California Introduces Reverse Mortgage Elder Protection Act of 2009

Earlier this week, California Assembly member Mike Feuer introduced three different bills designed to help protect seniors vulnerable to abuse in nursing homes and exploitation in the marketplace.  "Especially in this economy, we need to take every step we can to protect seniors who may be at serious risk of abuse or exploitation," said Feuer.

One of the bills, AB 329 would put into place the Reverse Mortgage Elder Protection Act of 2009 which would do the following:

  • Prohibit a lender from referring a prospective borrower to a counseling agency, or paying any counseling service fees without first informing the prospective borrower in writing that this may create a conflict of interest.
  • Require a lender to disclose to the prospective borrower in writing any other payment arrangements or business affiliations between the lender and a counseling agency.
  • Require the lender to provide the prospective borrower with a list of all nonprofit counseling agencies in the state that have been approved by the United States Department of Housing and Urban Development for counseling.
  • Grant borrowers the right to cancel a reverse mortgage within 30 days for any reason and would require a lender to provide a notice to this effect.
  • Establish a new fiduciary duty between reverse mortgage sales people and consumers.

If you read through the text of AB 329, it’s clear that Feuer has a problem with the word “refer”.  Instead of the word refer, he would like it to say “provide”.  You can read the text of AB 329 here.

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Feuer isn’t the first politician to introduce a bill to provide protections for reverse mortgage borrowers without understanding the product, Minnesota’s Attorney General did the same thing earlier this month. 

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  • While Assemblyman Feuer isn’t the first to introduce a bill to provide protections for reverse mortgage borrowers, you have to wonder who is the true author of the bill’s provisions. Who and what influenced Feuer to present this ill-advised bill?
    1) While I do not think it can be a conflict of interest to follow the law in providing the borrower with at least 5 counseling agencies and the mandatory phone numbers for the national HUD intermediaries, my form, which I have the borrowers sign, states that the borrowers do not have to use any of the counseling agencies provided and that they are only being provided with the names of the counseling agencies for their convenience in accordance with the law. How is this a conflict of interest?
    2) Since I do not provide any particular counseling agency with donations of money in any way, I don’t believe the second bullet point relates to me or my lender. I do know some lenders who might be affected; those who have danced around HERA 2008, perhaps. But then if there is no teeth in HERA 2008, won’t they dance around AB329 as well?
    3) How on earth are we to know every last counseling agency approved by HUD when at the NRMLA 2009 break-out sessions, the HUD representative in Santa Ana who works with the counseling issues did not even know how to tell when a counseling agency has no funding for and has therefore stopped providing RM counseling?
    4) Granting the borrower a 30 day recission period would defeat the purpose of the HECM Reverse Mortgage program. A lender cannot hold a loan that long, especially in today’s marketplace. The HECM program in California would grind to a halt and then what does the Assemblyman propose to do for those seniors who are desperately looking for a way to pay off loans or to provide funds for in home health care or just to have enough money to pay for meds, food, heat, water and gasoline? Does California have the funds to help? Let’s think about the costs that caring for the senior population who are unable to care for themselves would add to the budget, shall we?
    5) Well, we keep hearing about the new NRMLA credential program. We knew if we did not come up with something, the states would do it for us. After reading what Assemblyman Feuer proposes, we better all get ready for college and stiff E&O fees. What a pity, our fees are going down as our responsibilities go up.

    I do not place the entire blame on the Assemblyman. He and his staff would not be drafting such draconian legislation if there weren’t salespersons among us who have tarred us all with their shady sales tactics. What a shame that so many ethical and educated sales persons have had, and will continue to have a target on their backs as long as we as an industry do not uplift our industry standards in a credible fashion.

    California reverse mortgage salespersons, either call your assemblyperson and educate her/him about the damage this bill could cause, or get ready for a long good-night to the reverse mortgage industry in California.

  • Louise,

    As to calling members of the CA Assembly you are so right; however, one should be prepared to address the member and more particularly their staff with respect and deference.

    I sent off an email/letter to Assemblyman Feuer addressing several issues not only in the bill but also needed reforms. California government considers itself protective of seniors and yet fails to weed out those who should not be originating to the senior population. One of the Assemblyman’s legislative staff spoke with me for a considerable period of time about my concerns adding in some of her own.

    The bill provides the opportunity to correct many misconceptions about what the nature of the perceived conflicts of interest may be and what they actually are. It further allows us to present our concerns about interfering with the sale of reverse mortgages into the secondary market.

    I cannot agree more about the need for the NRMLA designation program and examination. Hopefully it will emphasize origination rather than other functions. The source for the potential greatest damage to our industry is not in the processor or the compliance staff as much as it is the originator sitting in the senior’s home.

    Well enough from me for now.

  • I am sure this is well-intended but I hope somebody tells the California Assembly that the counseling payment requirement portion of this bill is moot. HUD already prohibits brokers from paying any of the counseling fees. So the section stating that if they do pay the fee, they must notify the borrower of the conflict, would be a violation of HUD regulations.

