California Assemblyman Mike Feuer introduced reverse mortgage legislation that would allow borrowers to cancel the loan within 30 days, require lenders to provide a list of all nonprofit counselors in the state that are approved by the U.S. Department of Housing and Urban Development, and require the lender to pay triple the amount wrongfully withheld if it fails to make a loan advance to the borrower as required.
The Reverse Mortgage Elder Protection Act of 2009 (AB 329) was introduced by the Los Angeles-area legislator on Feb. 18. It may be heard in a committee, yet to be determined, on or after March 21, a spokeswoman for Feuer said today.
AB 329 would expand existing reverse mortgage law in California that already requires counseling and a disclosure notice advising the borrower that the loan is a complex financial arrangement. The bill is meant to address inadequacies in existing state and federal law in regards to reverse mortgages, including limitations on bundling reverse mortgages with annuities and a three-day right of rescission, according to a fact sheet released from Feuer’s office.
“Except in the most egregious cases of fraud, seniors have little legal recourse when they have been harmed,” the fact sheet said.
The 30-day right of rescission would be consistent with an existing right for annuity contracts, according to the fact sheet.
The bill states that any person who sells a reverse mortgage would have a fiduciary duty to act in the best interest of the borrower, “with the utmost care, honesty and undivided loyalty, diligence and good faith toward the elder.”
Another provision would prohibit a lender from referring a borrower to anyone for the purchase of an annuity prior to closing or before the 30-day rescission right expires.
The bill is supported by several senior advocacy and consumer groups including AARP-California and California Association of Community Organizations for Reform Now (ACORN), according to the fact sheet.
