NRMLA backs New Jersey bill clarifying reverse mortgage rules

The National Reverse Mortgage Lenders Association (NRMLA) has voiced formal support for New Jersey Senate Bill 4970 — urging lawmakers to advance legislation that would clarify how reverse mortgages are treated under the state’s secondary mortgage law.

In a letter sent to State Sen. Joseph Lagana, the association said the bill would exempt reverse mortgage transactions from a requirement that secondary mortgage loans be repaid in substantially equal installments over equal periods.

The letter was signed by NRMLA President Steve Irwin.

“We commend the sponsors for introducing this bill as it provides necessary clarity and common-sense regulatory relief that directly supports the core function of the reverse mortgage product,” it read.

NRMLA said the current statute — while aimed at protecting consumers in traditional second-lien lending — does not align with how reverse mortgages are structured or used by older homeowners.

The bill was introduced in the New Jersey Senate in early December.

Why NRMLA says the change is needed

Reverse mortgages allow homeowners — typically age 62 and older — to convert home equity into cash without making monthly mortgage payments.

Loan balances are generally repaid when the borrower sells the home, moves out permanently or dies.

NRMLA argued that this basic design conflicts with New Jersey’s requirement that secondary mortgage loans be paid back in equal installments, even when the requirement is not actively enforced.

“The fundamental purpose of a reverse mortgage is to convert home equity into cash flow for senior homeowners. This is inherently incompatible with the ‘substantially equal payment’ requirement under the current law,” the letter continued. “By design, reverse mortgages do not require monthly payments, so a requirement for certain payment amounts or timing of payments on reverse mortgage transactions is inapt.”

Leaving the law unchanged could spell unintended consequences for lenders and borrowers alike — including legal uncertainty that might discourage lenders from offering reverse mortgage products in the state, NRMLA added.

“The current requirement, even if unenforced, creates a significant legal ambiguity that could impede lenders from offering these products,” NRMLA stated. “SB 4970 removes this ambiguity, ensuring continued access to this specialized financing option, which is often essential for funding retirement, healthcare, and in-home services.”

Bill background and policy specifics

As introduced, SB 4970 amends Section 28 of P.L.2009, c.53, which governs the form and repayment terms of secondary mortgage loans in New Jersey.

Current law generally requires those loans to be repaid in substantially equal payment amounts over substantially equal periods — measured in weeks or months.

The bill would carve out an explicit exception for reverse mortgage transactions, as defined under federal law in the Truth in Lending Act.

All other disclosure, documentation and notice requirements for secondary mortgages would remain unchanged.

Lawmakers sponsoring the measure describe it as a technical clarification rather than a rollback of consumer protections.

The legislation would take effect immediately upon enactment.

Connection to federal reverse mortgage programs

NRMLA also highlighted the relevance of the bill to the Federal Housing Administration’s Home Equity Conversion Mortgage program — the dominant reverse mortgage product nationwide.

“This is critically relevant to the Federal Housing Administration Home Equity Conversion Mortgage program (HECM), which includes a second mortgage in favor of the Department of Housing and Urban Development,” the letter states. “This second mortgage is only operative if the Mortgagee under the first mortgage is financially insolvent and/or no longer in business.”

NRMLA urged lawmakers to move quickly.

“We believe SB 4970 is an essential technical amendment that recognizes the unique and beneficial nature of reverse mortgage financing,” the organization said. “By formally excluding reverse mortgages from an irrelevant regulatory requirement, the bill promotes financial stability for New Jersey’s senior population without sacrificing any meaningful consumer protection. We urge the Senate Commerce Committee to report this bill favorably and encourage its swift passage.”

NRMLA represents more than 300 member companies and says its members originate more than 90% of reverse mortgages nationwide.