The new law extends the application process by implementing a waiting period and worksheet to be signed by all parties.
Sponsored and introduced by Jose Medina (D-CA), AB 1700 adds new protections for reverse mortgage borrowers in the state and amends certain sections of California’s Civil Code relating to reverse mortgages.
The new law implements a seven-day cooling off period, prohibiting a lender from taking a reverse mortgage application until one week from the date of loan counseling. It also requires that a HUD-approved housing counselor provide a new reverse mortgage worksheet to the borrower before counseling.
The counselor and the prospective borrower must sign the worksheet and then return to the lender with a counseling certificate.
Paul Fiore, executive vice president of retail sales for reverese mortgage lender American Advisors Group, said the cooling off period will have a "negligible impact" on its overall business. “Our main concern is for the borrower," said Fiore. "In a rising interest rate economy, the borrower may end up with a higher rate of interest by having to wait seven additional days for his/her application to be accepted.”
The law bears similar resemblance to a previous bill, AB 553, Medina introduced in February 2013 that aimed to include a “suitability” checklist for reverse mortgage borrowers during the application process. However, the bill was later removed because officials found that certain requirements in it would burden the lending process.
