| 1 | A bill to be entitled |
| 2 | An act relating to reverse mortgage loans; creating s. |
| 3 | 494.00297, F.S.; providing definitions; limiting |
| 4 | originating or making reverse mortgage loans to licensed |
| 5 | mortgage lenders and mortgage brokers; specifying |
| 6 | requirements for reverse mortgage loans; specifying loan |
| 7 | limitations and parameters; authorizing mortgage lenders |
| 8 | to impose and collect an origination fee for reverse |
| 9 | mortgage loans; specifying origination fee limitations; |
| 10 | prohibiting additional origination fees; providing for |
| 11 | certain fees to be included in the origination fee; |
| 12 | requiring mortgage lenders to provide borrowers certain |
| 13 | loan information; providing additional lender |
| 14 | requirements; prohibiting lenders from requiring reverse |
| 15 | mortgage loan applicants to purchase certain financial |
| 16 | products; specifying prohibited reverse mortgage lender or |
| 17 | broker activities; providing counseling and consumer |
| 18 | education requirements for reverse mortgage lenders; |
| 19 | specifying a criterion for a property to be owner- |
| 20 | occupied; prohibiting invalidation of arrangements, |
| 21 | transfers, or liens under certain circumstances; |
| 22 | preserving application of other existing civil remedies |
| 23 | provided by law; authorizing the Financial Services |
| 24 | Commission to adopt rules; providing an effective date. |
| 25 |
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| 26 | Be It Enacted by the Legislature of the State of Florida: |
| 27 |
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| 28 | Section 1. Section 494.00297, Florida Statutes, is created |
| 29 | to read: |
| 30 | 494.00297 Reverse mortgage loans.- |
| 31 | (1) DEFINITIONS.-For purposes of this section, the term: |
| 32 | (a) "Department" means the United States Department of |
| 33 | Housing and Urban Development. |
| 34 | (b) "Making a reverse mortgage loan" means funding and |
| 35 | closing a reverse mortgage loan pursuant to this section. |
| 36 | (c) "Maximum claim" means the maximum amount of proceeds |
| 37 | over the life of the reverse mortgage loan the mortgagor is |
| 38 | entitled to receive under the loan. |
| 39 | (d) "Mortgagor" means an individual who: |
| 40 | 1. Is, or whose spouse is, at least 62 years of age. |
| 41 | 2. Holds title to the entire property that is the security |
| 42 | for the reverse mortgage loan, or if there are multiple |
| 43 | mortgagors, all the mortgagors collectively hold title to the |
| 44 | entire property. |
| 45 | 3. Has received adequate counseling, as provided in |
| 46 | subsection (7). |
| 47 | 4. Has received full disclosure of all costs charged to |
| 48 | the mortgagor, including costs of estate planning, financial |
| 49 | advice, and other services that are related to the reverse |
| 50 | mortgage loan but are not required to obtain the loan, which |
| 51 | disclosure clearly states which charges are required to obtain |
| 52 | the loan and which are not required to obtain the loan. |
| 53 | (e) "Originating a reverse mortgage loan" means taking an |
| 54 | application for a reverse mortgage loan pursuant to this |
| 55 | section. |
| 56 | (f) "Program" means the Home Equity Conversion Mortgage |
| 57 | Program of the Federal Housing Administration. |
| 58 | (g) "Reverse mortgage loan" or "loan" means a loan that |
| 59 | provides future payments and is secured by a mortgage, deed of |
| 60 | trust, or equivalent security interest in the principal |
| 61 | residence of the mortgagor, excluding loans made under the |
| 62 | program. Future payments include lump sum, periodic cash |
| 63 | advances, or lines of credit based on the equity or the value in |
| 64 | the place of residence. |
| 65 | (2) MORTGAGE LENDERS.-Only mortgage lenders and mortgage |
| 66 | brokers licensed under ss. 494.001-494.0077 may engage in |
| 67 | originating or making a reverse mortgage loan under this |
| 68 | section. |
| 69 | (3) LOAN LIMITATIONS AND PARAMETERS.-A reverse mortgage |
| 70 | loan must comply with all of the following: |
| 71 | (a) Any prepayment of the loan by the mortgagor, in whole |
| 72 | or in part, is permitted without penalty at any time during the |
| 73 | term of the loan. For purposes of this section, the term |
| 74 | "penalty" does not include any fees, payments, or other charges |
| 75 | that would have otherwise been due upon the reverse mortgage |
| 76 | loan being due and payable. |
| 77 | (b) If a reverse mortgage loan provides for periodic |
| 78 | advances to a mortgagor, the advances may not be reduced in |
