30-day Rescission Period Dropped from California Bill

Shannon Hicks May 7, 2009 0

It’s only fair to share…Share on LinkedInShare on FacebookShare on Google+Tweet about this on Twitter

California Reverse Mortgage Bill

A California Assembly committee struck the controversial 30-day rescission period as one of several amendments to a reverse mortgage bill Monday, a spokeswoman for Assemblyman Mike Feuer, the bill’s author, said today.

The Assembly Committee on Banking and Finance, on a nine to zero vote, also approved three other amendments suggested by the committee’s chief consultant Mark Farouk to clarify cross-selling prohibitions and counseling funding by lenders.

The bill, AB 329, now goes to a vote by the full assembly, said Feuer’s spokeswoman Arianna Smith. She said Feuer, who is not on the Banking and Finance Committee, accepted the amendments and is “still happy with moving the bill forward.”

In a bill analysis presented to the committee on Monday, Farouk explained the justification supporting the 30-day rescission is to mirror the rescission period for annuity contracts. But he questioned if the rescission was necessary or practical since the bill sets up clear prohibitions on selling or recommending investment products related to the reverse mortgage transaction. He stated in the analysis that by the time the loan closes, the borrower has been through counseling and has waited 30 to 90 days for funding during the underwriting process.

He also pointed out the complications of unwinding a reverse mortgage transaction. “If a borrower were allowed to rescind the transaction how would the lender recoup money from liens that may have been paid off? Additionally, what if the borrower has spent a substantive amount of the funds from the transaction?” Farouk wrote.

In addition, the committee approved amendments that would clarify the prohibition of cross-selling annuities or other insurance or financial products. One clarified the time frame to “prior to closing of the reverse mortgage or before the expiration of the right of the borrower to rescind the reverse mortgage agreement.” Federal law allows for a three-day rescission period. The other amendment would not prevent a lender from offering title, hazard or other insurance products that are “customary and normal under a reverse mortgage transaction.”

The committee also approved a suggested amendment that would not prevent a counseling agency from receiving funding from a lender that is unrelated to reverse mortgages and is provided as part of “charitable or philanthropic activities.”

It’s only fair to share…Share on LinkedInShare on FacebookShare on Google+Tweet about this on Twitter

Leave A Response »