Bill
SB 831
Requires reverse mortgage lenders to establish and fund escrow accounts to cover taxes, insurance, and related charges, ensuring on-time payments from disbursements.
Status: Withdrawn by Sponsor (withdrawn March 10, 2025)
Introduced: Feb 2025 (assigned to Finance)
Primary sponsor: Senator Charles
Summary
SB 831 would have required lenders that make reverse mortgage loans to establish and maintain escrow accounts to pay certain homeowner expenses (property taxes, specified insurance premiums, ground rents, water/sewer assessments, and homeowners‑association or other ownership‑community charges). The bill sought to ensure on‑time payment of those obligations by mandating periodic deductions from reverse‑mortgage disbursements into an escrow account and timely remittance from that account to the appropriate collection entities.
Purpose and intent
The bill’s stated purpose was to protect reverse‑mortgage borrowers (and the security interests of lenders) by reducing the risk that property tax, insurance, or other community assessments go unpaid during the life of a reverse mortgage — situations that can trigger default or reduce home equity.
Key provisions
- Escrow account requirement: Lenders must establish an escrow account for each reverse mortgage to cover:
- Property taxes;
- Insurance premiums for insurance required under §12‑1206(a)(2) (as referenced in the bill);
- Ground rents;
- Water and sewer facilities assessments; and
- Homeowners association (or comparable community) charges.
- Escrow mechanics:
- Accounts must be established in accordance with existing Commercial Law escrow requirements (cites §12‑1026).
- Accounts must permit monthly collection and deposit of funds.
- Deductions and deposits:
- From each distribution to the borrower, the lender must deduct and deposit into the escrow an amount proportional to the planned payment schedule and sufficient to cover estimated eligible expenses.
- Payments:
- Lenders must make on‑time payments from the escrow account to the relevant collection entities for each eligible expense.
- Effective date if enacted: October 1, 2025 (per bill text).
Who would be affected
- Reverse mortgage borrowers (typically older homeowners): would see a portion of disbursements withheld for escrowed obligations — reducing available cash but reducing risk of tax/insurance default.
- Reverse mortgage lenders and servicers: would incur administrative and compliance costs to establish escrow accounts, calculate required deductions, and make periodic payments to multiple taxing or billing entities.
- Local tax collectors, insurers, HOAs: could see improved payment reliability.
- Small lenders: flagged in the fiscal note as potentially meaningfully impacted due to new operational requirements.
Fiscal and policy effects
- The Maryland fiscal note projected no material effect on state or local finances. Consumer protection enforcement costs were expected to be manageable within existing resources if complaints remain low.
- Small business impact: Potentially meaningful compliance costs for small lenders (new forms, payment processing to many jurisdictions/assessors/insurers).
Procedural/timeline notes
- The bill was referred to the Finance Committee and had hearings scheduled (some cancelled). According to available legislative actions, the sponsor withdrew the bill on March 10, 2025, so it did not advance. If reintroduced or enacted, the bill specified an October 1, 2025 effective date.
Context / current law
- Under current law, reverse mortgages are nonrecourse loans secured by the borrower’s principal dwelling; borrowers generally remain responsible for taxes, insurance, and upkeep. Lenders sometimes require “set‑asides” for taxes/insurance; SB 831 would have standardized and codified a monthly escrow approach across reverse mortgage loans not otherwise federally governed.
Compiled from official sources — confirm details with the bill’s official record.
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