Florida Governor Ron DeSantis (R) this week signed a bill that changes certain requirements for reverse mortgage borrowers in the state, a move that National Reverse Mortgage Association (NRMLA) indicates closing cost savings.
The new law, House Bill (HB) 7073, changes how the state’s “documentary stamp tax” applies to reverse mortgages and other tax-related provisions. Document Stamp Duty “is an excise tax imposed on certain documents executed, delivered, or recorded in the State of Florida,” according to the Florida Department of Revenue.
The department said common examples that are subject to tax include “documents that transfer an interest in Florida real estate, such as a deed,” as well as “mortgages and written payment obligations, such as promissory notes.”
Under Florida law prior to the passage of the bill, “documentary stamp duty was required to be paid in full on the debt secured by the mortgage if the mortgage was recorded in this state, regardless of whether the debt was contingent.” Florida House of Representatives‘ Ways and Means Committee.
“Currently, document stamp duty applies to the entire mortgage debt amount, rather than to the principal limit,” which is the maximum amount of proceeds a reverse mortgage borrower can receive.
This will now be changed under legal provisions analyzed by the committee.
“For reverse mortgages, the bill requires that documentary stamp tax apply to the principal limit amount, rather than the full mortgage obligation amount,” the committee said. “The bill defines ‘principal limit’ and requires documentary stamp tax to apply to the closing amount.” The bill clarifies that the changes in the bill are retroactive but do not create a right to a refund or credit for any taxes paid prior to the effective date of the bill.
As the NRMLA noted in a letter submitted to the state in March, current law effectively requires reverse mortgage borrowers to pay a higher document stamp tax than the amount they actually receive against their reverse mortgage 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.
