BILL NUMBER: SB 660	AMENDED
	BILL TEXT

	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,
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. The bill would prohibit a lender, broker,
person, or entity from being deemed to have  breeched
  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. 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 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  breeched   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.
YOU MAY ALSO WANT TO DISCUSS YOUR DECISION WITH FAMILY MEMBERS OR
OTHERS ON WHOM YOU RELY FOR FINANCIAL ADVICE.


   (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 that conspicuously alerts 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.