California Reverse Mortgage Consumer Protections

Required Counseling Before Any Reverse Mortgage

Counseling is the first protection a family meets. In practice, it means a conversation with someone who has no stake in whether the loan happens.

Federal law makes it a condition of HECM insurance. Under 12 U.S.C. § 1715z-20(d), the borrower must have received adequate counseling from an independent third party. That counselor may not be associated with or paid by anyone involved in originating or servicing the mortgage or funding the loan. The same rule applies to anyone selling annuities, investments, long-term care insurance or other financial or insurance products.

The statute's subsection (f) says what counseling covers. The counselor must discuss options other than a HECM, including other housing, social service, health and financial options. The counselor must also cover other home equity conversion options, such as sale-leaseback financing, deferred payment loans and property tax deferral. Counseling includes the financial implications of the loan and a disclosure that a HECM may have tax consequences, affect eligibility for federal and state programs, and affect the estate and heirs. The list ends with any other information HUD requires.

California adds its own layer in Civil Code section 1923.2(j). Before accepting a final and complete application, the lender must give the borrower a list of at least 10 HUD-approved reverse mortgage counseling agencies. The counseling agency may not be paid, directly or indirectly, by the lender or by others involved in the loan or in selling financial products. Gifts unrelated to the loan that a lender gives as charity are an exception.

Proof matters too. Section 1923.2(k) requires a counseling certification signed by both the borrower and the counselor. It must show the date and the names, addresses and phone numbers of both. