S 929 Session 110 (1993-1994)
S 0929 General Bill, By Giese, Courson, Glover, Hayes, Holland, Lander,
Leatherman, T.W. Mitchell, O'Dell, Passailaigue, Reese, M.T. Rose, Short,
J.V. Smith, H.S. Stilwell, Washington and Wilson
Similar(H 4351)
A Bill 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.
12/20/93 Senate Prefiled
12/20/93 Senate Referred to Committee on Banking and Insurance
01/11/94 Senate Introduced and read first time SJ-41
01/11/94 Senate Referred to Committee on Banking and Insurance SJ-41
A BILL
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:
"Chapter 4
Reverse Mortgages
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.
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