SPRINGFIELD, IL â€“ In the wake of revelations that at least one con artist used a risky financial product called a reverse mortgage to scam dozens of senior citizens, Illinois State Senator Jacqueline Y. Collins (D-Chicago 16th) was pleased to announce today that the governor has signed her legislation designed to protect consumers from losing their homes in reverse mortgage schemes.
â€œA reverse mortgage is a complicated financial product that can leave homeowners and their families vulnerable to scams and unable to pay when the loan comes due,â€ Collins said. â€œThis legislation requires lenders to provide potential borrowers with accurate information about the product, a list of counselors they can contact if they need help and the opportunity to reconsider within three days of signing the paperwork.â€
For almost 30 years, a lawsuit filed by the state alleges, Chicago remodeler Mark Diamond tricked senior citizens into taking out reverse mortgages â€“ which pay out cash advances based on a homeownerâ€™s equity â€“ and then use the loan proceeds to pay his company to make home improvements. Instead, Diamond took the money while the repairs remained unfinished or poorly done. Many of his victims and their families faced losing cherished homes theyâ€™d owned for decades when the homeowner died or moved into long-term care and the loan (the cash paid out, plus interest) came due. Attorney General Lisa Madigan is asking a court to put Diamond, who kept his scheme going by conducting it under the auspices of different companies, out of business for good. Diamondâ€™s practices are also under federal investigation.
Collins worked with Madigan, Housing Action Illinois and other advocates on Senate Bill 1281, which ensures potential borrowers are informed about the risks of reverse mortgages and also prohibits someone who facilitates a reverse mortgage from accepting any of the proceeds in exchange for services, as Diamond did. Finally, the legislation prevents conflicts of interest by banning lenders from receiving compensation in exchange for trying to sell borrowers on other financial products, such as life insurance policies and investments.
â€œThe senior citizens I represent take great pride in their homes; many have worked hard their whole lives to pay off their mortgages,â€ Collins said. â€œStrong consumer protections can help them avoid unscrupulous schemes so they can live out their later years in peace and dignity and not worry about whether the family home will be there for their children and grandchildren.â€