H. B. 2757
(By Delegate Walters)
[Introduced February 24, 1995; referred to the
Committee on Banking and Insurance.]
A BILL to amend chapter forty-seven of the code of West Virginia,
one thousand nine hundred thirty-one, as amended, by adding
thereto a new article, designated article twenty-four,
relating to establishing reverse mortgages; and promulgating
rules for reverse mortgages.
Be it enacted by the Legislature of West Virginia:
That chapter forty-seven of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, be amended by
adding thereto a new article, designated article twenty-four, to
read as follows:
ARTICLE 24. THE REVERSE MORTGAGE ENABLING ACT.
§47-24-1. Short title.
The article may be cited as the "Reverse Mortgage Enabling
§47-24-2. Statement of purpose.
It is the intent of this legislation that elderly homeowners
be permitted to meet their financial needs by accessing the
equity in their homes through a reverse mortgage.
The Legislature recognizes that many restrictions and
requirements that exist to govern traditional mortgage
transactions are inapplicable in the context of reverse
In order to foster reverse mortgage transactions and better
serve the elderly citizens of this state, the Legislature
authorizes the making of reverse mortgages, and expressly
relieves reverse mortgage lenders and borrowers from compliance
with inappropriate requirements.
"Reverse mortgage" means a nonrecourse loan secured by real
(1) Provides cash advances to a borrower based on the equity
in a borrower's owner-occupied principal residence;
(2) Requires no payment of principal or interest until the
entire loan becomes due and payable; and
(3) Is made by any lender authorized to engage in business
as a bank, savings institution, or credit union under the laws of
this state or any other lender authorized to make reverse
mortgage loans by the division of banking.
§47-24-4. General rules for reverse mortgages.
Reverse mortgage loans shall be governed by the following
rules, without regard to the requirements set out elsewhere for
other types of mortgage transactions:
(a) Interest. -- A reverse mortgage may provide for an
interest rate which is fixed or adjustable, and may also provide
for interest that is contingent on appreciation in the value of
(b) Intervening liens. -- All advances made under a reverse
mortgage and all interest on such advances shall have priority
over any lien filed after the closing of a reverse mortgage.
(c) Lender default. -- Lenders failing to make loan advances
as required in the loan documents, and failing to cure such
default as required in the loan documents, shall forfeit any right to collect interest. Lenders may also be subject to
administrative penalty as determined by the division.
(d) Mortgage recordation tax. -- The recordation tax on
reverse mortgages shall not exceed the actual cost of recording
(e) Periodic advances. -- If a reverse mortgage provides for
periodic advances to a borrower, such advances shall not be
reduced in amount or number based on any adjustment in the
(f) Prepayment. -- Payment, in whole or in part, shall be
permitted without penalty at any time during the period of the
(g) Repayment. --
(1) The mortgage shall become due and payable upon the
occurrence of any one of the following events:
(A) The home securing the loan is sold;
(B) All borrowers cease occupying the home as a principal
residence, subject to the additional conditions set forth in
paragraph (A) and (B), subdivision (2), subsection (g) of this
(C) Any fixed maturity date agreed to by the lender and the
borrower is reached; or
(D) An event occurs which is specified in the loan documents
and which jeopardizes the lender's security.
(2) The repayment requirement is also expressly subject to
the following additional conditions:
(A) Temporary absences from the home not exceeding sixty
consecutive days shall not cause the mortgage to become due and
(B) Temporary absences from the home exceeding sixty
consecutive days but less than one year shall not cause the
mortgage to become due and payable so long as the borrower has
taken prior action which secures the home in a manner
satisfactory to the lender;
(C) The lender's right to collect reverse mortgage proceeds
shall be subject to the applicable statute of limitations for
loan contracts in section six, article two, chapter fifty-five.
Notwithstanding section six, the statute of limitations shall
commence on the date that the mortgage becomes due and payable;
(D) The lender must prominently disclose any interest or other fees to be charged during the period that commences on the
date that the mortgage becomes due and payable, and ends when
repayment in full is made.
§47-24-5. Inapplicability of related statutes.
Reverse mortgage loans may be made or acquired without
regard to the following provisions for other types of mortgage
transactions set out in the statutes specified below:
(a) Limitations on the purpose and use of future advances or
any other mortgage proceeds;
(b) Limitations on future advances to a term of years, or
limitations on the term of credit line advances;
(c) Limitations on the term during which future advances
take priority over intervening advances;
(d) Requirements that a maximum mortgage amount be stated in
(e) Limitations on loan-to-value ratios;
(f) Prohibitions on balloon payments;
(g) Prohibitions on compounded interest and interest on
(h) Interest rate limits under the usury statutes; and
(i) Requirements that percentage of the loan proceeds must
be advanced prior to loan assignment.
§47-24-6. Treatment of reverse mortgage loan proceeds by public
Notwithstanding any law relating to payments, allowances,
benefits or service provided on a means-tested basis, including
but, but not limited to, supplemental security income, low-income
energy assistance, property tax relief, medical assistance and
(a) Reverse mortgage loan payments made to a borrower shall
be treated as proceeds from a loan and not as income for the
purpose of determining eligibility and benefits under means
tested programs of aid to individuals.
(b) Undisbursed funds shall be treated as equity in a
borrower's home and not as proceeds from a loan for the purpose
of determining eligibility and benefits under means-tested
programs of aid to individuals.
§47-24-7. Consumer information and counseling.
(a) No reverse mortgage commitment shall be made by a lender
unless the loan applicant attests, in writing that the applicant
received from the lender at time of initial inquiry a statement prepared by the commissioner of banking regarding the
advisability and availability of independent information and
counseling services on reverse mortgages.
(b) The commissioner of banking shall be responsible for:
(1) Providing independent consumer information on reverse
mortgages and alternatives; and
(2) Referring consumers to independent counseling services
with expertise in reverse mortgages.
NOTE: The purpose of this bill is to establish reverse
mortgages; and to promulgate rules for reverse mortgages.
Article twenty-four, chapter forty-seven is new; therefore,
strike-throughs and underscoring have been omitted.