Current Status Introducing Body:Senate Bill Number:929 Primary Sponsor:Giese Committee Number:02 Type of Legislation:GB Subject:Reverse Mortgage Act Residing Body:Senate Current Committee:Banking and Insurance Companion Bill Number:4351 Computer Document Number:PT/22301AC.94 Introduced Date:19940111 Last History Body:Senate Last History Date:19940111 Last History Type:Introduced, read first time, referred to Committee Scope of Legislation:Statewide All Sponsors:Giese Passailaigue Glover Courson Hayes Holland Lander Leatherman Mitchell O'Dell Reese Short J. Verne Smith Stilwell Washington Rose Wilson Type of Legislation:General Bill
Bill Body Date Action Description CMN Leg Involved
____ ______ ____________ ______________________________ ___ ____________
929 Senate 19940111 Introduced, read first time, 02
referred to Committee
929 Senate 19931220 Prefiled, referred to 02
Committee
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TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING TITLE 29, CHAPTER 4, SO AS TO ENACT THE SOUTH CAROLINA REVERSE MORTGAGE ACT WHICH DEFINES "REVERSE MORTGAGE", PROVIDES RULES FOR GOVERNING THESE MORTGAGES, EXEMPTS REVERSE MORTGAGES FROM CERTAIN PROVISIONS OF OTHER MORTGAGE TRANSACTIONS, AND REQUIRES THAT CERTAIN INFORMATION CONCERNING REVERSE MORTGAGES IS AVAILABLE TO LOAN APPLICANTS.
Whereas, it is the intent of this legislation that elderly homeowners be permitted to meet their financial needs by accessing the equity in their homes through a reverse mortgage; and
Whereas, the legislature recognizes that many restrictions and requirements that exist to govern traditional mortgage transactions are inapplicable in the context of reverse mortgages; and
Whereas, in order to foster reverse mortgage transactions and better serve the elderly citizens of this State, this legislature authorizes the making of reverse mortgages, and expressly relieves reverse mortgage lenders and borrowers from compliance with inappropriate requirements. Now, therefore,
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 29 of the 1976 Code is amended by adding:
Section 29-4-10. This chapter may be cited as the South Carolina Reverse Mortgage Act.
Section 29-4-20. As used in this chapter `reverse mortgage' means a non-recourse loan secured by real property which:
(1) provides cash advances to a borrower based on the equity in a borrower's owner-occupied principal residency;
(2) requires no payment of principal or interest until the entire loan becomes due and payable; and
(3) is made by a lender authorized to engage in business as a bank, savings institution, or credit union under the laws of the United States or of South Carolina, or any other lenders authorized to make reverse mortgage loans.
Section 29-4-30. Reverse mortgage loans governed by these rules, without regard to the requirements set out elsewhere for other types of mortgage transactions:
(1) Payment in whole or in part is permitted without penalty at any time during the period of the loan.
(2) An advance made under a reverse mortgage and interest on the advances have priority over a lien filed after the closing of a reverse mortgage.
(3) A reverse mortgage may provide for an interest rate which is fixed or adjustable and may also provide for interest that is contingent on appreciation in the value of the property.
(4) If a reverse mortgage provides for periodic advances to a borrower, the advances may not be reduced in amount or number based on an adjustment in the interest rate.
(5) Lenders failing to make loan advances as required in the loan documents and failing to cure the default as required in the loan documents shall forfeit any right to collect all interest. Lenders also may be subject to an administrative penalty as determined.
(6) The recordation tax on reverse mortgages may not exceed the actual cost of recording the mortgage.
(7) The mortgage becomes due and payable upon the occurrence of one of the following:
(a) the home securing the loan is sold;
(b) all borrowers cease occupying the home as a principal residence;
(c) any fixed maturity date agreed to by the lender and the borrower is reached; or
(d) an event occurs which is specified in the loan documents and which jeopardizes the lender's security.
(8) The repayment requirement is also expressly subject to the following additional conditions:
(a) temporary absences from the home not exceeding sixty consecutive days do not cause the mortgage to be come due and payable;
(b) temporary absences from the home exceeding sixty consecutive days but less than one year do not cause the mortgage to become due and payable so long as the borrower has taken prior action which secures the home in a manner satisfactory to the lender;
(c) the lender's right to collect reverse mortgage proceeds is subject to the applicable statute of limitations for loan contracts. Notwithstanding the applicable statute of limitations for loan contracts, the statute of limitations commences on the date that the mortgage becomes due and payable;
(d) the lender must prominently disclose any interest or other fees to be charged during the period that commences on the date that the mortgage becomes due and payable and ends when repayment in full is made.
Section 29-4-40. Reverse mortgage loans may be made or acquired without regard to the following provisions for other types of mortgage transactions:
(1) limitations on the purpose and use of future advances or any other mortgage proceeds;
(2) limitations on future advances to a term of years, or limitations on the term of credit line advances;
(3) limitations on the term during which future advances take priority over intervening advances;
(4) requirements that a maximum mortgage amount be stated in the mortgage;
(5) limitations on loan-to-value ratios;
(6) prohibitions on balloon payments;
(7) prohibitions on compounded interest and interest on interest;
(8) interest rate limits under the usury statutes; and
(9) requirements that a percentage of the loan proceeds must be advanced prior to loan assignment.
Section 29-4-50. (A) Reverse mortgage loan payments made to a borrower must 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 funds must be treated as equity in a borrower's home and not as proceeds from a loan for the purpose of determining eligibility and benefits under means-tested programs of aid to individuals.
(C) This section applies to any law relating to payments, allowances, benefits, or services provided on a means-tested basis by this State, including but not limited to, supplemental security income, low-income energy assistance, property tax relief, medical assistance, and general assistance.
Section 29-4-60. (A) No reverse mortgage commitment may be made by a lender unless the loan applicant attests in writing that the applicant received from the lender at time of initial inquiry a statement regarding the advisability and availability of independent information and counseling services on reverse mortgages.
(B) The Housing Finance and Development Authority shall:
(1) develop the content and format of the statement described in subsection (A);
(2) refer consumers to independent counseling services with expertise in reverse mortgages.
(C) The Office of the Governor, Division on Aging shall provide independent consumer information on reverse mortgages and their alternatives."
SECTION 2. This act takes effect upon approval by the Governor.