Gov. Arnold Schwarzenegger signed a bill that helps protect seniors from unscrupulous lenders when they enter into reverse mortgages.
"It is our responsibility to help protect those who are most vulnerable in our society, " said Gov. Schwarzenegger. “Getting a reverse mortgage can be very helpful, but it is a huge decision. We want to make sure people have all the information they need before making any financial commitment and we want to make sure everyone is getting the right deal, a fair deal and an honest deal. "
Specifically, this bill prohibits 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, it prohibits a lender from requiring a borrower to purchase an annuity as a part of the reverse mortgage transaction and requires a reverse mortgage contract to be translated into Spanish, Chinese, Tagalog, Vietnamese or Korean if the contract was primarily negotiated in one of those languages.
A Reverse Mortgage applicant is already required to go through counseling through a HUD sponsored counselor. This has been a requirement since the government took over the program almost 15 years ago. But has time has gone on, safety measures must evolve and be update and it is good to see that Gov. Schwarzenegger see this and is acting accordingly.
A reverse mortgage generally allows homeowners 62 and above to receive either monthly payments or one lump sum from the property’s equity without having to sell the property or make monthly repayments. Reverse mortgage loans typically require no repayment for as long as residents do not move, but they must be repaid in full, including all interest and other charges, when the last living borrower dies, sells the home or permanently moves away. Reverse mortgage borrowers continue to own their homes. They remain responsible for property taxes, insurance, and repairs.
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