§ 34-25.1-7. Reverse mortgage loan requirements.
(a) A reverse mortgage loan shall comply with all of the following requirements:
(1) Reverse mortgages may be written over any period in use by lending institutions, with the outstanding balance due and payable upon the first to occur of the maturity of the loan or the mortgagor's default thereunder which cause the entire loan to become due and payable. A reverse mortgage loan may provide for a fixed or adjustable interest rate or combination thereof, including compound interest. Interest on a reverse mortgage loan shall be accumulated and due upon the first to occur of the maturity of the loan or the mortgagor's default thereunder which cause the entire loan to become due and payable.
(2) Prepayment, in whole or in part, shall be permitted without penalty. Notwithstanding the foregoing, where a mortgagee has waived all of the usual fees associated with a reverse mortgage loan, a mortgagee may impose a prepayment penalty in accordance with the provisions of Rhode Island general laws § 34-23-5, and shall provide that: (i) the prepayment penalty will be calculated as a percentage of the available credit commitment as stated in the reverse mortgage loan documents, which penalty shall not exceed the total of the usual fees that were initially absorbed by the mortgagee; and (ii) for a prepayment penalty imposed under the provisions of Rhode Island general laws subsection 34-23-5(b), the amount of the prepayment penalty shall not exceed the total of the usual fees that were initially absorbed by the mortgagee, reduced on a prorate basis by the percentage of the months remaining in the prepayment penalty term to the full prepayment penalty term. A mortgagee may not impose a prepayment penalty under this subsection if the prepayment is caused by the occurrence of any event specified in Rhode Island general laws subdivisions 34-25.1-7(5)(ii), (iii), (iv) or (v).
(3) If a reverse mortgage loan provides for periodic advances to a borrower, these advances shall not be reduced in amount or number based on any adjustment in the interest rate.
(4) A lender that is found by an appropriate court to have failed, beyond any applicable notice or cure periods, to make loan advances as required in the loan documents, shall forfeit to the borrower treble the amount wrongfully withheld plus interest at the legal rate.
(5) The reverse mortgage loan may become due and payable upon the occurrence of any one of the following events:
(i) The home securing the loan is sold or title to the home is otherwise transferred.
(ii) All mortgagors cease occupying the home as a principal residence, except as provided in subdivision (6).
(iii) For a period of longer than twelve (12) consecutive months, a mortgagor fails to occupy the property because of physical or mental illness and the property is not the principal residence of at least one other mortgagor.
(iv) Any fixed maturity date agreed to by the lender and the mortgagor occurs.
(v) An event occurs which is specified in the loan documents and which jeopardizes the lender's security.
(6) Repayment of the reverse mortgage loan shall be subject to the following additional conditions:
(i) Temporary absences from the home not exceeding one hundred twenty (120) consecutive days shall not cause the mortgage to become due and payable.
(ii) Extended absences from the home exceeding one hundred twenty (120) consecutive days, but less than one year, shall not cause the mortgage to become due and payable if the mortgagor has taken prior action which secures and protects the home in a manner satisfactory to the lender, as specified in the loan documents.
(iii) The lender's right to collect reverse mortgage loan proceeds shall be subject to the applicable statute of limitations for written loan contracts. Notwithstanding any other provision of law, the statute of limitations shall commence on the date that the reverse mortgage loan becomes due and payable as provided in the loan agreement.
(iv) The lender shall prominently disclose in the loan agreement any interest rate or other fees to be charged during the period that commences on the date that the reverse mortgage loan becomes due and payable, and that ends when repayment in full is made.
(7) A lender shall not require an applicant for a reverse mortgage to purchase an annuity as a condition of obtaining a reverse mortgage loan. A reverse mortgage lender or a broker arranging a reverse mortgage loan shall not:
(i) Offer an annuity to the mortgagor prior to the closing of the reverse mortgage or before the expiration of the right of the mortgagor to rescind the reverse mortgage agreement.
(ii) Refer the mortgagor to anyone for the purchase of an annuity prior to the closing of the reverse mortgage or before the expiration of the right of the mortgagor to rescind the reverse mortgage agreement.
(8) Notwithstanding anything in chapter 34-25.1 to the contrary, the fees, costs and payments that may be charged in connection with the origination and closing of a reverse mortgage loan shall not be other than the following and only may be charged provided they are properly disclosed to the mortgagor(s) as required in chapter 34-25.1:
(i) An application fee, which may be collected prior to closing, shall be designated as such and shall not be a percentage of the principal amount of the loan or amount financed, and shall be reasonably related to the services to be performed;
(ii) a loan origination fee;
(iii) The cost of document preparation which is reasonably related to the services provided;
(iv) The cost of appraising or surveying the property;
(v) The cost of a title examination, an abstract of title or title insurance;
(vi) The cost of a tax search for tax liens existing at the time of closing if such search is not included in the title examination;
(vii) The payment to discharge any existing liens on the real property securing the loan;
(viii) The cost of recording the reverse mortgage loan;
(ix) The cost of actual attorneys' fees charged to the lender in connection with the closing of such loan;
(x) The cost of a credit report;
(xi) The cost of a flood zone search;
(xii) The cost of an inspection to be paid in connection with the origination of the loan but not subsequent to the loan closing;
(xiii) The payment for any repairs contracted for at or before the loan closing irrespective of whether such repairs are completed at the time of closing and/or whether the funds are held in escrow;
(xiv) The cost of purchasing mortgage insurance;
(xv) The payment of real estate taxes and property insurance; and
(xvi) such other costs as shall be permitted to be charged by the director of the department of business regulation.
(9) Any reverse mortgage made in this state prior to July 14, 2006, the effective date of P.L. 2006, chapter 625, § 1, shall be deemed in compliance with chapter 34-25.1 as in effect as of July 14, 2006 if made pursuant to the provisions of § 255 of the National Housing Act and the regulations thereunder.
(10) With the exception of subsections 34-25.1-7(a)(4), 34-25.1-7(a)(6)(iii), 34-25.1- 7(a)(7), and 34-25.1-7(a)(9), § 34-25.1-7 shall not apply to: (i) any national bank, federal savings bank or financial institution (as defined in § 19-1-1) that is insured by the Federal Deposit Insurance Corporation or to the wholly owned subsidiary of any of the foregoing; or: (ii) any reverse mortgage loan that is subject to and that complies with 12 U.S.C. § 1715z-20 and the federal regulations promulgated with respect thereto (including without limitation 24 CFR Part 206).
(P.L. 1986, ch. 475, § 1; P.L. 2006, ch. 625, § 1; P.L. 2008, ch. 19, § 1; P.L. 2008, ch. 21, § 1.)