HB 845

1
A bill to be entitled
2An act relating to reverse mortgage loans to senior
3individuals; providing purposes; providing definitions;
4providing for application to certain reverse mortgage
5loans; specifying requirements for reverse mortgage loans;
6specifying authorized fees and charges for reverse
7mortgage loans; requiring lenders to provide borrowers
8certain loan information; providing additional lender
9requirements; specifying a statute of limitations for
10collection of loan proceeds; prohibiting lenders from
11requiring reverse mortgage loan applicants to purchase
12certain financial products; specifying prohibited reverse
13mortgage lender or broker activities; providing counseling
14and consumer education requirements for reverse mortgage
15lenders; specifying a reverse mortgage loan as a lien;
16specifying priority of the lien; providing construction;
17providing for treble damages under certain circumstances;
18providing for nonapplication of certain state laws and
19rules to reverse mortgage loans; providing an effective
20date.
21
22Be It Enacted by the Legislature of the State of Florida:
23
24     Section 1.  (1)  PURPOSES.-The purposes of this section are
25to:
26     (a)  Meet the special needs of senior homeowners by
27reducing the effect of the economic hardship caused by the
28increasing costs of meeting health, housing, and subsistence
29needs at a time of reduced income, through the issuance of
30reverse mortgage loans to permit the conversion of a portion of
31accumulated home equity into liquid assets.
32     (b)  Encourage and increase the involvement of mortgagees
33and participants in the mortgage markets in the making and
34servicing of reverse mortgage loans for senior homeowners.
35     (c)  Protect senior homeowners from abuse and fraud.
36     (d)  Encourage the use by senior homeowners interested in
37reverse mortgage loans of entities approved by the United States
38Department of Housing and Urban Development for participation in
39the Federal Housing Administration's Home Equity Conversion
40Mortgage Program and any alternative proprietary products.
41     (2)  DEFINITIONS.-For purposes of this section, the term:
42     (a)  "Broker" means an entity the activity of which in the
43reverse mortgage loan process is limited to taking applications,
44discussing terms and rates with the borrower, and undertaking
45similar activities, but is not identified on the promissory note
46as the payee and does not maintain its own funds for making
47reverse mortgage loans.
48     (b)  "Business day" means a day on which the offices of a
49lender are open to the public for carrying on substantially all
50of the lender's business functions.
51     (c)  "Department" means the United States Department of
52Housing and Urban Development.
53     (d)  "Eligible borrower" means any individual who is at
54least 62 years of age. A borrower who is incapacitated and
55otherwise considered an eligible borrower is eligible for a
56reverse mortgage loan if there is an individual who can contract
57for the borrower as a court-appointed guardian or who possesses
58a durable power of attorney for the borrower. If there is a co-
59borrower on the loan, the co-borrower must also be at least 62
60years of age to be deemed an eligible borrower.
61     (e)  "Lender" means an entity that is identified on the
62promissory note as the payee, that maintains its own funds,
63including warehouse lines, for making reverse mortgage loans,
64and that may or may not be approved by the department to
65participate in making reverse mortgage loans under the program.
66     (f)  "Make a reverse mortgage loan" means the funding and
67closing of a reverse mortgage loan subject to this section.
68     (g)  "Maximum claim" means the maximum amount of proceeds
69over the life of the reverse mortgage loan the borrower is
70entitled to receive under the note.
71     (h)  "Originate a reverse mortgage loan" means the taking
72of an application for a reverse mortgage loan subject to this
73section.
74     (i)  "Program" means the Home Equity Conversion Mortgage
75Program of the Federal Housing Administration.
76     (j)  "Reverse mortgage loan" means a nonrecourse loan
77secured by real property that meets the following criteria:
78     1.  The loan provides a lump sum, periodic cash advances,
79and lines of credit to a borrower based on the equity or the
80value in a borrower's owner-occupied principal residence.
81     2.  The loan requires no payment of principal or interest
82until the entire loan becomes due and payable.
83     (k)  "Taking an application" means the submission of a
84written application for a reverse mortgage loan by the borrower
85or borrower's representative to the lender, and the borrower or
86borrower's representative intends the application to be
87considered for approval. The taking of a borrower's contact
88information, property address, and similar information or
89obtaining the borrower's credit report is not deemed taking an
90application.
91     (3)  COVERAGE.-This section applies to reverse mortgage
92loans originated by or made to eligible borrowers on the
93borrower's principal, one-to-four family residential dwelling
94and not originated or made under the program, as well as reverse
95mortgage loans originated or made under the program.
