TN Allows Proprietary Reverse Mortgages

Tennessee recently adopted amendments to its Home Equity Conversion Mortgage Act, which include: (i) renaming the law the Tennessee Reverse Mortgage Innovation Act; (ii) amending the definition of “reverse mortgage;” and (iii) amending multiple sections to authorize making reverse mortgages in compliance with federal and Tennessee law. 

Prior to the amendments, the definition of “reverse mortgage” only included “home equity conversion mortgages,” defined specifically to include only HUD HECMs and those made under certain Fannie Mae programs.  The amended definition of “reverse mortgage” was broadened to include reverse mortgages not made under government programs, to permit proprietary reverse mortgages.  The definition of home equity conversion mortgage loan now refers only to HUD’s HECM program.

The amendments require that all reverse mortgages comply with the Act, and continues to require that all borrowers and necessary loan participants receive independent counseling.  The Act now prohibits the lender from requiring or soliciting the purchase of certain financial products as a condition of obtaining or authorizing a reverse mortgage.

The amendments were effective upon enactment.