Arizona Governor Signs Bill to Establish Reverse Mortgage Oversight

NewImage.jpgArizona Govenor Jan Brewer signed legislation to establish oversight for reverse mortgages in the state.

Despite reverse mortgage borrowers already being protected by federal laws established by the US Department of Housing and Urban Development, Assistant Attorney General Jennifer Boucek told AZ Central there is “a significant segment of the reverse-mortgage market is not subject to federal regulations.”

While clearly that’s not the case since there hasn’t been any proprietary reverse mortgage products widely available since 2007, the bill provides the same type of protections included in the HECM program.

Advertisement

Rep. Bill Konopnicki, R-Safford, who sponsored the legislation, said it fills a gap in the law.  “As people find themselves in more and more difficult economic conditions, one of the ways they can use to retire is the reverse mortgage on their house,” he said.

The problem, Konopnicki said, is that the lack of regulation often leaves borrowers in the dark about their obligations. With the new law, that changes, he said.

HB 2242 requires that adequate financial counseling be provided by a counselor who is an independent third party and by counselors who adhere to uniform counseling protocols approved by HUD.  In addition, the new law requires that before accepting a a final and complete application for a reverse mortgage or assessing any fees, the originator must provide the borrower a list of at least five housing counseling agencies, at least two of which are able to provide counseling by telephone.

Originators are now required to provide the borrower with access to a statement that informs them that his or her liability under the reverse mortgage is limited and explains the borrower’s rights and obligations of the loan at least ten days before closing.  The new law also permits whole or partial prepayment without penalty at any time during the term of the reverse mortgage.

According to AZ Central, the Arizona Bankers Association was able to loosen requirements in the bill which allows lenders to sell peril and flood insurance when necessary.  The fact that the bill allows variable interest rates caught the attention of Sen. Barbara Leff, R-Paradise Valley, who said many of those recently losing their homes had variable-rate mortgages.

Konopnicki agreed, adding “I wouldn’t sign one with a variable rate.” But, he said, variable-rate loans should be allowed as long as homeowners know what they’re getting into. The changes will be effective July 29.

Arizona to regulate reverse mortgages

Join the Conversation (7)

see all

This is a professional community. Please use discretion when posting a comment.

  • The fact that Sen. Leff was opposed to variable rate reverse mortgages is indicative of the lack of understanding that some lawmakers have with regard to the reverse mortgage industry. She apparently has limited understanding of how a reverse mortgage works, or the dynamics of the financial industry.

    • The attacks against Bill Konopnicki are ABSURD. Bill has proven to be a consistent, honest and dedicated voice and force for our kids and education in AZ. He is a rare form of common sense and common ground, while still maintaining a conservative voice for rural Arizona. Bill's sponsoring of this bill proves this. http://billkonopnicki.com

  • This law is a solution searching for a problem and may serve to feed the public paranoia that RM originators are out to “get” unwary seniors. The legislators' comments in support of the law reveal a profound lack of knowledge and understanding of reverse mortgages, but there are apparently some political points to be scored by supporting it.

  • Lance and Greg,

    Our friends also get the workings of HECMs wrong. This is neither good nor bad. Very few of those outside of our small world know much about them. With a shaky interest rate environment, is it any wonder there are strong statements of sentiment against any adjustable rate mortgage products, particularly related to a product that can go up 1,000 bps in just one month?

    The basic issue here is that despite the current propensity of state legislators and regulators to take matters into their own hands and provide a framework for proprietary products, we as an industry sit on our hands and have no real state model reverse mortgage legislation to provide them. Instead we run from state to state reacting to legislation. There have been times that this modus operandi has failed to stop some bills that are less than desirable.

    To speak bluntly, the MBA did a terrible job with its version of a reverse mortgage model bill for the states. Beyond the provisions themselves, the MBA went about the drafting all wrong. They did not include any state legislators or regulators in the drafting process. NRMLA has the people and the manpower as an industry to work with state legislators in drafting such a bill but the Board believes that the status quo is preferable to taking on the responsibility of initiating the drafting of such a bill. I wish the NRMLA Board felt otherwise and would take some proactive measures….

  • The Critic states, ” NRMLA has the people and the manpower as an industry to work with state legislators in drafting such a bill but the Board believes that the status quo is preferable to taking on the responsibility of initiating the drafting of such a bill. I wish the NRMLA Board felt otherwise and would take some proactive measures….”

    This is so highly misleading. NRMLA has been very actively involved in every state that has debated a reverse mortgage law. (Believe me, we have incurred tens of thousands — if not hundreds of thousnds of dollars in legal expsnese to do this.) In AZ, we worked hand-in-hand with the AZ Bankers Association, which had no expertise in our subject matter, analyzing the proposals and drafts and proposing amendments. In the end, the new law is very much a result of NRMLA's work product.

    This is also true of the new law in Maryland, as well as the bills pending in Massachusetts and Louisiana. NRMLA provides counsel, a President who travels into states to meet with decision-makers to explain the potential impact of their bills and suggest amendments and pretty much all of the intellectual work that goes into shaping the bills.

    We don't honk our horn about all we do day in and day out because, frankly, we're too busy dealing with all these issues to take time to honk. Furthermore, we're not about tooting our horn; we're about getting results.

    If we didn't do what we do, in several states you'd be facing 30-day rescission periods, vague suitability statutes, etc. Instead, we are getting rational, workable policies that protect seniors without cutting off the industry's ability to make loans.

    I'm not sure why some of the commenters on RMD have it out for NRMLA so strongly. I guess they're all entitled to their opinion, but they ought to take the time to find out what we really do before spouting off their entirely uninformed opinions.

    • The_Critic's complaint seems to be with the model legislation. “To speak bluntly, the MBA did a terrible job with its version of a reverse mortgage model bill for the states”.

      Perhaps if the model bill had included state legislators and regulators in the drafting process, NRMLA would not have to work on an ad hoc basis with each new state initiative.

  • The attacks against Bill Konopnicki are ABSURD. Bill has proven to be a consistent, honest and dedicated voice and force for our kids and education in AZ. He is a rare form of common sense and common ground, while still maintaining a conservative voice for rural Arizona. Bill’s sponsoring of this bill proves this. http://billkonopnicki.com

string(112) "https://reversemortgagedaily.com/2010/05/10/arizona-governor-signs-bill-to-establish-reverse-mortgage-oversight/"

Share your opinion