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.
California Governor Jerry Brown has signed a bill into law that requires California