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."
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.