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Governor signs predatory lending bill
September 06, 2006, 12:00 AM Daily Journal staff report

Gov. Arnold Schwarzenegger signed a bill by state Sen. Joe Simitian, D-Palo Alto, to protect the elderly from predatory lending into law Tuesday. SB 1609 puts tighter restrictions on reverse mortgages.

A bill seeking to protect the growing number of aging residents duped into risky reverse mortgages because they have valuable houses but little cash was signed by Gov. Arnold Schwarzenegger yesterday.

Senate Bill1609, authored by state Sen. Joe Simitian, D-Palo Alto, puts tighter requirements on reverse mortgages, including mortgage financial counseling and a three-day grace period before a person must sign an annuity.

Reverse mortgages are a loan against one’s home and require no repayment as long as the person continues to live there. Only people 62 or older qualify. The loan can be delivered in a lump sum cash advance, serve as a credit line or a monthly payment. Since the loan doesn’t require repayment, one’s debt grows while the equity in his or her home gets smaller — thus the "reverse mortgage” name.

"Elder abuse is called the crime of the 21st century,” Simitian said. "Reverse mortgages have seen tremendous growth in California.”

The new law mandates independent counseling from a HUD-approved counseling agency for all reverse mortgage transactions. It also requires lenders to prepare loan documents in the language in which the reverse mortgage was negotiated and prohibits lenders from requiring a borrower to purchase an annuity as a condition of the loan.

The idea for the bill came from Simitian’s annual "There Oughta Be a Law” contest in which constituents submit ideas for new legislation. The governor signed the bill at Avenidas Senior Center in Palo Alto.<

 

 

Tags: reverse, mortgages, mortgage, simitian,


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