California Updates Reverse Mortgage Elder Protection Act

California’s Senate Committee on Banking, Finance, and Insurance passed a new version of AB 329 by a 9-2 vote on Tuesday and is being referred to the Committee on Judiciary according to the Senate’s website.

AB 329 includes provisions which prohibit any person who participates in the origination process from requiring an applicant to purchase an annuity as a condition of obtaining a reverse mortgage.  It also prohibits referring the borrower to anyone for the purchase of an annuity or other financial or insurance products prior to closing the reverse mortgage or before the borrower’s rescission period is complete. 

AB 329 also revises the notice that must be provided by a reverse mortgage lender to a prospective borrower before the lender takes a loan application by adding the following language, and would require that the notice be given to the prospective borrower before that borrower receives counseling:

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SENIOR CITIZEN ADVOCACY GROUPS ADVISE AGAINST USING THE PROCEEDSOF A REVERSE MORTGAGE TO PURCHASE AN ANNUITY OR RELATED FINANCIAL PRODUCTS. IF YOU ARE CONSIDERING USING YOUR PROCEEDS FOR THIS PURPOSE, YOU SHOULD DISCUSS THE FINANCIAL IMPLICATIONS OF DOING SO WITH YOUR COUNSELOR AND FAMILY MEMBERS;

The bill also requires that lenders give borrowers a list of 10 counseling agencies and goes beyond federal law by requiring the provision of a specified checklist to  prospective borrowers, for their use when discussing the potential ramifications of a reverse mortgage with a HUD-certified housing counselor.

The Reverse Mortgage Elder Protection Act was introduced by California Assembly member Mike Feuer earlier this year and has support from the California Association of Nursing Home Reform and AARP California.   

AB 329

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  • I tried to discern what the differences were between existing law (federal and CA), but could not see too much. What is/are the differences, and how bad are they.
    Also, I see that there was no opposition to the bill, but plenty of co-sponsors (AARP, etc.). What does that imply?

  • dduck,

    When and if the CA legislation passes we will be required to provide the statement given above to potential borrowers along with a check list of things they should ask the counselor including the high costs of the reverse mortgages, what the alternatives to a reverse mortgage are, and these are in addition to the new information the consumer has to receive prior to counseling as mandated by HUD/FHA.

    Fun, huh?

  • Aren’t there enough laws on the books to protect a senior when acquring a reverse mtge? Politicians really don’t know when to quit! Recently, in one blog there was mention of a senior having to qualify medically(as if this were an insurance product) and a more in-depth financial test. Politicians who seem to understand so little-yet want to control more for the “security” of a senior, are actually going to make a reverse mtge very difficult to obtain! In addition, they will destroy the reverse mtge industry & lenders will begin to withdraw from the program! I’ve been offering seniors this program for the last 5 years & have seen 1st hand how it has been a “life saver” for many clients! It has allowed them to “KEEP” their homes & enjoy a more dignified retirement! Politicians–PLEASE “Back-Off” you are destroying a much needed program!

  • Louise

    Thanks, but I don’t hear anything more than trees being chopped down (for the extra paper). Isn’t it wonderful that this blog did kill one tree, but I digress.
    When I sold a variable annuity to someone over 65, I had a one-pound prospectus, a lot of forms and special check-off and disclaimer forms. A lot, but the client understood and we laughed it off. Point is at least there are no onerous new hoops, are there?

  • >>and goes beyond federal law by requiring the provision of a specified checklist to prospective borrowers

    This is the only part that’s new.

    Thank goodness most my clients obtain counseling prior to selecting me as their Lender.

    The Counseling side of Reverse Mortgages is changing faster then Fannie Mae raises margins.

  • The only hoops I see are combining the check list with the 3 pages FHA will require and the “booklet” we have to give the seniors to read before they get counseling. The old booklet is a significant number of pages in pdf format. I am not sure what the edited version will look like. There is at least a 1 to 2 week lead time between the senior receiving the booklet and the counseling session. It can be circumvented by the need for “emergency” counseling based on possible foreclosure action or hospitalization of the senior.

    Excuse me while I go practice jumping.

  • How do you require somebody to purchase an annuity before getting a reverse mortgage? That is such a red herring to give politicians more power over the mortgage and insurance industries.

  • Wehavegonemad

    You can’t “require”, but you can take an annuity application and in general confuse a vulnerable senior (or vulnerable anyone) into “a promise to buy” kind of a situation. Again, the counseling may, or may not, protect these vulnerable ones.

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