| 79 | amount or number based upon any adjustment in the interest rate. |
| 80 | (c) The loan balance is due and payable in full if any of |
| 81 | the following events occur: |
| 82 | 1. The mortgagor dies and the property is not the |
| 83 | principal residence of at least one other mortgagor; |
| 84 | 2. The mortgagor conveys all of his or her title in the |
| 85 | property and no other mortgagor retains title to the property; |
| 86 | 3. The property ceases to be the principal place of |
| 87 | residence of the mortgagor or, for a period of longer than 12 |
| 88 | consecutive months, a mortgagor fails to occupy the property |
| 89 | because of physical or mental illness and the property is not |
| 90 | the principal residence of at least one other mortgagor; or |
| 91 | 4. An obligation of the mortgagor under the mortgage is |
| 92 | not performed. |
| 93 | (d) The loan may not require payment of any principal or |
| 94 | interest until the entire loan becomes due and payable. |
| 95 | (4) ORIGINATION FEES.- |
| 96 | (a) The mortgage lender may impose and collect, in cash at |
| 97 | the time of closing or through an initial payment under the |
| 98 | reverse mortgage loan, an origination fee to compensate the |
| 99 | lender for expenses incurred in originating and closing the |
| 100 | loan, which may be fully financed by the loan mortgage. The |
| 101 | origination fee is equal to 2 percent of the maximum claim |
| 102 | amount of the loan, up to a maximum claim amount of $200,000, |
| 103 | plus 1 percent of any portion of the maximum claim amount which |
| 104 | is greater than $200,000 and is subject to a maximum origination |
| 105 | fee of $6,000. |
| 106 | (b) The mortgagor may not be required to pay any |
| 107 | additional origination fee of any kind to a mortgage broker or |
| 108 | loan originator. A mortgage broker's fee may be included as part |
| 109 | of the origination fee only if the mortgage broker is engaged |
| 110 | independently by the homeowner and if there is no financial |
| 111 | interest between the mortgage broker and the mortgage lender. |
| 112 | (5) DISCLOSURES.- |
| 113 | (a) A mortgage lender shall provide the mortgagor, at any |
| 114 | time during the reverse mortgage loan process but before the |
| 115 | loan closing, with a document disclosing in plain language a |
| 116 | summary of the core terms and conditions of the loan. The terms |
| 117 | and conditions must include, but are not limited to: |
| 118 | 1. The interest rate. |
| 119 | 2. Whether the rate is fixed or adjustable. |
| 120 | 3. If the rate is adjustable, the frequency of the rate |
| 121 | change and the maximum amount the rate can change in any period. |
| 122 | 4. The public index to which any changes in the interest |
| 123 | rate will be tied. |
| 124 | 5. The term of the loan. |
| 125 | 6. The schedule of payments paid out during the term of |
| 126 | the loan. |
| 127 | 7. The conditions under which repayment is triggered. |
| 128 | (b) The commission may adopt rules requiring mortgage |
| 129 | lenders to make specific disclosures to mortgagors regarding a |
| 130 | reverse mortgage loan. In adopting such rules, the commission |
| 131 | shall consider general industry standards as provided in the |
| 132 | federal Real Estate Settlement Procedures Act, as amended, 12 |
| 133 | U.S.C. ss. 2601 et seq., the federal Truth in Lending Act, as |
| 134 | amended, 15 U.S.C. ss. 1601 et seq., the federal Housing and |
| 135 | Economic Recovery Act of 2008, Pub. L. No. 110-289, the federal |
| 136 | Housing and Community Development Act of 1987, 12 U.S.C. s. |
| 137 | 1715z-20, and any regulations adopted under such acts. |
| 138 | (6) CROSS-SELLING.- |
| 139 | (a) A mortgage lender or any other party may not require |
| 140 | an applicant for a reverse mortgage loan to purchase insurance, |
| 141 | an annuity, or similar financial product, excluding title |
| 142 | insurance or hazard, flood, or other peril insurance, as a |
| 143 | condition of obtaining a reverse mortgage loan. |
| 144 | (b) A mortgage lender or a mortgage broker arranging a |
| 145 | reverse mortgage loan may not participate in, be associated |
| 146 | with, or employ any party that participates in or is associated |
| 147 | with any other financial or insurance activity unless the |
| 148 | mortgage lender or mortgage broker demonstrates to the office |
| 149 | that the mortgage lender or other party maintains, or will |
| 150 | maintain, firewalls and other safeguards designed to ensure |
| 151 | that: |
| 152 | 1. Individuals participating in the origination of the |
| 153 | reverse mortgage loan have no involvement with, or incentive to |
