1. National Reverse Mortgage Lenders Association
1400 16th Street, N.W.
Washington, DC 20036
June 1, 2011
Via U.S. Mail, Overnight Delivery and Facsimile
Senator Ron S. Calderon
Chairman, State Insurance Committee
State Senate
State Capitol, Room 5066
Sacramento, CA 95814
Phone: (916) 651-4030
Fax:
Re: California Assembly Bill 793 (Eng)
Dear Chairman Calderon:
We write to express our concern regarding California Assembly Bill 793 (Eng) (AB793).
While we support measures designed to protect senior homeowners, we cannot
support the current bill as drafted as it is too broad and vague and will not provide
clear guidance to those in the financial services industry regarding allowed or
prohibited practices. Further, AB793 will have the unintended consequence of
dictating to seniors when and how they can use their own funds. In this regard, while
we understand that it is difficult to define prohibited practices in this area while not
chilling legitimate business activity or substituting consumer choice with the judgment
of the legislature, below we outline the following items: (i) the challenges presented by
the bill as currently drafted, (ii) other areas of law already in place, or proposed and
pending enactment, that offer similar protections to seniors, (iii) examples of how the
bill as drafted could result in both unintended and onerous consequences upon
seniors, and (iv) proposals for more reasonable solutions to the issues policy goals to
be served by AB 793. Below, we discuss other laws and regulations which regulate the
same or similar activity that we believe AB793 is designed to address. We also provide
examples of the onerous and unintended consequences to seniors that AB793 would
effectuate if enacted as currently drafted. And finally, we offer suggestions for
alternatives that we believe meet the policy goals of AB793, while offering robust
protections to seniors, but not limiting consumer choice or casting a chilling effect on
legitimate business activity.

2. By way of background, the National Reverse Mortgage Lenders Association (NRMLA) is
the principal nationwide trade association for financial services companies that
originate, service, and invest in reverse mortgages. NRMLA was founded to enhance
the professionalism of those engaged in reverse mortgage lending, and NRMLA is
dedicated to assuring quality and integrity in reverse mortgage lending. Over 90% of
the reverse mortgages in the United States today are originated, purchased, or serviced
by NRMLA members.
Further, most reverse mortgages offered today are the Federal Housing Administration
(the “FHA”) insured home equity conversion mortgage loan (or HECM). FHA-insured
HECM reverse mortgage loans already have many robust protections in place including
steps that must be taken prior to the origination of the loan. Indeed, a borrower may
not obtain a HECM unless he or she first receives counseling from an independent
HUD-approved counselor.
Challenges Presented By the Bill As Currently Drafted
AB793 as currently drafted provides that “…individuals transacting insurance shall not
receive compensation, commission, or direct incentive for providing reverse mortgage
borrowers with a non-casualty insurance product that is connected to or a result of the
reverse mortgage“, without specifying or limiting what the “connection to” a reverse
mortgage might mean. Further, a “noncasualty insurance product” is not defined
under AB793, but appears to include any insurance product other than title insurance,
hazard, flood, or other peril insurance, or other similar products that are customary
and normal under a reverse mortgage loan.
Further, AB793 as currently drafted provides that “An insurance broker or agent shall
not participate in, be associated with, or employ any party that participates in, or is
associated with, the origination of a reverse mortgage, unless the insurance agent or
broker maintains procedural safeguards designed to ensure that the agent or broker
transacting insurance has no direct financial incentive to refer the policyholder or
prospective policyholder to a reverse mortgage lender.” AB793 as currently drafted
does not clearly specify what procedural safeguards are adequate to ensure the activity
purportedly regulated does not occur.
Other Areas of Law Already Providing Protections
The provisions authorizing the HECM program, Section 255 of the National Housing
Act regulate and prohibit the offering of other financial services products in connection
with HECM loans.1 No person involved in the origination of a HECM reverse mortgage
loan may be associated with another financial services or insurance company that
offers other financial services products unless safeguards and firewalls are established.
The FHA has issued guidance on these measures and has indicated plans to issue
1 12 U.S.C. § 1715z-20.

