California Governor Jerry Brown last week signed a bill into law that will add new protections for reverse mortgage borrowers in the state.
The legislation, known among industry members as AB 1700 or California’s “cooling off” bill, was introduced and sponsored by Assemblyman Jose Medina (D-CA) and will take effect January 1, 2015. The bill requires that a new reverse mortgage worksheet be presented to and signed by all borrowers during the counseling process and a “cooling off” period of seven days after counseling before a lender can accept a loan application or assess any fees.
Under the new law, the worksheet includes a list of items that the borrower is advised to consider and discuss during the counseling process. Either the lender or the counseling agency must provide the worksheet guide to the borrower, depending on whether the borrower contacts the lender prior to counseling. The borrower must receive the worksheet before the counseling session takes place.
The worksheet must be signed by both the borrower and counselor and returned to the lender with the counseling certificate, the language specifies.
The bill resembles a past bill that was introduced by Assemblyman Medina in 2013, but was later removed from further consideration upon finding that certain requirements would unnecessarily burden the lending process. The new bill moved swiftly through the state legislature; it passed through the California Assembly on April 21 by an 11-1 vote, and passed in the state Senate in August by a vote of 35-0.
Written by Elizabeth Ecker