My letter to my local Assemblywoman regarding CA Bill AB 329

Find your local assembly person: Click Here

Monday, March 09, 2009

Dear Assemblywoman Harkey,

I respect the proposal of AB 329 and the spirit of its creation.
My name is Angella Conrard. As a reverse mortgage originator of 4 years with a background in healthcare I can speak from experience. I am also the president of the National Aging in Place Council-Orange County and the director of the South Orange County National Care Council Chapter.

This bill if passed into law would be ineffective and only create hardship for seniors.

HUD already prohibits brokers from paying any of the counseling fees or referring to a specific agency. So the section stating that if they do pay the fee, they must notify the borrower of the conflict would be a violation of HUD regulations. We are also required to provide each client with a minimum of 5 counseling agencies. We are required to have our clients sign a disclosure upon the receipt of this list. With new agencies popping up continually this is an unrealistic provision. A more realistic provision is a list of 3 local counseling agencies and 3 referring agencies such as HUD or AARP. The quality of counseling has increased significantly over the last few years. 99% of the time they provide good consumer counseling and it has proven to be an excellent consumer protection mechanism. A provision forbidding lenders to make any kind of donation to counseling agencies would be more effective.
The right of recession period of 30 days is excessive and would provide many problems for seniors. It is unfortunate but most seniors who attain reverse mortgages need them. In many cases you would be creating hardship with a 30 day right of recession period. We are not a society of planners. It is not uncommon for a senior to wait until they are in despite need of money before they attain a reverse mortgage. One third of reverse mortgages are done to pay for medical or home care.

I am currently working with a borrower who is 87 and has Lou Gerrigs disease. She needs her reverse mortgage to be able to continue to pay for her 24 hour caregiver. Lenders will not fund a loan or release proceeds until the right of recession period is completed. The average completion time for a reverse mortgage from application is 30-45 days. She is just beyond 30 days from application date and has run out of money to pay her caregiver. VA and state benefits take over 6 months to attain. My client is just one of many who are doing the best they can to take care of themselves but who would be side swiped by such a law.

Many seniors whom I talk to got caught up in the refinance boom and no longer qualify for a reverse mortgage because they do not have enough equity, however with the new home purchase reverse mortgage product, they can often sell their home and retain enough equity to downsize so they can attain a more manageable home. They can move closer to children so they can have the support they need as they age. This bill would make home purchases with reverse mortgages impossible. No seller is going to consider selling to a buyer with financing of a reverse mortgage with a 30 day recession period. Such a recession period would not only inhibit the growth of the secondary market which eventually will create an environment to offer more products, but more seriously, lenders would not release funds until the right of recession is complete. This delays seniors from being able to pay for caregivers get relief them from burdensome mortgage payments, delays their ability to pay for medication and property taxes. You will hurt seniors with this bill.

In my opinion, a professional designation to qualify loan originators to provide reverse mortgages would be much more affective. The National Reverse Mortgage Lenders Association (NRMLA) has started the process to create such a designation with continuing education requirements. I agree, in that the originators need to be educated and be held to the highest ethics and levels of integrity, but do it by the educational requirements of the messenger not with legislation that will hurt seniors and the quality of their lives. I can assure you, I can recite many stories similar to this as other reverse mortgage originators can. I urge you to work with NRMLA to discuss this bill. It would be catastrophic for many people. NRMLA needs to complete the designation requirements and states need to adopt this as a requirement to originate reverse mortgages. It would require loan officers to take continuing education and ethics classes on a annual basis.

PLEASE DO NOT SUPPORT this bill. Contact Peter Bell, president of NRMLA 202-939-1741. I assure you this industry overall is dedicated to helping and protecting seniors.

Kind regards,
Angella Conrard
Reverse Mortgage Advisor

State Law Makers react to the growth of reverse mortgages proposing new laws- Here is what is happening in CA

CA: Assembly Member Feuer introduced AB 329 Reverse Mortgage Elder Protection Act of 2009.
Click here to read AB 329
1. Prohibits a lender from referring a prospective borrower to a counseling agency, or paying for counseling agency. It also will require lenders to provide borrowers to all agencies in their home state. Requires the lender to disclose any payments or business affiliations between the lender & counseling agency.
a. My Thoughts:
i. The lender should be forbidden from paying, contributing or having a business affiliation with a counseling agency.
ii. HUD presently forbids lenders to pay for counseling.
iii. HUD has regulations requiring lenders to provide a list of 5 counseling agencies to all prospective borrowers. A full list will be over 6 pages long for CA. This is a waste of paper and ineffective.
2. The bill will give borrowers a 30 day right of rescission.
a. My Thoughts:
i. Presently there is a 3 day right of rescission.
ii. A 30 day right of rescission will delay borrowers in attaining their proceeds. This will cause significant hardship for many borrowers who need the reverse mortgage to pay for care, are having trouble paying bills or their mortgage.
iii. The HUD 3rd party counseling is an effective consumer protection that IS WORKING. The counselors are HUD approved and are independent from the lender.
iv. 30 day right of rescission will significantly inhibit the reverse mortgage for home purchase program. What seller will consider a buyer using a reverse mortgage for home purchase if they have the right to change their mind for 30 days?
3. The bill also provides lenders to hold a fiduciary duty to the borrower.
a. My Thoughts:
i. Yes, of course this is a no brainer. The profession needs to establish a nationwide professional designation including CEUs and annual ethics training as many other professions have done. The National Reverse Mortgage Association is in the process of creating a Reverse Mortgage Professional designation. Grievances and Ethics board violation processes are included in the designation being established.