Colorado Amends Reverse Mortgage Principal Residence Requirements

Colorado recently passed House Bill 1266 (the “Bill”), adding an exception to the principal residence requirements for reverse mortgages when a “force majeure” renders the home temporarily uninhabitable.  The term “force majeure” means a fire, explosion, action of the elements, unusually severe weather, act of God, act of war, or any other cause that is beyond the control of the borrower and that could not have been prevented by the borrower while exercising reasonable diligence.  The Bill became effective on June 7, 2023.

Under the new exception, to the extent allowed by HUD’s regulations and policies, a temporary absence from the home does not cause a reverse mortgage to become due and payable if the absence is a result of a force majeure which renders the home temporarily uninhabitable, provided that all of the following conditions are met:

• The borrower must be engaged in repairing the home with the intent to reoccupy the home as a principal residence or to sell the home;
• The borrower must stay in communication with and reasonably respond to inquiries from the lender while the home is being repaired;
• The borrower must comply with all other terms and conditions of the reverse mortgage; and
• The repairing or rebuilding of the home does not reduce the lender’s security.

The Bill also requires the lender to disclose the requirements of this exception to the borrower in writing at the time of closing.