96     (4)  LIMITATIONS AND PARAMETERS.-A reverse mortgage loan
97must comply with all of the following:
98     (a)  Any prepayment, in whole or in part, shall be
99permitted without penalty at any time during the term of the
100reverse mortgage loan. For purposes of this section, a penalty
101does not include any fees, payments, or other charges that would
102have otherwise been due upon the reverse mortgage loan being due
103and payable.
104     (b)  A reverse mortgage loan may provide for a fixed or
105adjustable interest rate or combination of such rates,
106including, but not limited to, compound interest, and may also
107provide for interest that is contingent upon the value of the
108property upon execution of the loan or at the loan's maturity,
109or on changes in value between the dates of the loan's closing
110and maturity.
111     (c)  If a reverse mortgage loan provides for periodic
112advances to a borrower, the advances may not be reduced in
113amount or number based upon any adjustment in the interest rate.
114     (d)  The reverse mortgage loan shall become due and payable
115upon the occurrence of any of the following events:
116     1.  The home securing the loan is sold or title to the home
117is otherwise transferred;
118     2.  All borrowers cease occupying the home as a principal
119residence, except as provided in paragraph (e);
120     3.  Any fixed maturity date agreed to by the lender and the
121borrower occurs; or
122     4.  An event occurs that is specified in the loan documents
123and that jeopardizes the lender's security.
124     (e)  Repayment of the reverse mortgage loan is subject to
125the following additional conditions:
126     1.  Temporary absences from the home not exceeding 60
127consecutive days may not cause the mortgage loan to become due
128and payable.
129     2.  Extended absences from the home exceeding 60
130consecutive days, but less than 1 year, may not cause the
131mortgage loan to become due and payable if the borrower has
132taken prior action that secures and protects the home in a
133manner satisfactory to the lender, as specified in the loan
134documents.
135     (f)  This section does not require a lender to make a
136reverse mortgage loan if the lender has reason to believe the
137borrower, acting on his own or acting through the borrower's
138guardian or an individual with a durable power of attorney for
139the borrower, is unable to enter into a contract for any reason,
140including, but not limited to, incapacity or duress. This
141paragraph does not create any special legal duty for the lender
142to determine the borrower's ability to enter into a contract.
143     (5)  FEES AND CHARGES.-
144     (a)  A reverse mortgage loan may include costs and fees
145that are charged by the lender or the lender's designee,
146originator, or servicer, including, but not limited to, costs
147and fees charged upon execution of the loan, upon execution of
148appreciation on a periodic basis, or upon maturity. The borrower
149may also be responsible for any costs of failing to comply with
150the reverse mortgage loan contract.
151     (b)  All fees are subject to all applicable state and
152federal standards.
153     (6)  AGREEMENT AND NOTE; DISCLOSURES.-
154     (a)  A lender shall provide the borrower, anytime during
155the reverse mortgage loan process but before the loan closing,
156with a document disclosing in plain language a summary of the
157core terms and conditions of the loan. The core terms and
158conditions must include:
159     1.  Interest rate.
160     2.  Whether the rate is fixed or adjustable.
161     3.  If the rate is adjustable, the frequency of the rate
162change and the maximum amount the rate can change in any period.
163     4.  The public index to which any changes in the interest
164rate will be tied.
165     5.  The term of the loan.
166     6.  The schedule of payment paid out during the term of the
167loan.
168     7.  The conditions under which repayment is triggered.
169     (b)  Lenders that meet Federal Housing Authority
170requirements for disclosure are also deemed to meet the
171requirements of this subsection.
172     (c)  The lender must comply with applicable federal
173regulations.
174     (d)  The lender's right to collect reverse mortgage loan
175proceeds is subject to the applicable statute of limitations for
176written loan contracts. Notwithstanding any other provision of
177law, the statute of limitations shall commence on the date the
178reverse mortgage loan becomes due and payable as provided in the
179loan agreement.
180     (7)  CROSS-SELLING.-
181     (a)  A lender may not require an applicant for a reverse
182mortgage loan to purchase an insurance annuity or other similar
183financial product, excluding title insurance or hazard, flood,
184or other peril insurance, as a condition of obtaining a reverse
185mortgage loan. A reverse mortgage lender or a broker arranging a
186reverse mortgage loan may not:
187     1.  Offer an insurance, annuity, or other similar financial
188product, excluding title insurance or hazard, flood, or other
189peril insurance, to the borrower prior to the closing of the
190reverse mortgage loan or before the expiration of the right of
191the borrower to rescind the reverse mortgage loan agreement.
