Arizona recently enacted various new provisions regulating the origination of reverse mortgages.
Included in the new provisions are a series of disclosure requirements applicable throughout the reverse mortgage origination process.
Prior to accepting a final reverse mortgage application or assessing any fees, an originator must first provide the borrower with a list of at least five housing counseling agencies, including two that can provide counseling by telephone.
Second, the loan officer needs to obtain certification that the borrower has received counseling.
At least 10 days prior to closing, an originator must provide a statement informing the borrower that the borrower’s liability is limited under the reverse mortgage, and explaining the borrower’s rights, obligations, and remedies with respect to temporary absences, late payments, and payment defaults by the originator, as well as all conditions requiring satisfaction of the loan obligation.
Before entering into a reverse mortgage, an originator needs to disclose all costs charged by the originator, including costs of other services that are related to the reverse mortgage, but not required in order to obtain the reverse mortgage (e.g. estate planning, financial advice, etc.), clearly identifying which charges are required in order to obtain the reverse mortgage and which charges are not.
Also before the loan closes, the originator must disclose all terms and provisions regarding insurance, repairs, alterations, payment of taxes, default reserve, delinquency charges, foreclosure proceedings, anticipation of maturity and any additional second liens.
In addition, prior to closing, the originator has to disclose the projected total cost of the reverse mortgage, based on the projected total future loan balance for at lease two projected loan terms, including the cost for a short-term mortgage, and the cost for a loan term equaling the borrower’s actuarial life expectancy.
Another new provision of the statute allows for the providing of a fixed or variable interest rate or future sharing between the originator and borrower of the appreciation in the property value as agreed upon by the originator and borrower.
