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Posts Tagged ‘law’
Thursday, November 5th, 2009
 The US House of Representatives The new homebuyer’s tax credit extension that we have discussed extensively in the past week was passed by the House of Representatives today. Now that the bill has been passed by Congress, it will go to President Obama for his signature. The bill passed by a vote of 403-12 after it unanimously passed in the Senate. The bill is expected to be signed into law by the President tomorrow.
For more posts on this topic, please see:
Breaking News: Deal Announced to Extend New Homebuyer’s Tax Credit Through April 2010
Reflecting on the Impact of an Extended Tax Credit
Tags: bill, Congress, House of Representatives, law, new homebuyer's tax credit, Senate, tax credit
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Monday, October 12th, 2009
 This weekend Gov. Arnold Schwarzenegger signed AB 329 into law in California. The bill finally establishes the Reverse Mortgage Elder Protection Act of 2009. The bill prohibits cross-selling, requires the lender to provide the borrower with no fewer than 10 nonprofit HUD-approved counseling agencies, and requires the lender to provide the borrower with a checklist of issues to discuss with the reverse mortgage counselor. The loan application will be unable to be approved without the signed checklist. However, given that the first two requirements are included in national legislation, the main feature of the bill will be the addition of the checklist to the reverse mortgage counseling process.
The provisions of the bill will be administered by both the California Department of Real Estate and the California Department of Corporations.
The bill can be found at: AB 329
Tags: AB 329, Arnold Schwarzenegger, bill, California, law, reverse mortgage, reverse mortgage counseling, reverse mortgages, Reverse Mortgages Elder Protection Act of 2009
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Wednesday, April 29th, 2009
 Senator McCaskill in DC At first, I was inclined to be in favor of the new “cross selling” restrictions. However, after learning more about them, I have changed my view.
One of the most popular and well-publicized examples of reverse mortgage fraud comes from lenders selling a senior a reverse mortgage, then convincing them to use the proceeds to buy an annuity or long term care insurance. This practice is known as “cross selling.” The annuity could perform poorly, the money could be invested for the gain of the broker, or the terms of the insurance could be highly unfavorable. And in many of these cases, seniors could be taken advantage of.
Hence the new series of “cross selling” restrictions that are passing through state legislatures and the federal government. The federal government’s restriction, in the McCaskill amendment to the Housing & Economic Recovery Act of 2008, is arguably the most stringent one. The amendment states that the mortgagee “shall not participate in, be associated with, or employ any party that participates in or is associated with any other financial or insurance activity;” This language can be extended to include tellers and savings accounts, let alone all insurance products and 401(k)s. There is an “or,” however, which states that the mortgagee can do the above if they prove to the Secretary that the mortgagee maintains firewalls and safeguards to ensure that the originator has no incentives to provide the mortgagor with any other financial product and that the mortgagor does not need to purchase any other product as a condition of the reverse mortgage. This means that, provided that it can be proven adequately that safeguards are present, other financial products may be able to be sold by mortgagee.
The principle of the law is correct. Clearly it is important to protect seniors from fraud. Cross selling can prove disadvantageous for seniors, especially when the mortgagee is being compensated for the other products–something the senior may or may not be aware of.
However, there are other instances where cross selling may be advantageous. A senior may wish to place the money in a savings account or open up a credit card with the bank behind their reverse mortgage. They may decide to purchase a long term care insurance plan. These products can be favorable, and seniors should be able to purchase them.
The current law means that reverse mortgage lenders can only discuss a reverse mortgage with their client. If the client asks them about other options, they are not permitted to answer. Many seniors have long-term relationships with their banks or financial advisors. These seniors should not be forced to go to a variety of sources, leaving the person whom they trust and have a long-standing relationship with, just because they are considering a reverse mortgage. Such a policy has a potential to cause more harm than good.
Seniors have the right to evaluate all their options. Hopefully HUD’s interpretation of the McCaskill ammendment will still enable seniors to discuss alternatives to a reverse mortgage with their financial advisors and/or discuss options for what to do with the money, if they wish to do so. Cross selling could be prevented by a more narrow law. But the McCaskill ammendment takes it too far.
Tags: annuity, bank, Cross Selling, financial advisor, government, Housing & Economic Recovery Act, HUD, law, long term care insurance, McCaskill Amendment, mortgagee, mortgagors, reverse mortgage, reverse mortgage fraud, reverse mortgage lender, reverse mortgage scams, reverse mortgages, senior, seniors, Washington
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Wednesday, March 25th, 2009
 The Washington state Capitol, one of the states where a new reverse mortgage bill has been introduced. Last week, we discussed the proposed reverse mortgage bill in Arizona. Today, we would like to highlight three other states where bills regulating proprietary reverse mortgages have been introduced in the last month. The three bills differ dramatically from each other.
The California bill aims to protect seniors from being lied to and/or misinformed, including a lot of regulations surrounding impartial HUD counseling. Some highlights of the California Reverse Mortgage Elder Protection Act of 2009 include requiring lenders to provide prospective borrowers with a list of all approved HUD counselors in the state, requiring lenders to disclose any business relationships or potential conflicts of interest with the counseling agency to the prospective borrower, and allowing the borrower to cancel the reverse mortgage for any reason within the first 30 days. This bill apparently addresses the needs of the state, where seniors have been found to be misinformed or misled regarding reverse mortgages more often than in some of their neighbors.
Minnesota’s new bill addresses the issues of fraud and double dipping. It too seeks to ensure that lenders do not provide reverse mortgages to seniors who do not need them.
One of the key facets of the bill is that it prohibits cross selling involving reverse mortgages. The bill will also require mandatory counseling for proprietary reverse mortgages. There appears to be a lot of skepticism as to whether it is possible to ever really prohibit cross selling. However, it seems valuable to state that lenders cannot also sell annuities or insurance to the borrower if the payments will come from the reverse mortgage. Trust is a crucial aspect of the reverse mortgage program, and double dipping has the potential to undermine that trust.
The Washington bill protects both the lender and the consumer from eachother. The bill appears similar in some ways to the Arizona bill by mandating counseling. It requires basic protections, ensuring that there is a right of recession and that the payments go to the correct party. However, the bill is also notable because it adds provisions for the lender, helping to confirm that the lender can afford to make the payments in the reverse mortgage and that they are held accountable if they do not. The Washington bill appears to be designed to prevent court cases and help provide guidance to the courts in determining disputes. It also is likely to serve as an important step in protecting seniors in the proprietary reverse mortgage market–especially since one only needs to be 60 to qualify for a proprietary reverse mortgage in Washington State.
These bills continue to show the increased interest the states have been taking in regulating the proprietary reverse mortgage market during the recession. Reverse mortgages can help seniors and improve their lives. On the other hand, there also instances where getting a reverse mortgage may prove to not be the right thing for the senior and their family. Taking steps to protect the senior while helping to prevent lawsuits is a good thing. It is valuable that the states have gotten involved in regulating a market that is so at risk for fraud and manipulation.
Tags: Arizona, bill, California, law, lawsuit, Minnesota, Proprietary Reverse Mortgage, reverse mortgage, reverse mortgages, senior, state legislature, Washington
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