3. additional guidance. In the issued guidance, the FHA advised that mortgagees must
not condition a HECM mortgage on the purchase of any other financial or insurance
product, and should establish, consistent with the HECM statute, firewalls and other
safeguards to ensure there is no undue pressure or appearance of pressure for a
mortgagor to purchase another product of the mortgage originator or mortgage
originator’s company.
The California Civil Code also contains restrictions on offering other financial services
products in connection with all reverse mortgage loans, including FHA-insured HECM
loans, as well as conventional or private loan programs.2 However, unlike the federal
rules, it is not clear that any California agency has authority to issue regulations under
these California Civil Code provisions. In any event, no such agency has issued any
further guidance since those provisions were last amended several times over the past
few years.3 Such rule making, if and when forthcoming, presumably would be subject
to public notice and a comment period.
Further note that in response to the FHA directive that firewalls and other safeguards
to ensure there is no undue pressure or appearance of pressure for a senior reverse
mortgage borrower to purchase another financial services product, we note that
NRMLA has established best practices for its own members in the area of the offering
of other financial services products in conjunction with reverse mortgages.4
We also think it very important to note, that in proposing further regulations to amend
and augment Regulation Z provisions under the federal Truth-in-Lending Act
regarding reverse mortgages, particularly the provisions on offering other financial
services products therewith, the Federal Reserve Board adopted many of the concepts
outlined in the NRMLA Ethics Advisory opinion.5 One overriding principle of the Ethics
Advisory Opinion, and the proposed rule under Regulation Z, is that such directives
provide clear guidance on how to proceed in an area that is difficult at best to define.
Examples of Unintended and Onerous Results upon Seniors
If a senior obtains a “noncasualty insurance product” from an insurance agent several
months after obtaining a reverse mortgage, is such activity in violation of AB793 as
that bill is currently drafted? This is not clear. Note, business persons do not
necessarily object to regulation, however, business persons do object to regulation
2 See Cal. Civ. Code § 1923.2(i).
3 See Cal. Senate Bill 1609 (2006) and Cal. Assembly Bill 329 (2009).
4 See NRMLA ETHICS ADVISORY OPINION 2009-1, Ethical Offers of Other Financial and
Insurance Products and Services (June 16, 2009), found at http://www.nrmlaonline.org/
App_Assets/public/d27c71a2-0c0a-41e6-a824-9af0bcfaa14b/Ethics%20Advisory
%202009-1%20FINAL%20VERSION.pdf
5 See 75 Fed. Regis. 58539 (Sept. 24, 2010).

4. that is unclear, has a chilling effect on legitimate activity and has the effect of allowing
deficient activity to persist in the marketplace where some might “compete based on
compliance” where the law is not clear.
Thus, AB 793 as currently drafted, could be read to prevent a senior from obtaining
anything other than a “noncasualty insurance product” after the senior obtains a
reverse mortgage, with no time limit. Therefore, a senior with $100,000 in a money
market account, and obtains a reverse mortgage, may be precluded from purchasing a
long term care policy to help finance the seniors healthcare needs or a single premium
life insurance policy to facilitate an estate plan. We do not believe this is the intent of
the legislation, but could reasonably the effect if AB 793 isn’t clarified.
More Reasonable Solutions
As an alternative to broadly prohibiting any “association” with no definition of non-
casualty insurance product along with a safe harbor procedural safeguard that is
undefined, we believe the following would adequately address the policy concerns at
which AB793 is aimed. The bill could provide that no individual sales person can
require a senior to purchase a reverse mortgage in order to obtain a more clearly
defined other than non-casualty insurance product , and that no individual sales
person can receive direct compensation from direct involvement in a reverse mortgage
transaction.
Alternatively, the bill could provide a cooling off period, after consummation of a
reverse mortgage transaction, during which a senior could not obtain a more clearly
defined other than non-casualty insurance product.
Again, however, as noted above, if a senior chose to obtain an other than non-casualty
insurance product with proceeds separate from those deriving from a reverse
mortgage, and such other transaction meets other applicable laws, we do not believe
that it is the intent of the California legislature to dictate how a senior uses their
separate funds for all time after receiving a reverse mortgage.
For the foregoing reasons, we respectfully request that California Assembly Bill 793 be
amended to provide clear guidance while achieving important policy objectives, while
not limiting consumer choice or chilling legitimate business activity. We appreciate
your time and attention in this matter. Please do not hesitate to contact us if you have
any questions or require any additional information.
Very truly yours,
Peter H. Bell

5. President and CEO, National Reverse Mortgage Lenders Association
202-939-1741
cc: Honorable Mike Eng, CA State Assembly
James A. Brodsky, Weiner Brodsky Sidman Kider PC
James M. Milano, Weiner Brodsky Sidman Kider PC