California Senate Bill 1609 and Reverse Mortgage
In June 2006, Governor Arnold Schwarzenegger signed California Senate Bill 1609. By doing so, he added another layer of protection against financial abuse of elders. The signing ceremony was held at Palo Alto’s Avenidas, a 35 year-strong non-profit agency serving seniors and their families/caregivers.
California Senate Bill 1609, authored by California Senator Joe Simitian, and coauthored by California Assemblywoman Lois Walk, prohibits lenders from accepting a reverse mortgage application until the senior has received reverse mortgage counseling regarding reverse mortgage pros and cons. This bill helps protect seniors from reverse mortgage scams.
Governor Schwarzenegger’s actions assure government responsibility in helping protect those who are vulnerable in our society: our seniors.
While getting a reverse mortgage can be very helpful, the decision is not a small one. More politicians like Governor Schwarzenegger are making it their responsibility to ensure that elderly homeowners have all the information they need before making any long-term financial commitment.
Because home equity is the most valuable and prominent equity most middle class Americans see in their lifetime, humanitarian politicians like Schwarzenegger want to make sure everyone is getting the right deal, a fair deal and an honest deal.
Specifically, this bill forbids a reverse mortgage lender from accepting a reverse mortgage application or assessing any fees until the potential borrower has received independent counseling regarding the loan.
In addition, the bill prevents the lender from requiring a borrower to purchase an annuity as a part of the transaction and requires the contract to be translated into Spanish, Chinese, Vietnamese or Korean, or whatever applicable language in which the contract was primarily negotiated.
Bills like 1069 are imperative during this reverse mortgage age. Even though reverse mortgages are “non-recourse” loans, they accrue many origination fees that are similar to those of traditional mortgages. Furthermore, even though the borrower will never owe more than the value of that home, interest accrues throughout the life of the loan. The amount accrued can be substantial, and this fact has caused politicians to highlight the importance fair play.