Arizona Reverse Mortgage Bill Passes House Committee

statesealcolor Earlier this week, the Arizona House Banking and Insurance Committee agreed to set up new regulations for companies offering reverse mortgages.  HB 2513 includes some mandatory disclosures and counseling requirements which were already required by HUD, but Robert Zumoff, an assistant state attorney general said “proprietary” lending is not covered.     

"This is a bill that is timely and important," Rep. Bill Konopnicki said. "As we see people lose equity in 401(k)s and IRAs, people are going to be looking for a way to retire and expand their opportunities."

Konopnicki said the legislation is designed less to be regulatory than it is to provide information "so people know when they make the decision to do a reverse mortgage they know exactly what it is. What am I getting, how long will it last, what are my obligations, what are the obligations of the funder."

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Republicans balked at what they saw was an effort by the government to protect people from themselves.  Several lawmakers expressed similar sentiments this session but  they have agreed to go along because HB 2513 is not opposed by the Arizona Bankers Association.

HB 2513 requires that before accepting a final and complete application for a reverse mortgage or assessing any fees, the originator must:

  • Provide the homeowner a list of at least five housing counseling agencies, at least two of which who are able to provide counseling by telephone.
  • Receive certification from the homeowner or the homeowner’s representative that the homeowner has received counseling from a housing counseling agency. 
  • Mandates that adequate financial counseling be provided by a counselor who is an independent third party.
  • Explains that to be considered an independent third party, the counselor can not be associated with or paid by a party who:
    • Originates or services the reverse mortgage.
    • Funds the loan underlying the reverse mortgage.
    • Sells annuities, investments, long-term care insurance or any other type of financial or insurance product.
  • Instructs that counseling services be provided by housing counseling agencies and by counselors who adhere to uniform counseling protocols approved by HUD.

HB 2513

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  • As MMI has a lot AZ-based counselors, I reviewed this pretty carefully and I see no changes at all as the way counseling is handled today.

    There is one exception which is very welcome:

    “Counseling services required pursuant to this chapter shall be provided by housing counseling agencies and by counselors who follow uniform counseling protocols approved by the united states department of housing and urban development”.

    Hopefully, this means that counseling agencies who have chosen not to comply with the “HUD HECM Network Protocol” will no longer be able to take shortcuts with the content of a counseling session.

    At present only HUD HECM Network counselors are required by HUD to follow this protocol, although many agencies (including MMI) has chosen to follow the protocol universally). Other HUD-approved Counseling Agencies whose counselors have not passed the HUD HECM Exam and are therefore not part of the HUD HECM Network, are not required to follow the protocol. This loophole will be closed in AZ.

    This provision makes sense and is a good thing for AZ seniors, but will soon be a mute point as HUD is moving to require use of the protocol nationwide.

    Otherwise what’s new? Am I missing something?

  • this is exactly what we do here in florida. we give them nmaes of 5 or more counslers and our 108 page explaining about what they are doing is left with borrower and we gp over explaiming every thing and leave copies.
    Only thing diffrence which I agree with is not allowing insurance agents to solicit them.

    But why are we afraid of seniors deciding for them selves what is good for them. The goverment can’t run thier own business but want to jam down our throats we senior they know what is good for them and seniors can’t think for them selves.

  • I have no quarrel with State Regulations for Private Jumbo Loans, which someday, too, may return. Or with
    collecting State Fees (Licenses: Both in-State and Out-Of-State. However, Out-Of-State Mortgage Brokers and Originators should be able to get licenses just as the Out-Of-State Insurance Sales people do–pay the fee and as long as one holds a valid State License elsewhere, all one has to do is pay a Fee, no additional testing involved.) HUD should ban the States from having any involvement in setting additional regulations which affect HUD/FHA HECM Loans
    or Licensing. And, this business of banning Out-Of-State Sales People (I know, I know, some of you folks think you are just Loan Officers, not Sales People.) or Out-Of -State Counselors from working in certain States is not what are Country and economic system
    is supposed to be. Smacks totally of Selfishness and protectionism.

  • Here we go again politicians adding their two cents to protect seniors & yet they can’t seem to do anything right with the country. Do politicians really believe that they are smarter than today’s seniors who are internet savy & very much up to date on programs available to them?

    Just one more un necessary law–hopefully other states will not follow suit! FHA guidelines are fine. With loan officers now being required to be licensed & finger printed in my state (NY) and others–the “slime” & criminals who entered this market after their subprime market imploded, will be kept out!

  • Thanks Critic, no apology needed.. The issue as to what degree counselors should pronounce on the suitability of a RM for a particular senior is an interesting question (for me at least), but not for this thread!

  • Only an ignoramus, Critic, would think that if one is licensed as a Life and Health Agent in one State, he could become licensed as a P&C Agent in a different State without taking that State’s P & C Exams. (I’ve been a licensed Life and Health Agent in the State of Washington for about 20 years. I never spent much time as a Salesman but I kept my license up to date. I just dropped my license because I do not wish to cross-sell And yes, The State of Washington created a RM specific exam–after learning a high number of those working in the Mortgage Industry in the State of Washington were felons!!!! The rest of what you wrote is generally well done and I hope it comes to pass.

  • Dear Critic, it appears that I am the Ignoramus: I checked with the folks at the State of Washington DFI. And, the State of Washington does NOT have a reverse mortgage specific licensing test. I guess I was just too focused on the reverse mortgage portion of the exam. Sorry, might as well blame it on old age,
    I blame my poor perfomance now on other matters on age ( from sex to memory), seems to satisfy everyone but my young wife (62, but she still thinks she’s 21).

  • It’s appealing to think that the HECM Counselors can provide adequate financial counseling, and indeed, some counselors try to save the world by taking on that mission, but this lies specifically outside the scope of their training and licensing and the instructions HUD places on them.

    Unfortunately, liability is a two-edged sword. What liabilities the regulators are trying to prevent by outright prohibition carries the seeds of its own scandal because it detaches good planning and execution from suitability and casts criminal suspicion over all multi-intrument planning.

    What now happens to a good & suitable plan crafted by a financial planner who makes his fee from the plan, then outsources the HECM loan and an annuity to different and unrelated and appropriately licensed and trained professionals? Does it get undone because a well-intentioned HECM counselor doesn’t understand it? There’s a lawsuit waiting to happen when LTC isn’t purchased or an estate is not insured.

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