2007 California Civil Code Chapter 8. Reverse Mortgages

CA Codes (civ:1923-1923.10)

1923.  For purposes of this chapter, "reverse mortgage" means a
nonrecourse loan secured by real property that meets all of the
following criteria:
   (a) The loan provides cash advances to a borrower based on the
equity or the value in a borrower's owner-occupied principal
residence.
   (b) The loan requires no payment of principal or interest until
the entire loan becomes due and payable.
   (c) The loan is made by a lender licensed or chartered pursuant to
the laws of this state or the United States.



1923.2.  A reverse mortgage loan shall comply with all of the
following requirements:
   (a) Prepayment, in whole or in part, shall be permitted without
penalty at any time during the term of the reverse mortgage loan. For
the purposes of this section, penalty does not include any fees,
payments, or other charges that would have otherwise been due upon
the reverse mortgage being due and payable.
   (b) A reverse mortgage loan may provide for a fixed or adjustable
interest rate or combination thereof, including compound interest,
and may also provide for interest that is contingent on the value of
the property upon execution of the loan or at maturity, or on changes
in value between closing and maturity.
   (c) A reverse mortgage may include costs and fees that are charged
by the lender, or the lender's designee, originator, or servicer,
including costs and fees charged upon execution of the loan, on a
periodic basis, or upon maturity.
   (d) If a reverse mortgage loan provides for periodic advances to a
borrower, these advances shall not be reduced in amount or number
based on any adjustment in the interest rate.
   (e) A lender who fails to make loan advances as required in the
loan documents, and fails to cure an actual default after notice as
specified in the loan documents, shall forfeit to the borrower treble
the amount wrongfully withheld plus interest at the legal rate.
   (f) The reverse mortgage loan may become due and payable upon the
occurrence of any one of the following events:
   (1) The home securing the loan is sold or title to the home is
otherwise transferred.
   (2) All borrowers cease occupying the home as a principal
residence, except as provided in subdivision (h).
   (3) Any fixed maturity date agreed to by the lender and the
borrower occurs.
   (4) An event occurs which is specified in the loan documents and
which jeopardizes the lender's security.
   (g) Repayment of the reverse mortgage loan shall be subject to the
following additional conditions:
   (1) Temporary absences from the home not exceeding 60 consecutive
days shall not cause the mortgage to become due and payable.
   (2) Extended absences from the home exceeding 60 consecutive days,
but less than one year, shall not cause the mortgage to become due
and payable if the borrower has taken prior action which secures and
protects the home in a manner satisfactory to the lender, as
specified in the loan documents.
   (3) The lender's right to collect reverse mortgage loan proceeds
shall be subject to the applicable statute of limitations for written
loan contracts. Notwithstanding any other provision of law, the
statute of limitations shall commence on the date that the reverse
mortgage loan becomes due and payable as provided in the loan
agreement.
   (4) The lender shall prominently disclose in the loan agreement
any interest rate or other fees to be charged during the period that
commences on the date that the reverse mortgage loan becomes due and
payable, and that ends when repayment in full is made.
   (h) The first page of any deed of trust securing a reverse
mortgage loan shall contain the following statement in 10-point
boldface type: "This deed of trust secures a reverse mortgage loan."
   (i) A lender shall not require an applicant for a reverse mortgage
to purchase an annuity as a condition of obtaining a reverse
mortgage loan. A reverse mortgage lender or a broker arranging a
reverse mortgage loan shall not:
   (1) Offer an annuity to the borrower prior to the closing of the
reverse mortgage or before the expiration of the right of the
borrower to rescind the reverse mortgage agreement.
   (2) Refer the borrower to anyone for the purchase of an annuity
prior to the closing of the reverse mortgage or before the expiration
of the right of the borrower to rescind the reverse mortgage
agreement.
   (j) Prior to accepting a final and complete application for a
reverse mortgage loan or assessing any fees, a lender shall refer the
prospective borrower to a housing counseling agency approved by the
United States Department of Housing and Urban Development for
counseling. The counseling shall meet the standards and requirements
established by the United States Department of Housing and Urban
Development for reverse mortgage counseling. The lender shall provide
the borrower with a list of at least five housing counseling
agencies approved by the United States Department of Housing and
Urban Development, including at least two agencies that can provide
counseling by telephone.
   (k) A lender shall not accept a final and complete application for
a reverse mortgage loan from a prospective applicant or assess any
fees upon a prospective applicant without first receiving a
certification from the applicant or the applicant's authorized
representative that the applicant has received counseling from an
agency as described in subdivision (j). The certification shall be
signed by the borrower and the agency counselor, and shall include
the date of the counseling and the name, address, and telephone
number of both the counselor and the borrower. Electronic facsimile
copy of the housing counseling certification satisfies the
requirements of this subdivision. The lender shall maintain the
certification in an accurate, reproducible, and accessible format for
the term of the reverse mortgage.
   (l) A lender shall not make a reverse mortgage loan without first
complying with, or in the case of brokered loans ensuring compliance
with, the requirements of Section 1632, if applicable.