192     2.  Refer the borrower to anyone for the purchase of an
193insurance, annuity, or other similar financial product,
194excluding title insurance or hazard, flood, or other peril
195insurance, prior to the closing of the reverse mortgage loan or
196before the expiration of the right of the borrower to rescind
197the reverse mortgage loan agreement.
198     (b)  A mortgage originator or any other party that
199participates in the origination of a reverse mortgage loan must
200comply with all applicable state laws and rules and federal laws
201and regulations.
202     (8)  COUNSELING AND CONSUMER EDUCATION.-
203     (a)  Prior to making a reverse mortgage loan, a lender
204shall:
205     1.  Refer the prospective borrower to a housing counseling
206agency approved by the department.
207     2.  Provide the borrower with a list of at least five
208counseling agencies approved by the department, including at
209least two agencies that can provide counseling by telephone.
210     (b)  A lender may not accept a final and complete
211application for a reverse mortgage loan from a prospective
212applicant or assess and collect any fees from a prospective
213applicant without first receiving a certification from the
214applicant or the applicant's authorized representative that the
215applicant has received counseling from an approved agency. The
216certification shall be signed by the borrower and the agency
217counselor and shall include the dates of the counseling and the
218names, addresses, and telephone numbers of the counselor and the
219borrower. An electronic facsimile copy of the housing counseling
220certification satisfies the requirements of this paragraph. The
221lender shall maintain the certification in an accurate,
222reproducible, and accessible format for the term of the reverse
223mortgage loan.
224     (c)  Counseling may be face to face or by telephone.
225     (d)  The information covered in the counseling session
226shall include:
227     1.  Options other than a reverse mortgage loan that are
228available to the homeowner, including other housing, social
229service, health, and financial options.
230     2.  Other reverse mortgage loan options that are or may
231become available to the homeowner, including, but not limited
232to, sale-leaseback financing, deferred payment loans, and
233property tax deferrals.
234     3.  The financial implications of entering into a reverse
235mortgage loan.
236     4.  A disclosure that a reverse mortgage loan may have tax
237consequences, affect eligibility for assistance under federal
238and state programs, and have an impact on the estate and heirs
239of the homeowner.
240     (e)  For borrowers represented by an individual who is a
241court-appointed guardian or possesses a durable power of
242attorney for the borrower, such individual must complete the
243counseling requirements.
244     (f)  Upon the request of the borrower, other parties shall
245be permitted to attend the counseling with the borrower. This
246paragraph does not create an obligation or duty on the part of
247the lender to inform, notify, or advise any other party of the
248opportunity to attend the counseling.
249     (g)  The borrower may be assessed a fee for the counseling.
250The fee may be financed under the loan amount as limited by the
251department.
252     (9)  OTHER PROVISIONS.-
253     (a)  A reverse mortgage loan constitutes a lien against the
254subject property to the extent of all advances made pursuant to
255the reverse mortgage loan and all interest accrued on such
256advances, and that lien shall have priority over any lien filed
257or recorded after a reverse mortgage is recorded.
258     (b)  For purposes of this section, a property is deemed to
259be owner-occupied notwithstanding that legal title to the
260property is held in the name of a trust provided the occupant of
261the property is a beneficiary of the trust.
262     (c)  An arrangement, transfer, or lien subject to this
263section may not be invalidated solely because of the failure of
264a lender to comply with any provision of this section. However,
265this section does preclude the application of any other existing
266civil remedies provided by law.
267     (d)  A lender who fails to make loan advances as required
268in the reverse mortgage loan documents and fails to cure an
269actual default after notice as specified in the reverse mortgage
270loan documents shall forfeit to the borrower treble the amount
271wrongfully withheld plus interest at the legal rate.
272     (e)  Any state law or rule applicable to loans, extensions
273of credit, or other similar financial instruments that apply
274limitations, restrictions, or prohibitions against certain
275financial concepts, including, but not limited to, shared equity
276lending, collateral-based lending, negative amortization,
277adjustable-rate interest, deferred interest, and payments
278calculated on an interest-only basis, however defined, that
279frustrate the purpose of reverse mortgage loans does not apply
280to reverse mortgage loans.
281     Section 2.  This act shall take effect July 1, 2010.


CODING: Words stricken are deletions; words underlined are additions.