DeSantis stamps changes to reverse mortgage tax requirements in Florida

Florida Gov. Ron DeSantis (R) signed a bill into law this week that changes certain requirements for the state’s reverse mortgage borrowers, a move that the National Reverse Mortgage Lenders Association (NRMLA) says could save money on closing costs.

The new law, House Bill (HB) 7073, changes the way the state’s “documentary stamp tax” can be applied to reverse mortgages, among other provisions related to taxation. The documentary stamp tax “is an excise tax imposed on certain documents executed, delivered, or recorded in Florida” according to the state’s Department of Revenue.

Common examples of instances subject to the tax include “documents that transfer an interest in Florida real property, such as deeds” as well as “mortgages and written obligations to pay money, such as promissory notes,” the department said.

Under Florida law prior to the bill’s passage, “if a mortgage is recorded in the state, it is subject to the documentary stamp tax on the full amount of the obligation secured by the mortgage, regardless of whether the indebtedness is contingent,” according to an analysis by the Florida House of Representatives’ ways and means committee.

“Currently, the documentary stamp tax is applied to the entire mortgage obligation amount rather than being applied to the principal limit amount,” or the maximum amount of proceeds that a reverse mortgage borrower can receive.

This will now be changed, according to provisions of the law as analyzed by the committee.

“For reverse mortgages, the bill requires the documentary stamp tax to be applied to the principal limit amount and not the entire mortgage obligation amount,” the committee said. “The bill defines ‘principal limit,’ and requires the documentary stamp tax be calculated on the principal limit at the time of closing. The bill clarifies that the changes to the act apply retroactively, but do not create a right to a refund or credit of any tax paid before the effective date of the act.”

As argued by NRMLA in a letter submitted to the state in March, the current law effectively makes reverse mortgage borrowers subject to pay documentary stamp taxes on amounts higher than what they can actually receive in a reverse mortgage’s principal limit.

In a statement, “DeSantis described the new law as a counterbalance to “reckless federal spending“ approved by Congress and the White House. The law will take effect across the state on July 1.