Thinking About a Reverse Mortgage? Californians Get New Protections in 2015


Senior Attorney; Manager, Financial Services Program


We support reforms to the financial marketplace that protect consumers from unscrupulous banks and lenders.

By Norma Garcia on Friday, January 23rd, 2015

Wondering if a reverse mortgage is right for you?  Reverse mortgages are home loans that allow eligible homeowners, 62 years of age or older, to tap into their home equity. While that friendly reverse mortgage salesperson can be helpful, the Consumer Financial Protection Bureau (CFPB) says you should not rely only on advice you get from someone who will benefit from selling you a loan.  We couldn’t agree more.  And if you’re reading this blog, I’m sure you’ve already seen all the upbeat reverse mortgage TV commercials. Remember, though, that television actors and spokespersons are paid to say good things about reverse mortgages, but they will not be there to protect you if something doesn’t turn out as expected.  At the end of the day, this is about your real life, not a sales pitch or a television script.

If you’re considering a reverse mortgage, read our Tips and check out our new video.

In real life, we know these loans can be risky and expensive. The number of reverse mortgages that have gone into default nationwide hit a record 9.4% in 2012, almost double the default rate on traditional mortgages.  Reverse mortgages are not for everyone but for some people, they can be a good choice.  To avoid problems, it always pays to do your homework before buying any product, especially something as important as a mortgage.  Many would think nothing of spending many hours considering whether to buy a toaster, a toaster oven, or nothing at all.  Buying a reverse mortgage should be no different, yet the consequences of buying the wrong mortgage, or one you don’t need, can be much more severe.

If you’re a Californian, beginning in January 2015, under a new law you must receive important information about reverse mortgages. The law also gives you time to consider your choice before you can become obligated on a new reverse mortgage.

The new law:

1.  Requires reverse mortgage sellers to give prospective borrowers a self-evaluation worksheet before the required counseling session to consider key issues in deciding whether a reverse mortgage is right for them. The worksheet will make the counseling session more efficient by pre-identifying any issues of importance for discussion, such as:

  • What happens to others living in a home with a reverse mortgage when the borrower dies or moves out.
  • Whether the borrower has sufficient assets to avoid a reverse mortgage default by keeping up with homeowners insurance, property taxes, and home maintenance.
  • The importance of fully exploring other options to a reverse mortgage.
  • Dangers of using a reverse mortgage to fund the purchase of other financial products.
  • The possible impact a reverse mortgage may have on a borrower’s eligibility for government assistance programs.

2.  Requires the counselor and the prospective borrower to sign the reverse mortgage worksheet guide.

3.  Prohibits a lender from taking a reverse mortgage application unless the applicant has received from the lender a specified reverse mortgage worksheet guide.

4.  Prohibits a lender from taking a reverse mortgage application or assessing any fees until seven days from the date of loan counseling.

We’re glad that Californians considering a reverse mortgage now have more information to help them decide if a reverse mortgage is right for them.  The new law, AB1700, was supported by Consumers Union, California Advocates for Nursing Home Reform, AARP, Inc., California Commission on Aging, California Retired Teachers Association, Center for Responsible Lending, Consumer Federation of California, and the Fair Housing Council of Riverside County (sponsor). We’re grateful that Assemblymember Jose Medina lead the effort to make this a reality.  Armed with the right information, potential borrowers can be more confident that they can make their best decision. Consumers Union believes senior homeowners in every state ought to have the same protections as Californians and be able to choose with the same degree of confidence.

If you have a problem with a reverse mortgage, or any other type of mortgage, contact the Consumer Financial Protection Bureau (CFPB)  The CFPB will forward your complaint to the company and work to get a response from them.

Take a look, also, at the California Department of Consumer Affairs publication,  A Consumer Guide to Mortgage Related Complaints

Finally, share your reverse mortgage story with us.  Tell us what’s worked and what hasn’t worked.  We want to hear from you.

2 responses to “Thinking About a Reverse Mortgage? Californians Get New Protections in 2015”

  1. Matt Reverse says:

    Actually you can learn all the current rules and regulations about reverse mortgages at Reverse Your Mortgage.

    The rules change yearly and you don’t want to get misinformation.

  2. Jim says:

    What are the HUD and FHA requirements for a reverse mortgage on a condo?

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