A bill that would establish consumer safeguards for "reverse mortgage" loans in California is now in the legislature. "Reverse mortgages" allow people 62 and older to take out loans based on the equity in their homes.
Under AB 1700, lenders would be required to provide informational worksheets. They would also have to wait at least a week until after a borrower has consulted with a federal loan counselor to begin processing a reverse mortgage application.
Los Angeles-based reverse mortgage consultant Sandy Jolley says that time is crucial for assessing whether a loan is right for a borrower.
"If it's suitable, there won't be problems, because you know what the outcome is going to be and what to expect," she says.
The bill's opponents say borrowers already have the final voice in the application process. Peter Bell with the National Reverse Mortgage Lenders Association says this bill would hurt a borrower who faces a financial emergency.
"This bill would force that person to wait another week until they could actually apply," says Bell.
The bill has passed in the Assembly and is awaiting action in the Senate.