Reverse Mortgage Loan Blog

The Assembly passed approved legislation to prevent money lenders from preying on senior citizens, late Wednesday.

Despite lobbying by the banking industry, legislation by Senator Lois Wolk, D-Davis, to prevent money lenders from selling seniors complex, expensive, and unnecessary reverse mortgage loans, was approved.

“These loans, while appropriate in some instances, can have devastating financial consequences,” said Wolk. “Because the amount due can fairly quickly exceed the value of the home, borrowers get trapped. They lose their equity and their ability to move into assisted living or other supportive housing, or otherwise provide for long-term care. This measure ensures that seniors have the information they need when making important financial decisions involving their homes.”

Wolk’s Senate Bill 660 would hold bankers selling reverse mortgages to a standard of “honesty, good faith, and fair dealing” – a standard commonly used in state code, and the same standard insurance companies have been held to for 20 years when selling insurance products to seniors, particularly long term care insurance.

“With the rise in abuses in the reverse mortgage market, this standard is not only appropriate, but also necessary to protect seniors from those who would take financial advantage of them,” she said.

SB 660 would also require banks to provide a checklist to the loan applicant prior to attending the federally required loan counseling.

The bill is supported by a wide coalition of senior and health care groups — most recently, the Alzheimer’s Association.

The Senate must now vote on amendments to SB 660 taken in the Assembly before the measure can be sent to the Governor for his signature.

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