1923.3.  A reverse mortgage shall constitute a lien against the
subject property to the extent of all advances made pursuant to the
reverse mortgage and all interest accrued on these advances, and that
lien shall have priority over any lien filed or recorded after
recordation of a reverse mortgage loan.



1923.4.  For the purposes of this chapter, a property shall be
deemed to be owner-occupied, notwithstanding that the legal title to
the property is held in the name of a trust, provided that the
occupant of the property is a beneficiary of that trust.




1923.5.  No reverse mortgage loan application shall be taken by a
lender unless the loan applicant has received from the lender the
following plain language statement in conspicuous 16-point type or
larger, advising the prospective borrower about counseling prior to
obtaining the reverse mortgage loan:

      IMPORTANT NOTICE
TO REVERSE MORTGAGE LOAN APPLICANT
    A REVERSE MORTGAGE IS A COMPLEX FINANCIAL TRANSACTION THAT
PROVIDES A MEANS OF USING THE EQUITY YOU HAVE BUILT UP IN YOUR HOME,
OR THE VALUE OF YOUR HOME, AS A SOURCE OF ADDITIONAL INCOME. IF YOU
DECIDE TO OBTAIN A REVERSE MORTGAGE LOAN, YOU WILL SIGN BINDING LEGAL
DOCUMENTS THAT WILL HAVE IMPORTANT LEGAL AND FINANCIAL IMPLICATIONS
FOR YOU AND YOUR ESTATE. IT IS THEREFORE IMPORTANT TO UNDERSTAND THE
TERMS OF THE REVERSE MORTGAGE AND ITS EFFECT. BEFORE ENTERING INTO
THIS TRANSACTION, YOU ARE REQUIRED TO CONSULT WITH AN INDEPENDENT
LOAN COUNSELOR. A LIST OF APPROVED COUNSELORS WILL BE PROVIDED TO YOU
BY THE LENDER.   YOU MAY ALSO WANT TO DISCUSS YOUR DECISION WITH
FAMILY MEMBERS OR OTHERS ON WHOM YOU RELY FOR FINANCIAL ADVICE.



1923.6.  The lender shall be presumed to have satisfied any
disclosure duty imposed by this chapter if the lender provides a
disclosure statement in the same form as provided in this chapter.



1923.7.  No arrangement, transfer, or lien subject to this chapter
shall be invalidated solely because of the failure of a lender to
comply with any provision of this chapter.  However, nothing in this
section shall preclude the application of any other existing civil
remedies provided by law.



1923.9.  (a) To the extent that implementation of this section does
not conflict with federal law resulting in the loss of federal
funding, reverse mortgage loan payments made to a borrower shall be
treated as proceeds from a loan and not as income for the purpose of
determining eligibility and benefits under means-tested programs of
aid to individuals.
   (b) Undisbursed reverse mortgage funds shall be treated as equity
in the borrower's home and not as proceeds from a loan, resources, or
assets for the purpose of determining eligibility and benefits under
means-tested programs of aid to individuals.
   (c) This section applies to any law or program relating to
payments, allowances, benefits, or services provided on a
means-tested basis, by this state, including, but not limited to,
optional state supplements to the federal supplemental security
income program, low-income energy assistance, property tax relief,
general assistance, and medical assistance only to the extent this
section does not conflict with Title 19 of the federal Social
Security Act.
   (d) For the purposes of this section, "means-tested programs and
aid to individuals" includes, but is not limited to, programs set
forth in Chapter 2 (commencing with Section 11200) of Part 3 of
Division 9, and Part 5 (commencing with Section 17000) of Division 9,
of the Welfare and Institutions Code.



1923.10.  This chapter shall only apply to those reverse mortgage
loans executed on or after January 1, 1998.