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