    That is why some agencies, like the one I work for, let borrowers pay for counseling at the closing. It eliminates the hardship to seniors who can’t afford to pay upfront and can no longer rely on the lender to upfront that fee. Hopefully someone will work with this bill to reflect that reality.

  • Patty, so you only get paid when your client take out a loan? How impartial can you be if you are paid on commission like that? Sounds like a conflict of interest to me.

  • please tell me who Asembleman Feuer is protecting the seniors who had succesfull business who worked 60 to 80 hours a week and left thier business to thier families so they could haave money to retire with and enjoy tghier life.. Only to have many business end up in bankrupt or homes in foreclosure but now they want to dictate how thier parents should live. Many of the familly members resent that their parents are enjoying thier lives thanks to a reverse mortgage.

    Since when do I have to be told by my grand children or my children that they have to teach me how to vote for Pres.Obams since we can’t think for our selves.

    How many foreclosuers do we have with Reverse mortgage not counting the homes that the value is lower than the loan amount. Yet many people with advise from thier younger ones allowed seniors to do the liar loan. Do we knnow how many seniors have lost thier home this way. We know we have to pay our bills and most of us do.

    How many times i heard you don’t want a reverse mortgage because there will be no money left for us. We strugled to put our familly thru school and business and now we can enjoy life and they feel it’s thier money?
    When I make calls for seniors, that their parents are having problems i don’t see all of them running to help.
    I do hear if mom or dad will send me plane tickts I will come and when we go out to eat pick the most expensive items on the menu while Parents when they eat out many do the early bird wjich many fmilies object to.

    Now Iam not saying this is always the case but it seams the one’s that complain the most are the heirs who can’t mange thier own estates but want to manage our estates.

    Where is it written that when I became a senior i lost my business sense and I can’t do any thing with out my fmilly consent. I never have had a senior lose money with me do taking out a reverse. Meanwhile thier sons and daughters and nieces and nephews were advising them on investments and they now lost 60% t0 75% of thier retirement money. I do have many people walking away with more money then thier home was worth and never spent a penny that wasn’t reinburst to them.
    Example: a home worth 130,000 was sold for 70,000 borroer walked waay with 113,000 never wrote a check that was not returned to her. Now living in Atlanta enjoying her selve. With cash in her pocket.

    True you might have some cases were they were sold bad investment advise but they did not lose their home over it. If we want to protect seniors make it illegl to use reverse money for investments. Stcok brokers are not allowed to use borrowed money to purchae stocks. make same rule for insurance products.

    STOP TERATING SENIORS AS IF THEY CAN’T DECIDE FOR THEM SELVES AND BIG BROTHER HAS TO TAKE OVER FOR THEM.

    Many of my clients do not want me to even communicate with thier children because they can’t run there own lives nor there parents lives.

    My seniors are enjoying thier lives with traveling trips, playing golf and not worrring about thier home values. We forget its the seniors money not the fmillies till we pass away.

  • What a mess when good people with even better intentions are grossly uninformed. Remember: What happens in California may eventually affect us all.
    Leaders (Politicians especially) must be educated
    by Reverse Mortgage Industry (Lobby) Groups and
    Individuals about what a Reverse Mortgage is and isn’t;
    how one works and doesn’t; and, most importantly, how
    blessed their availability is to a financially struggling Senior. While we all know some Politicians serve to achieve power over others, most serve because of a sincere desire to help their fellow man and woman.
    The latter with insight and understanding will always do what’s best. It is our job to educate them.

  • California Dreaming, it isnt a conflict at all. If your a not-for-profit, as all counseling agencies are, your not in it for the money. In fact, you should come out and take a tour of almost any counseling agency, you will see some very old furniture, ancient equipment and a lot of folks who are dedicated to helping people. The sad truth is that in this economy a lot of seniors just don’t have the upfront money to pay for counseling. In a more perfect world, HUD would have the funding to support counseling agencies and this would be a free service for seniors. Maybe someday.

  • I’ve often wondered since as I understand, it was AARP who was instrumental in requiring RM Counseling (which
    I believe in, actually, though I’m uncertain how effective a session is sometimes), why doesn’t AARP use some of their $500,000,000 yearly to pay for some of the Counseling. What does AARP do with all that money anyway. (My dollar figures are a guess: $10.00 x 30 million members= $300,000,000 plus a couple hundred million in ad fees and Insurance bonuses perhaps. Lots-A-Money for “Helping ” Seniors.

  • To Critic:

    I know we have reverse mortgage foreclosuer my point was how many was for turning over properties in liu,of foreclosure because they have borrowed cash and can not sell the home and receive enough to pay back the money. The are moving some where else. but keep the excess momey My questioing is also how many properties were foreclosed be cause they could not make payments or used up the income coming to them.

  • Our lawmaker’s are up to it again.

