The California Assembly passed a bill earlier this week, which is meant to provide an additional level of protection to senior citizens considering reverse mortgages.
Passed by a vote of 49-29, SB 660 requires that a checklist be provided to the consumer prior to the mandatory counseling session and states that any person who recommends a reverse mortgage, with anticipation of financial gain, owes a duty of honesty, good faith, and fair dealing to the consumer.
Senator Lois Wolk, D-Davis, told the Daily Democrat that, "These loans, while appropriate in some instances, can have devastating financial consequences. Because the amount due can fairly quickly exceed the value of the home, borrowers get trapped. They lose their equity and their ability to move into assisted living or other supportive housing, or otherwise provide for long-term care. This measure ensures that seniors have the information they need when making important financial decisions involving their homes."
The new version of SB 660 includes the following amendments:
- Specify that a lender, broker, person, or entity shall not be deemed to have breeched the duty set forth by this bill solely based on the actions or omissions of the counseling agency.
- Provide that compliance with existing law may be cited by a lender, broker, person, or entity as evidence demonstrating compliance with the duties of this bill.
- Requires the counseling agency to provide the prospective borrower with a written checklist of issues and problems that could arise in the transaction if the prospective borrower seeks counseling prior to requesting a reverse mortgage.
- Require that the notice that must be delivered to reverse mortgage borrowers highlight certain risks associated with reverse mortgages.
"With the rise in abuses in the reverse mortgage market, this standard is not only appropriate, but also necessary to protect seniors from those who would take financial advantage of them," said Wolk.
The Senate must now vote on the new amendments, then it can be sent to the Governor for his signature.