State governor signs 'Cooling Off' reverse mortgage bill

by Rachel.Norvell20 Oct 2014
California Governor Jerry Brown has signed a bill into law that requires California reverse mortgage lenders to provide certain disclosures to potential borrowers during the application process. The new law also includes a waiting period after counseling before a lender can accept the application or assess any fees.

Sponsored and introduced by Jose Medina (D-CA), AB 1700  adds new protections for reverse mortgage borrowers in the state and amends certain sections of California’s Civil Code relating to reverse mortgages.

The new law implements a seven-day cooling off period, prohibiting a lender from taking a reverse mortgage application until one week from the date of loan counseling. It also requires that a HUD-approved housing counselor provide a new reverse mortgage worksheet to the borrower before counseling.

The counselor and the prospective borrower must sign the worksheet and then return to the lender with a counseling certificate.


Paul Fiore, executive vice president of retail sales for reverese mortgage lender American Advisors Group, said the cooling off period will have a "negligible impact" on its overall business. “Our main concern is for the borrower," said Fiore. "In a rising interest rate economy, the borrower may end up with a higher rate of interest by having to wait seven additional days for his/her application to be accepted.”

The law bears similar resemblance to a previous bill, AB 553, Medina introduced in February 2013 that aimed to include a “suitability” checklist for reverse mortgage borrowers during the application process. However, the bill was later removed because officials found that certain requirements in it would burden the lending process.

COMMENTS

  • by Colette A Gray, TheReverseMortgageGuide.com | 10/21/2014 9:48:54 AM

    Before Mr. Medina went to work on AB1700 he might have taken the time to familiarize himself with how the program already works. Who knows how many hundreds of thousands of taxpayer dollars to "fix" something that wasn't broken.

    It seems to me the real point of AB1700 was for politicians to make a lot of noise to get their names in the news and help themselves, not the borrowers. If helping seniors was their goal they might have begun looking for ways to restore funding to the senior programs they cut like Meals on Wheels, Senior Community Service Employment, Qualified Individual Program, Low Income Home Energy, and Social Security to name a few.

    I agree with Paul Fiore. The cooling off period will have a "negligible impact" on business and "In a rising interest rate economy, the borrower may end up with a higher rate of interest by having to wait seven additional days for his/her application to be accepted.”

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