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Fees Reduced for Reverse Mortgages Used to Buy LTC

Wed, 12/13/2000 - 12:00am — Karen Stevenson
Description: 

The Senate passed HR 5640 and it is going to President Clinton, who is expected to sign it. Among other things, this bill adds a provision that up-front premiums for reverse mortgages will be waived if the all the proceeds are used to purchase "qualified" long term care insurance that covers the mortgagor or members of the household residing in the mortgaged property. The full text of this provision is reproduced below:

(1) IN GENERAL- Section 255 of the National Housing Act (12 U.S.C. 1715z-20) is amended by inserting after subsection (k) (as added by subsection (a) of this section) the following new subsection:

(l) WAIVER OF UP-FRONT PREMIUMS FOR MORTGAGES TO FUND LONG-TERM CARE INSURANCE-

(1) IN GENERAL- In the case of any mortgage insured under this section under which the total amount (except as provided in paragraph (2)) of all future payments described in subsection (b)(3) will be used only for costs of a qualified long-term care insurance contract that covers the mortgagor or members of the household residing in the property that is subject to the mortgage, notwithstanding section 203(c)(2), the Secretary shall not charge or collect the single premium payment otherwise required under subparagraph (A) of such section to be paid at the time of insurance.

(2) AUTHORITY TO REFINANCE EXISTING MORTGAGE AND FINANCE CLOSING COSTS- A mortgage described in paragraph (1) may provide financing of amounts that are used to satisfy outstanding mortgage obligations (in accordance with such limitations as the Secretary shall prescribe) and any amounts used for initial service charges, appraisal, inspection, and other fees (as approved by the Secretary) in connection with such mortgage, and the amount of future payments described in subsection (b)(3) under the mortgage shall be reduced accordingly.

(3) DEFINITION- For purposes of this subsection, the term `qualified long-term care insurance contract' has the meaning given such term in section 7702B of the Internal Revenue Code of 1986 (26 U.S.C. 7702B)), except that such contract shall also meet the requirements of--

(A) sections 9 (relating to disclosure), 24 (relating to suitability), and 26 (relating to contingent nonforfeiture) of the long-term care insurance model regulation promulgated by the National Association of Insurance Commissioners (as adopted as of September 2000); and

(B) section 8 (relating to contingent nonforfeiture) of the long-term care insurance model Act promulgated by the National Association of Insurance Commissioners (as adopted as of September 2000).'.

(2) APPLICABILITY- The provisions of section 255(l) of the National Housing Act (as added by paragraph (1) of this subsection) shall apply only to mortgages closed on or after April 1, 2001.

The Senate passed HR 5640 and it is going to President Clinton, who is expected to sign it. Among other things, this bill adds a provision that up-front premiums for reverse mortgages will be waived if the all the proceeds are used to purchase "qualified" long term care insurance that covers the mortgagor or members of the household residing in the mortgaged property. The full text of this provision is reproduced below:

(1) IN GENERAL- Section 255 of the National Housing Act (12 U.S.C. 1715z-20) is amended by inserting after subsection (k) (as added by subsection (a) of this section) the following new subsection:

(l) WAIVER OF UP-FRONT PREMIUMS FOR MORTGAGES TO FUND LONG-TERM CARE INSURANCE-

(1) IN GENERAL- In the case of any mortgage insured under this section under which the total amount (except as provided in paragraph (2)) of all future payments described in subsection (b)(3) will be used only for costs of a qualified long-term care insurance contract that covers the mortgagor or members of the household residing in the property that is subject to the mortgage, notwithstanding section 203(c)(2), the Secretary shall not charge or collect the single premium payment otherwise required under subparagraph (A) of such section to be paid at the time of insurance.

(2) AUTHORITY TO REFINANCE EXISTING MORTGAGE AND FINANCE CLOSING COSTS- A mortgage described in paragraph (1) may provide financing of amounts that are used to satisfy outstanding mortgage obligations (in accordance with such limitations as the Secretary shall prescribe) and any amounts used for initial service charges, appraisal, inspection, and other fees (as approved by the Secretary) in connection with such mortgage, and the amount of future payments described in subsection (b)(3) under the mortgage shall be reduced accordingly.

(3) DEFINITION- For purposes of this subsection, the term `qualified long-term care insurance contract' has the meaning given such term in section 7702B of the Internal Revenue Code of 1986 (26 U.S.C. 7702B)), except that such contract shall also meet the requirements of--

(A) sections 9 (relating to disclosure), 24 (relating to suitability), and 26 (relating to contingent nonforfeiture) of the long-term care insurance model regulation promulgated by the National Association of Insurance Commissioners (as adopted as of September 2000); and

(B) section 8 (relating to contingent nonforfeiture) of the long-term care insurance model Act promulgated by the National Association of Insurance Commissioners (as adopted as of September 2000).'.

(2) APPLICABILITY- The provisions of section 255(l) of the National Housing Act (as added by paragraph (1) of this subsection) shall apply only to mortgages closed on or after April 1, 2001.