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.