| 154 | provide the mortgagor with, any other financial or insurance |
| 155 | product; and |
| 156 | 2. The mortgagor will not be required, directly or |
| 157 | indirectly, as a condition of obtaining a reverse mortgage, to |
| 158 | purchase any other financial or insurance product. |
| 159 | (7) COUNSELING AND CONSUMER EDUCATION.- |
| 160 | (a) Before making a reverse mortgage loan, a mortgagor |
| 161 | must receive counseling as provided in this subsection. |
| 162 | (b) The mortgage lender shall provide the mortgagor with a |
| 163 | list of at least five counseling agencies approved by the |
| 164 | department, including at least two agencies that can provide |
| 165 | counseling by telephone. The counseling agency must be an |
| 166 | independent third party that is not, directly or indirectly, |
| 167 | associated with or compensated by a party involved in: |
| 168 | 1. Originating or servicing the reverse mortgage loan; |
| 169 | 2. Funding the loan underlying the reverse mortgage loan; |
| 170 | or |
| 171 | 3. Funding the sale of annuities, investments, long-term |
| 172 | care insurance, or any other type of financial or insurance |
| 173 | product. |
| 174 | (c) Counseling may be face to face or by telephone. The |
| 175 | information covered in the counseling session shall include: |
| 176 | 1. Options other than a reverse mortgage loan that are |
| 177 | available to the homeowner, including other housing, social |
| 178 | service, health, and financial options. |
| 179 | 2. Other reverse mortgage loan options that are or may |
| 180 | become available to the homeowner, including, but not limited |
| 181 | to, sale-leaseback financing, deferred payment loans, and |
| 182 | property tax deferrals. |
| 183 | 3. The financial implications of entering into a reverse |
| 184 | mortgage loan. |
| 185 | 4. A disclosure that a reverse mortgage loan may have tax |
| 186 | consequences, affect eligibility for assistance under federal |
| 187 | and state programs, and have an impact on the estate and heirs |
| 188 | of the mortgagor. |
| 189 | 5. Any other information the commission may require by |
| 190 | rule. |
| 191 | (d) For mortgagors represented by an individual who is a |
| 192 | court-appointed guardian or possesses a durable power of |
| 193 | attorney for the borrower, such individual must complete the |
| 194 | counseling requirements. |
| 195 | (e) Upon the request of the mortgagor, other parties shall |
| 196 | be permitted to attend the counseling with the mortgagor. This |
| 197 | paragraph does not create an obligation or duty on the part of |
| 198 | the mortgage lender to inform, notify, or advise any other party |
| 199 | of the opportunity to attend the counseling. |
| 200 | (f) The mortgagor may be assessed a fee for the |
| 201 | counseling. The fee may be financed under the loan amount as |
| 202 | limited by the department. |
| 203 | (g) A mortgage lender may not accept a final and complete |
| 204 | application for a reverse mortgage loan from a prospective |
| 205 | mortgagor or assess and collect any fees from a prospective |
| 206 | mortgagor without first receiving a certification from the |
| 207 | mortgagor or the mortgagor's authorized representative that the |
| 208 | mortgagor has received counseling from an approved agency. |
| 209 | 1. The certification shall be signed by the mortgagor and |
| 210 | the agency counselor and shall include the dates of the |
| 211 | counseling and the names, addresses, and telephone numbers of |
| 212 | the counselor and the mortgagor. An electronic facsimile copy of |
| 213 | the counseling certification satisfies the requirements of this |
| 214 | subparagraph. |
| 215 | 2. The mortgage lender shall maintain the certification in |
| 216 | an accurate, reproducible, and accessible format for the term of |
| 217 | the reverse mortgage loan. |
| 218 | (8) OTHER PROVISIONS.- |
| 219 | (a) For purposes of this section, a property the legal |
| 220 | title to which is held in the name of a trust is deemed to be |
| 221 | owner-occupied if the occupant of the property is a beneficiary |
| 222 | of the trust. |
| 223 | (b) An arrangement, transfer, or lien subject to this |
| 224 | section may not be invalidated solely because of the failure of |
| 225 | a mortgage lender to comply with any provision of this section. |
| 226 | However, this section does not preclude the application of any |
| 227 | other existing civil remedies provided by law. |
| 228 | (9) RULES.-The commission may adopt rules necessary to |
| 229 | administer this section. |
| 230 | Section 2. This act shall take effect January 1, 2011. |