Texans Get 12 Days…
The Lone Star state become the last state to allow its senior citizens the ability to purchase a home using a reverse mortgage when Proposition 5 was voted into a law in early November. The reverse purchase is expected to be available for senior homeowners during the first quarter of 2014, even when the bill went into effect on November 22 with a catch…lenders must include a “12-day disclose” at the closing of any reverse mortgage loan. This means a borrower has a 12-day period where they can opt not to move forward with the loan.
It’s like the old saying, “one step forward, two steps back.”
Not only was Texas behind every other state by preventing its citizen the ability to purchase a new home and obtain a reverse mortgage in one transaction, saving seniors thousands of dollars in the process, it now wants to hinder the ability of lenders to close loans in a timely manner.
I’m not saying there shouldn’t be a disclosure period. Borrowers should always have time to think about their decision, even after closing, it just makes sense. Whether it’d be something they saw in closing that they didn’t like or a simple change of heart, borrowers have the option to not go forward with the loan.
In a sense, it’s a fail safe, that can be used for whatever reason.
However, this disclosure period is typically 72 hours, or 3 days. In an effort to protect consumers (that’s the only reason it makes sense to me) it may also hinder the ability of lenders to make sound business deals. The fact of the matter is 12 days, is basically two weeks already. This doesn’t take into consideration that if a loan is closed on a Friday, for example, the disclosure period may extend up to three weeks. And that’s not good business for everyone involved.
In addition, the 12-day disclosure period is not just for reverse purchases but for all reverse mortgages in general.
It seems to me there are two things at play here: Texas wants to provide its citizens with the option to do a reverse purchase while, at the same time, it wants to tell lenders in Texas that it doesn’t trust them. While I am aware that not all lenders are ethical or whatever the case may be, this also prevents smaller brokers, who work with various lenders to get the best deal for their clients, from growing.
Big business will always have a foothold because they have the resources to continue to do loans but smaller brokers don’t have the same power. Imagine how many will close up shop after four or five loans, that they worked on for months, don’t close because of this “extended” disclosure period?
Personally, if smaller brokerages aren’t allowed to grow, and only “big business” remains, this spells disaster for everyone involved. Competition needs to thrive and this will possibly hinder competition all in the name of “consumer protection.”
There has to be a better way around this that benefits both lenders and consumers. It can’t be one over the other because one, without the other, is not good business either.
Interested in a reverse mortgage or simply want more information? Give PS Financial Services a call at (888) 845-6630 or via email at info@PSReverseMortgage.com. We do not pressure those who inquire. We are simply here to help.