Bill Text: CA SB660 | 2009-2010 | Regular Session | Amended
Bill Title: Reverse mortgages.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed - Dead) 2010-07-01 - Joint Rule 62(a) file notice suspended. (Ayes 47. Noes 28. Page 5909.) [SB660 Detail]
Download: California-2009-SB660-Amended.html
BILL NUMBER: SB 660 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 24, 2010
AMENDED IN ASSEMBLY AUGUST 20, 2009
AMENDED IN ASSEMBLY JULY 15, 2009
AMENDED IN ASSEMBLY JULY 8, 2009
AMENDED IN ASSEMBLY JUNE 23, 2009
AMENDED IN SENATE MAY 20, 2009
AMENDED IN SENATE APRIL 27, 2009
INTRODUCED BY Senator Wolk
FEBRUARY 27, 2009
An act to amend Section 1923.5 of, and to add
Section 1923.1 to, to the Civil Code,
relating to reverse mortgages.
LEGISLATIVE COUNSEL'S DIGEST
SB 660, as amended, Wolk. Reverse mortgages.
Existing law defines and regulates reverse mortgage loans
and provides a disclosure notice that a lender must provide an
applicant, which informs the applicant that a reverse mortgage is a
complex financial arrangement and advises the applicant of the wisdom
of seeking financial counseling before entering the agreement.
Existing law requires a lender to refer a prospective borrower to a
housing counseling agency for counseling, as specified, prior to
accepting a final and complete application for a reverse mortgage or
assessing any fees, and prohibits a lender from accepting a final and
complete reverse mortgage application without first receiving from
the applicant, or his or her representative, a certification that the
applicant has received loan counseling .
This bill would provide that a lender, broker, person, or entity
that recommends the purchase of a reverse mortgage in anticipation of
financial gain owes the prospective borrower a duty of honesty, good
faith, and fair dealing , as defined. This bill would provide
that a person or entity shall not attempt to avoid the application of
these provisions, as specified . The bill would
prohibit a lender, broker, person, or entity from being deemed to
have breached this duty solely based on the actions or omissions of
the counseling agency. The bill would revise the disclosure notice
provided to reverse mortgage applicants and would prohibit a lender
from accepting a reverse mortgage loan application unless the lender
provides the prospective borrower, prior to his or her meeting with
the counseling agency, with a specified written checklist that
conspicuously alerts the prospective borrower of subjects that he or
she should discuss with the loan counselor or, if the borrower seeks
counseling prior to requesting a reverse mortgage loan application,
the bill would require a mortgage counselor to provide the checklist.
This bill would require that the counselor and the prospective
borrower sign the checklist and return it to the lender. The bill
would prohibit approval of the loan application until the signed
checklist is provided to the lender. The bill would require that a
copy of the checklist be provided to the borrower.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1923.1 is added to the
Civil Code , to read:
1923.1. (a) Any person or entity that recommends the purchase of
a reverse mortgage for compensation or in expectation of
compensation, paid directly or indirectly, owes the prospective
borrower a duty of honesty, good faith, and fair dealing.
(b) For purposes of this section, "the duty of honesty, good
faith, and fair dealing" shall mean and include an obligation to not
do any of the following:
(1) Make, or cause to be made, any false, deceptive, or misleading
statement, representation, or omission in connection with a reverse
mortgage.
(2) Originate a reverse mortgage transaction or assess any fees
upon a prospective applicant by use of undue influence, as defined in
Section 1575.
(3) Originate a reverse mortgage transaction for a wrongful
purpose. A person or entity shall be deemed to have originated a
reverse mortgage transaction for a wrongful purpose if the person or
entity originated the reverse mortgage with respect to a consumer and
knew or should have known that the reverse mortgage was likely to be
harmful to the consumer.
(4) Originate a reverse mortgage transaction, or assess any fee
upon a prospective applicant, when the person or entity knows or
should know that the applicant lacks capacity pursuant to Section 812
of the Probate Code, or is of unsound mind, but not entirely without
understanding, pursuant to Section 39.
(5) Originate a reverse mortgage transaction when the person or
entity knows or should know that the reverse mortgage will be used as
a tool of financial abuse of an elder as defined in Section 15610.30
of the Welfare and Institutions Code.
(6) Offer, recommend, or provide a reverse mortgage that violates
any provision of Section 1923.2 or 1923.5.
(c) A person or entity shall not attempt to avoid the application
of this division by doing any of the following:
(1) Dividing any reverse mortgage transaction into separate parts
for the purpose and with the intent of evading the provisions of this
section, including, but not limited to, using the proceeds of the
reverse mortgage to fund an annuity, insurance, or investment product
within one year from origination of the reverse mortgage.
(2) Any other subterfuge.
