|
REFERENCE TITLE: reverse mortgages; regulations |
|
State of Arizona House of Representatives Forty-ninth Legislature Second Regular Session 2010
|
|
HB 2242 |
|
|
|
Introduced by Representative Konopnicki
|
AN ACT
amending title 6, Arizona Revised Statutes, by adding chapter 16; relating to reverse mortgages.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 6, Arizona Revised Statutes, is amended by adding chapter 16, to read:
CHAPTER 16
REVERSE MORTGAGES
ARTICLE 1. GENERAL PROVISIONS
6-1601. Definitions
In this chapter, unless the context otherwise requires:
1. "Agreement" means the document that on execution obligates the homeowner and originator under the reverse mortgage.
2. "Dwelling" means a residence that is designed principally for at least one and not more than four families in which the homeowner occupies at least one of the units.
3. "Housing counseling agency" means an agency that is approved by the united states department of housing and urban development to provide reverse mortgage counseling.
4. "Originator" means a person who regularly makes or brokers reverse mortgages, including a creditor or broker.
5. "Reverse mortgage" means a nonrecourse consumer credit obligation to which all of the following apply:
(a) A mortgage, deed of trust or equivalent consensual security interest securing one or more advances is created in the homeowner's principal dwelling.
(b) Any principal, interest or shared appreciation or equity is due and payable only after the homeowner dies, the dwelling is transferred or the homeowner ceases to occupy the dwelling as a principal dwelling. This subdivision does not apply in the case of default.
(c) Cash advances are provided to a homeowner based on the equity or the value in a homeowner's owner occupied principal residence.
(d) The consumer credit obligation is not a home equity conversion mortgage insured by the federal housing authority.
6-1602. Financial counseling; counselor requirements
A. Adequate counseling under this chapter must be provided by a counselor who is an independent third party.
B. To qualify as an independent third party, the counselor may not be associated with or compensated, directly or indirectly, by a party involved in any of the following:
1. Originating or servicing the reverse mortgage.
2. Funding the loan underlying the reverse mortgage.
3. Selling annuities, investments, long-term care insurance or any other type of financial or insurance product.
C. Counseling services required pursuant to this chapter shall be provided by housing counseling agencies and by counselors who follow uniform counseling protocols approved by the united states department of housing and urban development.
6-1603. Required disclosures; counseling
A. Before accepting a final and complete application for a reverse mortgage or assessing any fees, the originator shall:
1. Provide the homeowner with a list of at least five housing counseling agencies, including at least two housing counseling agencies that can provide counseling by telephone.
2. Receive from the homeowner or the homeowner's authorized representative a certification that the homeowner has received counseling from a housing counseling agency. The certification shall be signed by the homeowner and the housing counseling agency counselor and shall include the date of the counseling and the name and address of both the counselor and the homeowner. The date on the certification must show that the counseling occurred within the six months preceding the homeowner accepting a final and complete application for a reverse mortgage. An electronic copy of the housing counseling certification satisfies the requirements of this paragraph. The originator shall maintain the certification in an accurate, reproducible and accessible format for the term of the reverse mortgage.
B. At least ten days before loan closing, the originator shall make available to the homeowner a statement informing the homeowner that the homeowner's liability under the reverse mortgage is limited and Explaining the homeowner's rights, obligations, remedies with respect to temporary absences from the home, late payments and payment default by the originator and all conditions requiring satisfaction of the loan obligation.
C. Before entering into a reverse mortgage, an originator shall fully disclose in writing:
1. All costs charged by the originator, including costs of estate planning, financial advice and other services that are related to the reverse mortgage but that are not required to obtain the reverse mortgage. The disclosure shall clearly identify which charges are required to obtain the reverse mortgage and which charges are not required to obtain the reverse mortgage.
2. All terms and provisions with respect to insurance, repairs, alterations, payment of taxes, default reserve, delinquency charges, foreclosure proceedings, anticipation of maturity and any additional and secondary liens.
3. The projected total cost of the reverse mortgage to the homeowner based on the projected total future loan balance for at least two projected loan terms. This statement shall include:
(a) The cost for a short-term mortgage.
(b) The cost for a loan term equaling the actuarial life expectancy of the homeowner.
6-1604. Reverse mortgage; provisions
A. A reverse mortgage may provide for a fixed or variable interest rate or future sharing between the originator and the homeowner of the appreciation in the value of the property, as agreed on by the originator and the homeowner.
B. The reverse mortgage agreement shall prominently disclose any interest rate or other fees to be charged during the period that begins on the date that the reverse mortgage becomes due and payable and that ends when repayment in full is made.
C. The reverse mortgage shall provide for future payments to the homeowner by payment of the amount based on accumulated equity minus any applicable fees and charges according to the method that the homeowner selects from among the following:
1. Based on a line of credit.
2. On a monthly basis over a term specified by the homeowner.
3. On a monthly basis over a term specified by the homeowner and based on a line of credit.
4. On a monthly basis over the tenure of the homeowner.
5. On a monthly basis over the tenure of the homeowner and based on a line of credit.
D. Except in the case of a fixed rate reverse mortgage, the reverse mortgage shall provide that the homeowner may convert the method of payment under this section to any other method during the term of the reverse mortgage.
E. The reverse mortgage shall contain restrictions that ensure the homeowner does not fund any unnecessary costs for obtaining the reverse mortgage, including any costs of estate planning, financial advice or other related services.
F. The originator shall make available to the homeowner on an annual basis not later than January 31 a statement summarizing the total principal amount paid to the homeowner under the loan secured by the reverse mortgage, the total amount of deferred interest added to the principal and the outstanding loan balance at the end of the preceding year.
6-1605. Prepayment; repayment conditions
A. Prepayment, in whole or in part, shall be permitted without penalty at any time during the term of a reverse mortgage.
B. For the purposes of this section, penalty does not include:
1. Any fees, payments or other charges that would otherwise be due when the reverse mortgage becomes due and payable.
2. Any closing costs that the agreement states are owed by the homeowner if the homeowner repays the reverse mortgage in whole before the date in the agreement, if the repayment occurs within five years after the date on which the agreement was made.
C. A reverse mortgage becomes due and payable if any of the following applies:
1. The property is not the principal residence of at least one homeowner.
2. A homeowner conveys all of the homeowner's title in the property and no other homeowner retains title.
3. For a period of longer than twelve consecutive months, a homeowner fails to occupy the property because of physical or mental illness and the property is not the principal residence of at least one other homeowner.
4. A homeowner does not perform an obligation under the mortgage.
D. A reverse mortgage does not become due and payable if the legal title to the property is held in the name of a trust and the occupant of the property uses the property as a principal residence and is a beneficiary of that trust.
E. The originator's right to collect the outstanding balance under the loan is subject to the applicable statute of limitations for written loan contracts. Notwithstanding any other law, the statute of limitations begins on either of the following:
1. The date that the reverse mortgage becomes due and payable as specified in the agreement.
2. The date the originator accelerates the loan due to the homeowner’s default on a provision in the agreement.
6-1606. Homeowner liability; prohibited practices; investments; annuities
A. The homeowner is not liable for any difference between the net amount of the homeowner's remaining debt under the reverse mortgage and the amount recovered by the originator from the net sales proceeds from the dwelling that is subject to the reverse mortgage. This amount is based on the amount of the accumulated equity selected by the homeowner to be subject to the reverse mortgage as agreed on by the originator and the homeowner.
B. An originator shall not:
1. Offer an annuity, an investment, long-term care insurance or any other type of financial instrument to the homeowner before the closing of the reverse mortgage or before the expiration of the homeowner's right to rescind the reverse mortgage agreement.
2. Refer the homeowner to anyone for the purchase of an annuity before the closing of the reverse mortgage or before the expiration of the homeowner's right to rescind the reverse mortgage agreement.
6-1607. Enforcement
A. An act or practice in violation of this chapter is an unlawful practice under section 44-1522 and is subject to enforcement through private action and prosecution by the attorney general.
B. Any provision of a reverse mortgage agreement that violates this chapter is unenforceable against the homeowner.
C. A private action against an originator shall be commenced subject to the applicable statute of limitations for written contracts.
D. The remedies provided in this chapter are not intended to be the exclusive remedies available to the homeowner.