Reverse Mortgages

Amends definition of "reverse mortgage loan" to mean a
nonrecourse loan, the committed principal amount of which is
secured by a mortgage on the borrower's residential property and
includes cash advances to the borrower based upon the equity in
or value of the borrower's owner-occupied principal residence,
requires no payment of principal or interest until the entire
loan becomes due and payable, and may only be made by a state or
federally chartered or licensed lender.  (HB2005 HD1)

HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  Section 506-10, Hawaii Revised Statutes, is
 2 amended to read as follows:
 3      "[[]506-10[]]  Reverse mortgage loan.(a)  Prior to
 4 accepting an application for a reverse mortgage loan, a lender
 5 shall refer every borrower to counseling from an organization
 6 that is a housing counseling agency approved by the United States
 7 Department of Housing and Urban Development, and shall receive
 8 certification from the counselor that the borrower has received
 9 counseling.  The certificate [must] shall be signed by the
10 borrower and the counselor and include the date of counseling,
11 the name, address, and telephone number of both the borrower and
12 the organization providing counseling, and shall be maintained by
13 the holder of the reverse mortgage throughout the term of the
14 reverse mortgage loan.
15      (b)  A lender that fails to comply with the requirements of
16 subsection (a) shall be deemed to have engaged in an unfair
17 method of competition or unfair or deceptive act or practice in
18 the conduct of any trade or commerce within the meaning of
19 section 480-2.

Page 2                                                     2005
                                     H.B. NO.           H.D. 1

 1      (c)  "[Reverse] As used in this section, "reverse mortgage
 2 loan" means a loan [made to a] that:
 3           (1)  Is a nonrecourse loan [borrower] wherein the
 4                committed principal amount is secured by a
 5                mortgage on residential property owned by the
 6                borrower [and which is due];
 7           (2)  Is due upon sale of the property securing the
 8                loan, or upon the death of the last surviving
 9                borrower, or upon the borrower terminating use of
10                the real property as [the] a principal residence,
11                or upon the borrower's default[.];
12           (3)  Provides cash advances to the borrower based upon
13                the equity or the value in the borrower's owner-
14                occupied principal residence;
15           (4)  Requires no payment of principal or interest until
16                the entire loan becomes due and payable; and
17           (5)  Is made by a lender licensed or chartered under
18                state or federal law.
19      For purposes of this section, "reverse mortgage loan" [does]
20 shall not include [loans:] a loan:
21      (1)  Insured by the United States Department of Housing and
22           Urban Development;

Page 3                                                     2005
                                     H.B. NO.           H.D. 1

 1      (2)  Intended for sale to the Federal National Mortgage
 2           Association (also known as "Fannie Mae") or to the
 3           Federal Home Loan Mortgage Corporation (also known as
 4           "Freddie Mac"); or
 5      (3)  For which mortgage counseling is required under other
 6           state or federal laws.
 7      (d)  No person other than a state chartered or licensed, or
 8 federally chartered or licensed, lender shall offer reverse
 9 mortgage loans."
10      SECTION 2.  This Act shall apply to any transaction made
11 after April 25, 1999.
12      SECTION 3.  Statutory material to be repealed is bracketed.
13 New statutory material is underscored.
14      SECTION 4.  This Act shall take effect upon its approval.