The bill “allows a lender that, in a reverse mortgage, provides a lump sum in exchange for a claim upon the equity of a property to claim as the lender’s equity, and receive as proceeds in a sale of the property, not more than the percentage of the total equity in the property to which the lump sum is equivalent on the date the lender provides the lump sum,” according to its entry on the state legislature’s website.
The proposal was introduced by Sen. Deb Patterson (D-Salem) and is co-sponsored by Sen. Suzanne Weber (R-Tillamook). According to the state Legislature, it has taken testimony from NRMLA, as well as a private citizen in the state who believes the measure can provide protection for seniors against home equity contracts.
Another letter from a private citizen opposes reverse mortgages due to “sickening [reverse mortgage] commercials with corresponding testimonials as seen on television,” saying they “do not convey the seriousness of the complex contract language.”
But NRMLA’s opposition to the bill is due primarily to the impact it would have on the availability of proprietary reverse mortgages in the state.
“This is a very problematic piece of legislation as it relates to proprietary product lending,” Irwin told RMD. “Currently, all proprietary products, as with [Home Equity Conversion Mortgages (HECMs)], encumbers 100% of the property. It’s a nonrecourse loan that is negatively amortizing, and balances increase over time.”
But to preclude a lender from encumbering 100% of the property would not allow proprietary products to operate within the state, Irwin said.
While it’s unclear if the intention of the bill is to apply to both proprietary loans and HECMs sponsored by the Federal Housing Administration (FHA), NRMLA made clear in its submitted comments that the existing HECM statute in federal law would supersede any state-level legislation, continuing to allow for HECM business.
But proprietary products have to operate based on the laws within the states that have them, and the same cannot be said of these private-label HECM alternatives.
“What we have suggested is not unlike the state of Washington — allow for the continued encumbrance of 100% of the property, even if you’re lending against a portion of that property,” Irwin said of the association’s comments. “Over time, that balance increases, and if that balance were to increase at a rate that was different than the property’s rate of appreciation, then you are capped at how much you would realize at time of property sale or transfer. That’s just not doable.”
RMD reached out to Patterson’s office for comment but did not receive an immediate reply. While difficult to ascribe an intent to the bill, Irwin said it could have been fashioned in response to other equity-based products like home equity investments.
One constituent’s letter in support of the bill would bear that out, describing how a client engaged in a home equity contract with Unison in 2017 “needed to sell her home to move into a senior living community.”
By 2024, “her home was valued at $425,000. After selling, she was required to repay Unison not only the $40,000 but also 65.75% of the home’s appreciation — nearly $137,000 in total,” the letter stated. “Instead of using this equity to fund her care, she is applying for Medicaid to cover her expenses, shifting the financial burden to Oregon taxpayers.”
Separately, Unison is also involved in a lawsuit in Washington state in which the plaintiffs allege that the company’s product is effectively a reverse mortgage without accompanying regulatory oversight, which the company denies.
The same constituent also recently submitted information to the legislature about the Consumer Financial Protection Bureau (CFPB)’s issue brief and consumer bulletins regarding home equity contracts. This was among the final guidance the bureau issued under former director Rohit Chopra.
NRMLA continues to seek engagement with its members inside the state of Oregon, as well as the legislators seeking to get the bill passed, Irwin said.
“We have offered to continue to educate the legislators and sponsors of this bill,” Irwin said. “But I would say we, for the first half of the year, are prepared for and had anticipated more state-level legislation relative to the reverse mortgage category. And here we are.”