(d) The duties set forth in this section shall not be construed to
limit or narrow any other duty of a lender, broker, person, or
entity, including, but not limited to, the duties set forth in
Section 2923.1 and Division 1.9 (commencing with Section 4995) of the
Financial Code.
SECTION 1. Section 1923.1 is added to the Civil
Code, to read:
1923.1. (a) Any lender, broker, person, or entity who recommends
the purchase of a reverse mortgage in anticipation of financial gain
owes the prospective borrower a duty of honesty, good faith, and fair
dealing. The duties set forth in this section shall not be construed
to limit or narrow any other duty of a lender, broker, person, or
entity. Compliance with this chapter and all other applicable law may
be cited as evidence demonstrating compliance with the duties of
this subdivision.
(b) A lender, broker, person, or entity shall not be deemed to
have breached the duty set forth in subdivision (a) based solely on
the actions or omissions of the counseling agency pursuant to this
chapter.
SEC. 2. Section 1923.5 of the Civil Code is
amended to read:
1923.5. (a) No reverse mortgage loan application shall be taken
by a lender unless the loan applicant, prior to receiving counseling,
has received from the lender the following plain language statement
in conspicuous 16-point type or larger, advising the prospective
borrower about counseling prior to obtaining the reverse mortgage
loan:
IMPORTANT NOTICE
TO REVERSE MORTGAGE LOAN APPLICANT
A REVERSE MORTGAGE IS A COMPLEX FINANCIAL TRANSACTION. IF YOU DECIDE
TO OBTAIN A REVERSE MORTGAGE LOAN, YOU WILL SIGN BINDING LEGAL
DOCUMENTS THAT WILL HAVE IMPORTANT LEGAL AND FINANCIAL IMPLICATIONS
FOR YOU AND YOUR ESTATE. IT IS THEREFORE IMPORTANT TO UNDERSTAND THE
TERMS OF THE REVERSE MORTGAGE AND ITS EFFECT. BEFORE ENTERING INTO
THIS TRANSACTION, YOU ARE REQUIRED TO CONSULT WITH AN INDEPENDENT
LOAN COUNSELOR. A LIST OF APPROVED COUNSELORS WILL BE PROVIDED TO YOU
BY THE LENDER.
SENIOR CITIZEN ADVOCACY GROUPS ADVISE AGAINST USING THE PROCEEDS OF A
REVERSE MORTGAGE TO PURCHASE AN ANNUITY OR RELATED FINANCIAL
PRODUCTS. IF YOU ARE CONSIDERING USING YOUR PROCEEDS FOR THIS
PURPOSE, YOU SHOULD DISCUSS THE FINANCIAL IMPLICATIONS OF DOING SO
WITH YOUR COUNSELOR AND FAMILY MEMBERS.
(b) (1) In addition to the plain statement notice described in
subdivision (a), no reverse mortgage loan application shall be taken
by a lender unless the lender provides the prospective borrower,
prior to his or her meeting with a counseling agency on reverse
mortgages, with a written checklist, or in the event that the
prospective borrower seeks counseling prior to requesting a reverse
mortgage loan application from the reverse mortgage lender, the
counseling agency shall provide the prospective borrower with a
written checklist. The written checklist shall conspicuously alert
the prospective borrower, in 12-point type or larger, that he or she
should discuss with the agency counselor the following issues:
(A) How unexpected medical or other events that cause the
prospective borrower to move out of the home earlier than anticipated
will impact the total loan cost.
(B) The extent to which the prospective borrower's financial needs
would be better met by options other than a reverse mortgage,
including, but not limited to, less costly home equity lines of
credit, property tax deferral programs, or governmental aid programs.
(C) Whether the prospective borrower intends to use the proceeds
of the reverse mortgage to purchase an annuity or other insurance
products and the consequences of doing so.
(D) The effect of repayment of, or inability to repay, the loan on
residents who are not borrowers after all borrowers have died or
permanently left the home.
(E) The prospective borrower's ability to finance routine or
catastrophic home repairs, especially if maintenance is a factor that
may determine when the mortgage becomes payable.
(F) The impact that the reverse mortgage may have on the
prospective borrower's tax obligations, eligibility for government
assistance programs, and the effect that losing equity in the home
will have on the borrower's estate and heirs.
(G) The ability of the borrower to finance alternative living
accommodations, such as assisted living or long-term care nursing
home residency, after the borrower's equity is depleted.
(2) The checklist required in paragraph (1) shall be signed by the
agency counselor and by the prospective borrower and returned to the
lender along with the certification of counseling required under
subdivision (k) of Section 1923.2, and the loan application shall not
be approved until the signed checklist is provided to the lender. A
copy of the checklist shall be provided to the borrower.
