Reverse Mortgage Disclosures

Question: What are the additional disclosure requirements for originating a reverse mortgage loan? Answer: Regulation Z, the implementing regulation of the Truth-in-Lending Act (TILA), sets forth the disclosures that are required for reverse mortgage loan transactions. Indeed, Regulation Z requires additional disclosures reflective of the model form provided in its Appendix K, paragraph (d).

These additional disclosure requirements are:

1. A disclosure that the applicant is not obligated to complete the reverse mortgage transaction, even if the applicant received specific reverse mortgage disclosures, and even if the applicant has signed an application for a reverse mortgage loan.

2. A Good Faith Estimate (GFE) that provides the total cost of the credit extended, and expressed as a table of “total annual loan cost rates.” [see Regulation Z, Appendix K]

3. An itemization containing the loan terms, charges, age of the youngest borrower, and the appraised value of the property.

4. An explanation of the table of the “total annual loan cost rates” that are provided in the model form found in Regulation Z. [see Regulation Z, Appendix K, paragraph (d)]

Jonathan Foxx, former chief compliance officer for two of the country’s top publicly-traded residential mortgage loan originators, is the president and managing director of Lenders Compliance Group, a mortgage risk management firm devoted to providing regulatory compliance advice and counsel to the mortgage industry. He may be contacted at (516) 442-3456 or by e-mail at [email protected].