A bill aimed at protecting California’s elderly and non-English speakers from predatory reverse-mortgage loan practices awaits Gov. Arnold Schwarzenegger’s signature.

Senate Bill 1609 would require reverse-mortgage loan applicants to complete counseling from a Department of Housing and Urban Development-approved agency. The bill would also ban penalties for prepayments, and makes lenders who fail to make loan advances liable for three times the amount wrongfully withheld. Although adjustable interest rates would still be permissible, adjusting periodic loan advances based on adjustments to interest rates would be banned.

Lenders would be required to prominently disclose interest rates or other fees throughout the full term of the loan, and the first page of any deed of trust securing a reverse-mortgage loan would have to state, in boldface type, “This deed of trust secures a reverse mortgage loan.”

Lenders would be barred from requiring applicants to purchase an annuity as a condition for arranging a reverse mortgage.

The bill also stipulates that if negotiations are conducted in Spanish, Chinese, Tagalog, Vietnamese or Korean, the final contract must be translated into the language in which it was negotiated, unless borrowers provide their own translators during negotiations.

The bill passed the Assembly Aug. 17 in a 49-28 vote, and the Senate signed off Aug. 23 on the amended bill in a 28-7 vote. The bill went to the governor’s desk Aug. 30 and he has 30 days to sign it into law.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Thank you for subscribing to Morning Headlines.
Back to top
Inman Connect Black Friday Sale! Bundle our next two events or secure your 2021 All Access Pass.SEE THE DEALS×
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription