Governor signs Wolk coauthor bill to protect seniors

Legislation requires borrowers be informed of risks associated with reverse mortgages

SACRAMENTO–The Governor signed legislation Tuesday coauthored by Assemblywoman Lois Wolk (D-Davis) to ensure that senior citizens are fully informed of the risks of a reverse mortgage.

Senate Bill 1609, authored by Senator Joe Simitian (D-Palo-Alto), prohibits reverse mortgage lenders from accepting a reverse mortgage application until the borrower has received independent counseling on the possible risks of the loan.

“This bill protects seniors from an alarming new trend in elder financial abuse,” said Assemblywoman Wolk. “Seniors, whose finances are often tied largely to their homes, are prime targets for dishonest lenders. This legislation requires that potential borrowers be made fully aware of the risks before entering into reverse mortgages, which are more complicated and a far larger investment than other loans. ”    

The bill also prohibits lenders from requiring a borrower to purchase an annuity in order to receive a reverse mortgage.

“These loans can be useful in the appropriate circumstances. But they are a major commitment that must be entered into with your eyes wide open. This bill protects seniors from fraudulent lending practices that can cost them their homes. It is a good bill, and I am proud to be a coauthor,” concluded Wolk. 

AB 1609, which will take effect January 1, 2007, has a broad support base that includes elected officials, money lenders, and both senior and consumer advocacy groups. Among the bill’s supporters are Insurance Commissioner John Garamendi, the AARP, California Congress of Seniors, Gray Panthers Consumer Attorneys of California, California Association of Mortgage Brokers, and the Consumer Federation.