    In the effort to “protect seniors” many state lawmakers are drafting state legislation further regulating the sale of reverse mortgages. Well, it seems there is a domino effect here. One state drafts a bill and another copies it and brands it as their own. Lawmaker’s want their constituents to see them as advocates for the consumer and are eager to draft legislation in their name.

    Don’t get me wrong. We need to protect the senior but are lawmaker’s going to improve the situation or make things worse? In many cases I’ve found lawmakers (politicians) are the masters of the law of “unintended consequences”. Remember last summer when a new law in Washington State shut down the sale of reverse mortgages by most brokers? Oops! Sorry.

    My question is, what banks would want to fund loans under these conditions when the money could be lost to a borrower if they cancel and then the bank must collect from the borrower? And is it fair to impose subjective standards of fiduciary responsibility opening up originators to unmerited lawsuits? The bill exposes the originator if “other options” were available besides the reverse mortgage.

    If passed in it’s current form this bill could very well eliminate reverse mortgages in California for seniors who need them the most.

  • Obviously, if there had been reasonable oversight and regulation on the traditional mortgage side, Rep. Feuer and his co-sponsors would never have had the bully pulpit from which to propose such absurdly detailed reforms.
    No question seniors need to be protected, they aren’t all at the same level of sophistication when it comes to complex transactions. But steps to prohibit originators from marketing/selling any other financial products or receiving compensation from such sales by third parties should cover most of the abuse.
    I applaud Jim Veale for his actions in having real conversations with staffmembers. We should all be watching for the results of today’s hearing. If the Bill remains in tact, it is then up to us to lobby for its defeat. A professional approach and a well thought out message are key.

  • I was a CA life insurance agent for 18 years, Never mind that I was not the one selling annuities to seniors who were getting reverse mortgages — I have been punished just the same. I am a senior. I thought my income was safe being that I could sell funeral plans and final expense life insurance until the day I die. But No! I get to sit here and starve to death. I had a nice income with the insurance picking up the reverse mortgage shortfalls. When the order came, I gave up my insurance practice in lieu of the Reverse Mortgage. I needed a change but I didn't need to change from having a modest income to rarely having an income. I think those who did the deeds are the ones who should be punished — not the entire industry. From what I see, the ones who were doing the misdeeds are still doing them and those of us who weren't and are law abiding are the ones who get to do without.

    It is getting more and more difficult to find seniors to serve in CA unless you're able to drop 5,000 or so lead pieces every month. It is difficult to compete with those Big Boys who have “deep” pockets. I choose not to go that route. By the time they get through cutting my commission because of the leads they are paying for, there's nothing left for me anyway.

    I'm left to figure out another retirement plan. I never thought the government would step in and cancel out my income.

    In my opinion, with this Bill, the reverse mortgage will be over-regulated. Legislators seem to forget, if any of us originators were in it for the money, we would be doing other types of loans. From what I can see, most of us are not getting rich doing the reverse mortgage. I believe most of us are in this business because we love helping.

    Looks like I'm going to have to jump out of the reverse mortgage business and back into the insurance business if I expect to keep eating. Not to mention that everytime the government changes their rules, business slows down for a while.

    I wish someone would legislate to protect originators for a change, making it easier for us to bring actions against those who harm us. I also wish the government would find another way of punishing violators rather than cancelling out those of us who are honorable.

  • I was a CA life insurance agent for 18 years, Never mind that I was not the one selling annuities to seniors who were getting reverse mortgages — I have been punished just the same. I am a senior. I thought my income was safe being that I could sell funeral plans and final expense life insurance until the day I die. But No! I get to sit here and starve to death. I had a nice income with the insurance picking up the reverse mortgage shortfalls. When the order came, I gave up my insurance practice in lieu of the Reverse Mortgage. I needed a change but I didn’t need to change from having a modest income to rarely having an income. I think those who did the deeds are the ones who should be punished — not the entire industry. From what I see, the ones who were doing the misdeeds are still doing them and those of us who weren’t and are law abiding are the ones who get to do without.rnrnIt is getting more and more difficult to find seniors to serve in CA unless you’re able to drop 5,000 or so lead pieces every month. It is difficult to compete with those Big Boys who have “deep” pockets. I choose not to go that route. By the time they get through cutting my commission because of the leads they are paying for, there’s nothing left for me anyway.rnrnI’m left to figure out another retirement plan. I never thought the government would step in and cancel out my income. rnrnIn my opinion, with this Bill, the reverse mortgage will be over-regulated. Legislators seem to forget, if any of us originators were in it for the money, we would be doing other types of loans. From what I can see, most of us are not getting rich doing the reverse mortgage. I believe most of us are in this business because we love helping.rnrnLooks like I’m going to have to jump out of the reverse mortgage business and back into the insurance business if I expect to keep eating. Not to mention that everytime the government changes their rules, business slows down for a while. rnrnI wish someone would legislate to protect originators for a change, making it easier for us to bring actions against those who harm us. I also wish the government would find another way of punishing violators rather than cancelling out those of us who are honorable.rnrn

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