HB 23-1266

House Bill 23-1266, which has been signed into law and is now effective, helps homeowners with reverse mortgages if their home becomes uninhabitable due to a natural disaster or other unforeseen event. Under this bill, borrowers don’t have to repay the mortgage immediately as long as they are working on repairing the house with plans to live there again or sell it, stay in touch with their lender during repairs, and follow all loan terms without reducing the lender’s security. The law also requires lenders to inform borrowers about these conditions when they take out a reverse mortgage. This bill benefits homeowners who face unexpected home damage and need time to fix it without worrying about losing their home due to immediate repayment requirements.

Official Summary

Under current law, the borrower in a reverse mortgage transaction is relieved of the obligation to occupy the subject property as a principal residence (principal-residence requirement) if the borrower is temporarily absent for up to 60 days or, if the property is adequately secured, for up to one year. The act adds a third exception to the principal-residence requirement to cover situations in which a natural disaster or other serious incident beyond the borrower's control (force majeure) renders the property uninhabitable, in which case the reverse mortgage does not become due and payable if: The borrower is engaged in repairing the home with the intent of reoccupying the home as a principal residence or selling the home; The borrower stays in communication with the lender while the home is being repaired; The borrower complies with all other terms and conditions of the reverse mortgage; and Repairing or rebuilding of the home does not reduce the lender's security. The act requires that the lender disclose these conditions suspending the repayment requirement on a reverse mortgage due to a force majeure to the borrower in writing at the time of closing. APPROVED by Governor June 7, 2023 EFFECTIVE June 7, 2023(Note: This summary applies to this bill as enacted.)

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