The legislature in the state of Utah passed a bill earlier this month that lowers the minimum borrower age for proprietary reverse mortgage loans to 55. The bill was signed into law by Gov. Spencer Cox (R) on Monday.
Sponsored by Republicans Rep. Walt Brooks and Sen. Don Ipson, the bill initially failed to progress due to a deadlocked 3-3 committee vote, but legislators worked to ready it for passage by the state’s House of Representatives and Senate.
Concerns were related to the bill’s original counseling provisions, which changed the required receipt of a counseling certificate from prior to application to after a loan is assigned a number by the lender. The changes were intended to save the borrower between one and three days of processing time, according to Rep. Brooks.
Counseling issues
In the February 14 session, Utah Mortgage Commission Vice Chair Allison Olsen spoke in favor of its passage.
“I’ve studied reverse mortgages for years. This particular bill is super important because the state of Utah has laws in place right now which can hurt a borrower’s ability to get a certain amount of money,” Olson said in February. “When a lender like me is trying to determine the loan amount […] in the state of Utah, this person cannot apply for the loan until their counseling is done.”
Olson told the committee that the concept of principal limit factors (PLFs) and the prolonged counseling waiting period can limit a borrower’s ability to benefit from higher loan proceeds.
“If rates go up a person can get to less money, if rates go down they can get to more money,” she said. “But I’ve had the three-day waiting period actually hurt borrowers.”
Olson explained to the committee that because of the way rates work on a reverse mortgage loan, waiting for a counseling receipt could impact a borrower’s ability to get a more favorable rate, and in turn, higher loan proceeds.
“I’ve actually had [the counseling period] take a borrower from being able to qualify for a reverse mortgage, then the rates went up and they had to bring money in,” she said. “And some of them can’t.”
After Olsen’s testimony, the committee voted to report the bill out favorably for consideration, ultimately leading to its passage.
Proprietary products at age 55
In 2021, leading reverse mortgage industry lenders began offering their proprietary loans primarily to borrowers aged 55 or older. Reverse Mortgage Funding (RMF), which offered a line of proprietary reverse mortgage loans under its “Equity Elite” brand, lowered its minimum eligible age to 55 in September of that year.
For a time, Equity Elite was the only product in the U.S. reverse mortgage industry that could be offered to people under the age of 60 in 19 eligible states and Washington, D.C.
The following month, Finance of America Reverse (FAR) followed suit, lowering the minimum age to 55 for its “HomeSafe” suite of proprietary products. FAR reintroduced its “HomeSafe Second” earlier this year, and the minimum age of 55 also applied to the product in certain states.
With the minimum age requirement now more accessible, the concept of the reverse mortgage product is more readily available to younger borrowers in Generation X, who were born between the early- to mid-1960s, the late 1970s or early 1980s.
There are implications of the transition the reverse mortgage industry will need to make in the coming years in order to serve this generation. Unlike the current generation primarily served by the reverse mortgage industry in baby boomers, those who are part of Generation X have demonstrably different financial circumstances than their parents.
A 2021 Harris Poll conducted for Fast Company found that older members of Generation X were the least likely of any age group to believe that wealth is an achievable goal in the U.S.
