The California Senior Legislature wants to change reverse mortgage counseling policy to require that counseling is face-to-face in the state of California. The non-partisan senior organization proposed the change through a model legislative session that adjourned in October.
The Reverse Mortgage Transparency Act (AP 32), which the group drafted during its 31st annual session, states that 90% of home equity conversion mortgage borrowers receive counseling over the telephone, and calls telephone counseling “seriously inadequate.” AP 32 appeared on the organization’s Top-10 priority list for the coming the year and stressed the need for counseling reform within the state.
“[Phone counseling] does not account for accurately communicating the complexities of the reverse mortgage loans, any possible hearing or cognitive impairments of the borrower, and the difficulty of determining who exactly is on the telephone,” the proposal states.
It further says that when a married couple or two or more individuals are on a home’s title, it’s not possible for a counselor to “effectively communicate with all parties” throughout a phone counseling session, and that many seniors don’t fully understand their responsibilities when taking out a reverse mortgage.
If the act were to progress, California would join North Carolina and Massachusetts as the only states to pursue such a requirement. North Carolina currently mandates that all reverse mortgage counseling is face-to-face and Massachusetts recommends it.
Additionally, the proposal suggests that the fees associated with in-person counseling be incorporated into the closing cost of the reverse mortgage.
The proposal is a good idea, but it’s not exactly realistic, says Enrique Juarez, HECM counseling manager at CCCS of Orange County.
“I don’t think it would come to pass, just because of the logistical factors, and the funding factors,” he told RMD. “If this proposed legislation goes forward and passes, it’s just going to cause a lot of HECM counseling agencies a dilemma of trying to collect their fee. It’s not conducive to the industry as a whole.”
Many counseling agencies have expressed concerns with face-to-face counseling, namely, that it is not readily available to those who need it. Counselors may not travel to seniors’ homes for counseling sessions, which is problematic for seniors who can’t get themselves to a counseling facility.
“It’s not in the best interested of Californians to be dictated to,” he says. “The legislation is going to dictate to someone who may be homebound, who is competent to understand over the phone, that you have to find some way to get transported to this agency. It should be their preference whether they want face-to-face counseling or telephone counseling.”
Now, it’s up to the state’s legislative office to “pick up” AP 32 and “unback” the proposal if it chooses to pursue the topic, according to the group’s consulting executive director. From there, it could either be incorporated into a Senate bill or stand alone as a legislative bill.
There’s a lot of state interest in the topic of reverse mortgages, the executive director says, but the costs associated with the proposal might be an issue.
The California Senior Legislature will find out in early 2012 whether or not any of its proposals will be picked up.
Written by Alyssa Gerace