of home equity into cash.  This enables senior citizens to tap the equity in their home for living expenses.  Payments may be made to the borrower in a lump sum, a stream of payments, a line of credit, or combinations of these methods.  Unlike a traditional mortgage, however, repayment of a reverse mortgage is not required until the borrowers are no longer using the home as their principal residence.

A reverse mortgage can be a beneficial financial tool for cash-strapped seniors.  But the terms of reverse mortgages are very varied and complex, and it is critical that borrowers know the true risks and tax implications up front to avoid harmful outcomes.  On top of being a tricky product to begin with, reverse mortgages have increasingly become a means for unscrupulous companies to exploit or deceive seniors.    

Top Ten Things to Know about Reverse Mortgages
The website of the U.S. Department of Housing and Urban Development's website has a site about Housing Resources for Vermont Seniors, including excellent information on reverse mortgages, and a list of the Top Ten Things to Know About Reverse Mortgages .  

Vermont's Legal Protections for Reverse Mortgage Borrowers
Vermont law requires reverse mortgage lenders to participate in the federally-insured HUD reverse mortgage program. Lenders must ensure that borrowers first meet with approved independent counselors to guide them about whether a reverse mortgage is actually suitable for the individual borrower's particular circumstances. 
H.222 effective July 2009 contained a number of other "senior protections" relating to reverse mortgages:

• It ensures that funds promised to borrowers will always be delivered. 

• The lender’s recovery of loaned funds is limited to the value of the senior citizens’ home at the time the loan is repaid, even if the value of the home is less than when the reverse mortgage transaction was entered into.

• Unscrupulous firms cannot induce consumers to immediately purchase an annuity from the funds obtained from a reverse mortgage.

References for Lenders, Industry Members:

How to Obtain Approval for Reverse Mortgage Counseling by Telephone
Because of the complexity of reverse mortgages,  Vermont law requires counseling to be done face-to-face.  But there are exceptions that allow counseling by phone for the convenience of the borrower, and there is a process to obtain approval from BISHCA to conduct reverse mortgage counseling by phone.  Click here for these Requirements and Application Procedures .

Reverse Mortgage Counselors Approved (to date) to Counsel by Phone: