California Reverse Mortgage Counseling Rule Change of 2017
Michael G. Branson, CEO of All Reverse Mortgage, Inc., and moderator of ARLO™, has 45 years of experience in the mortgage banking industry. He has devoted the past 19 years to reverse mortgages exclusively. (License: NMLS# 14040) |
All Reverse Mortgage's editing process includes rigorous fact-checking led by industry experts to ensure all content is accurate and current. This article has been reviewed, edited, and fact-checked by Cliff Auerswald, President and co-creator of ARLO™. (License: NMLS# 14041) |
Purpose
The purpose of this bulletin is to restate and update new California requirements regarding required disclosures, counseling, timing for when certain fees may be incurred on the borrower’s behalf, and when other activities related to the origination and processing of a loan may be performed.
Implementation
These requirements are effective for all California reverse mortgages with applications taken on or after August 22, 2017
Required Disclosures
Prior to counseling, the applicant must receive the list of HUD-approved counseling agencies as well as the required Reverse Mortgage Worksheet Guide and Important Notice to Reverse Mortgage Loan Applicant disclosures. These disclosures are available in the proposal package for California loans, along with the existing CA-required list of HUD-approved counseling agencies. These disclosures must meet the below requirements:
Reverse Mortgage Worksheet Guide
∙ Must be received by the applicant prior to counseling and before taking an initial application
∙ If the borrower obtains counseling prior to contacting the loan originator, the counselor must provide the borrower the copy of the form, and the borrower must certify at application that they received the form prior to counseling
Important Notice to Reverse Mortgage Loan Applicant
∙ Must be received by the applicant prior to counseling and before taking an initial application
∙ If the borrower obtains counseling prior to contacting the loan originator, the borrower must certify at application that they received the form prior to counseling
California 7 Day Cooling Off Period Acknowledgement
∙ Must be received by the applicant at the time they sign the initial application disclosures
Requirements
A final and complete application cannot be accepted, and no fees may be assessed upon a prospective applicant until the lapse of seven (7) days from the date of counseling (i.e., the 8th day following counseling). This must be evidenced by receipt of a copy of the counseling certificate, signed and dated by the applicant and counselor showing face-to-face counseling was completed (unless the applicant waived the face-to face option).
The following activities are permissible prior to counseling:
Explain the reverse mortgage to the prospective client;
Discuss whether the prospective borrower is eligible;
Provide information regarding the fees and charges associated with the reverse mortgage;
Describe the potential financial implications of a reverse mortgage loan for the client;
Provide the borrower with copies of the mortgage note, and Loan Agreement
Use automated valuation models (AVMs) to perform a preliminary estimation of the value of the property; and
Complete the initial application package, providing the required disclosures either prior or in conjunction with the initial application.
The following processing functions may be performed during the 7-day cooling off period after counseling:
Order a credit report to perform a preliminary credit review of the borrower’s financing obligations; and
Order a preliminary title search.
The following activities are NOT permitted until after the expiration of the 7-day cooling off period:
A final and complete application may not be accepted;
The appraisal cannot be ordered;
The title search may not be ordered; and
The FHA case number may not be ordered.
These requirements are in addition to the federal requirement that no fees (other than the credit report) may be charged applicant until the applicant has received initial TILA/RESPA disclosures and indicated an intent to proceed. Therefore, on CA loans, no fees, including the credit report fee, may be assessed until both the intent to proceed has been received and the above requirements have been met.
ARLO recommends these helpful resources:
October 17th, 2018
October 17th, 2018
January 21st, 2018
January 22nd, 2018