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Calif. law would require counseling for reverse-mortgage applicants

Bill intended to protect elderly, non-English speakers from predatory practices

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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 conditi...