Industry advocates poised to get the message out about the value of a reverse mortgage have to convince people like Prescott Cole, senior staff attorney with California Advocates for Nursing Home Reform, self-described as a non-profit advocacy organization “dedicated to improving the choices, care and quality of life for California’s long-term care consumers”.
Cole and his group are among those who lobby lawmakers in Sacramento on issues affecting reverse mortgages and they are vocal in support of what they call “a fiduciary duty,” which would require originators “to put a customer’s interest above their own,” according to Cole.
In a recent legislative go-round, which resulted in passage of AB 329, a.k.a. “The Reverse Mortgage Elder Protection Act of 2009,” California lawmakers prohibited “a lender or any other person who participates in the origination of the [reverse] mortgage from participating in, being associated with, or employing any party that participates in or is associated with any other financial or insurance activity, as provided, except as specified.”
The bill also prohibits “a lender or any other person who participates in the origination of the [reverse] mortgage from referring a prospective borrower to anyone for the purchase of other financial or insurance products, except as specified.”
At the Annual Meeting of the National Reverse Lenders Mortgage Association in San Diego last week, the trade group’s attorney, Jim Brodsky, said the California law “addresses cross-selling at the initial point-of-sale” and he suggested that the wording be combined “with NRMLA’s ethics directive” on the issue, to create “a pro-active solution to the cross-sell complaint.”
Referring to “suitability,” Brodsky said “maybe California has a good idea.” The new law there requires lenders to provide prospective borrowers with a written checklist that encourages them to discuss with a counselor multiple issues, including the extent to which the prospective borrower’s financial needs would be better met by options other than a reverse mortgage, and the ability of the borrower to finance alternative living accommodations.
Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade. He can be reached at [email protected]
