A reverse mortgage consumer protection bill failed to pass the California Banking and Finance Committee earlier this month.

SB 660 provides that anyone who recommends the purchase of a reverse mortgage owes the borrower a duty of honesty, good faith, and fair dealing.

Sponsored by Senator Lois Wolk, the bill prohibits the “dividing” of the reverse mortgage transaction into separate parts in order to evade application of the requirements.  This includes, but is not limited to “using the proceeds of the reverse mortgage to fund an annuity, insurance, or investment product within one year from origination of the reverse mortgage.”

The National Reverse Mortgage Lenders Association told members it would “continue to monitor the situation in case any attempts are made to revive the bill.”