Reverse Mortgages

Requires lenders to refer borrowers to a HUD-approved housing
counseling agency for counseling prior to accepting an
application for a reverse mortgage loan.  Makes failure to comply
with requirement an unfair or deceptive act or practice.  Exempts
certain loans from counseling requirement.  (SD1)

THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  Chapter 506, Hawaii Revised Statutes, is amended
 2 by adding a new section to be appropriately designated and to
 3 read as follows:
 4      "506-    Reverse mortgage loan.  (a)  Prior to accepting an
 5 application for a reverse mortgage loan, a lender shall refer
 6 every borrower to counseling as defined in this subsection from
 7 an organization that is a housing counseling agency approved by
 8 the United States Department of Housing and Urban Development,
 9 and shall receive certification from the counselor that the
10 borrower has received counseling.  The certificate shall be
11 signed by the borrower and the counselor and include the date of
12 counseling, the name, address, and telephone number of both the
13 borrower and the organization providing counseling, and shall be
14 maintained by the holder of the reverse mortgage throughout the
15 term of the reverse mortgage loan.  For purposes of this section,
16 "counseling" means that the following services were provided to
17 the borrower:
18      (1)  A review of the advantages and disadvantages of reverse
19           mortgage loan programs;

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                                     S.B. NO.           S.D. 1

 1      (2)  An explanation of how the reverse mortgage loan affects
 2           the borrower's estate and public benefits;
 3      (3)  An explanation of the lending process;
 4      (4)  A discussion of the borrower's supplemental income
 5           needs; and
 6      (5)  An opportunity to ask questions of the counselor.
 7      (b)  A lender that fails to comply with the requirements of
 8 subsection (a) shall be deemed to have engaged in an unfair
 9 method of competition or unfair or deceptive act or practice in
10 the conduct of any trade or commerce within the meaning of
11 section 480-2.
12      (c)  "Reverse mortgage loan" means a loan made to a borrower
13 wherein the committed principal amount is secured by a mortgage
14 on residential property owned by the borrower and which is due
15 when the committed principal amounts have been fully paid to the
16 borrower, or upon sale of the property securing the loan, or upon
17 the death of the last surviving borrower, or upon the borrower
18 terminating use of the real property as the principal residence,
19 or upon the borrower's default.  For purposes of this section,
20 "reverse mortgage loan" does not include a loan that is insured
21 by the United States Department of Housing and Urban Development,
22 or a loan for which mortgage counseling is required under other
23 state or federal law."

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                                     S.B. NO.           S.D. 1

 1      SECTION 2.  New statutory material is underscored.
 2      SECTION 3.  This Act shall take effect upon its approval.