Today, a hearing is scheduled in California for AB 329, to discuss the amended bill which no longer includes the “fiduciary duty” and “cause of actions” provisions. Opponents of the bill are still concerned that the amended bill would reduce the availability reverse mortgages in the state due to a provision which would extend the right of recession to 30 days.
The bill was introduced by California Assembly member Mike Feuer earlier this year and according to latest assembly committee analysis AB 329 will:
- Prohibit a lender or any other person that participates in the origination of a reverse mortgage from requiring the prospective borrower to purchase an annuity as a condition of obtaining a reverse mortgage loan.
- Prohibit a lender or any other person that participates in the origination of a reverse mortgage from doing either of the following:
- Participate in, be associated with, or employ any party that participates in or is associated with any other financial or insurance activity, unless the lender maintains firewalls and other safeguards designed to ensure that individuals participating in the origination of the mortgage shall have no involvement with, or incentive to provide the prospective borrower with, any other financial or insurance product.
- Refer the prospective borrower to anyone for the purchase of an annuity or other financial or insurance product.
- Permit the borrower to rescind any reverse mortgage within 30 days of execution by providing the lender with written notice and returning any payments received in connection with the reverse mortgage within 15 days of rescission.
- Provides that prior to accepting a final and complete application for a reverse mortgage the lender shall provide the borrower with a list of not fewer than ten counseling agencies that are approved by the United States Department of Housing and Urban Development to engage in reverse mortgage counseling. Provides further that the counseling agency shall not receive any compensation, either directly or indirectly, from the lender or from any other person or entity involved in originating or servicing the mortgage or the sale of annuities, investments, long-term care insurance, or any other type of financial or insurance product.
- Requires the lender, prior to counseling, to provide the prospective borrower with a plain and conspicuous written statement warning the prospective borrower of the legal and financial implications of a reverse mortgage, a statement of the risks associated with using reverse mortgage proceeds to purchase annuities or other financial products, and notice that the borrower has a 30-day right of rescission, as specified.
- Requires a lender, prior to counseling, to provide a prospective borrower with a written checklist pertaining to the risks and suitability of a reverse mortgage. Requires further that the borrower and counselor sign the checklist acknowledging that the items have been discussed in counseling and the checklist be returned to the lender, along with the required counseling certificate, prior to closing.
To read more about the AB 329, click the link below. Thank you Shannon Hicks for the update.