STAND. COM. REP. NO. 580

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 1134
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred S.B. No. 1134 entitled: 

     "A BILL FOR AN ACT RELATING TO REVERSE MORTGAGES,"

begs leave to report as follows:

     The purpose of this measure is to ensure that elderly
homeowners seeking funds through a reverse mortgage loan receive
the counseling necessary to make an informed and reasoned
decision about reverse mortgage financing.

     The Department of Commerce and Consumer Affairs, the
Executive Office on Aging, the American Association of Retired
Persons Hawaii State Legislative Committee, and the Hawaii
Association of Realtors presented testimony in support of the
measure.  The Hawaii Bankers Association presented testimony in
opposition to the measure.  American Savings Bank, though not
present at the hearing, submitted written testimony in opposition
to the measure. 

     Your Committee finds that reverse mortgage financing is
becoming an increasingly popular form of financing for seniors on
a fixed income with equity in their homes.  A reverse mortgage is
a loan against home equity that provides a cash advance to
homeowners and requires no payment until a future time, usually
when the borrower dies or sells the home.

     Your Committee further finds that reverse mortgage financing
is not appropriate for everyone, and consumers considering this

 
a                                                     SB1134 SD1
                                   STAND. COM. REP. NO. 580
                                   Page 2


form of financing should be fully informed about the lending
process and the advantages and disadvantages of reverse mortgage
financing given factors such as the borrower's age and current
and future needs. 

     Your Committee received testimony that some unscrupulous
lenders charge the elderly thousands of dollars for information
about reverse mortgage financing that is available at no cost
from the Department of Housing and Urban Development (HUD).  This
measure would require that lenders refer applicants for reverse
mortgage financing to counseling from a housing counseling agency
approved by HUD and obtain certification that counseling has been
provided prior to accepting the application.  

     The level of counseling required by this measure is
consistent with that required for a federally-insured reverse
mortgage.  Since most financial institutions are already familiar
with the counseling requirements for federally-insured loans,
your Committee finds that the requirements imposed by this
measure should not create undue administrative hardships.

     Your Committee has amended this measure by:

     (1)  Replacing the existing penalty language with language
          providing that a lender who fails to comply with the
          counseling requirement engages in an unfair method of
          competition or unfair or deceptive act or practice in
          the conduct of trade or commerce within the meaning of
          section 480-2, Hawaii Revised Statutes;

     (2)  Providing that a "reverse mortgage loan" does not
          include a loan insured by HUD or loans subject to other
          state or federal laws requiring mortgage counseling;
          and

     (3)  Making technical, nonsubstantive changes.

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 1134, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as S.B.
No. 1134, S.D. 1, and be placed on the calendar for Third
Reading.


 
a                                                     SB1134 SD1
 
 
                                   STAND. COM. REP. NO. 580
                                   Page 3


                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,



                                   ______________________________
                                   BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
a                                                     SB1134 SD1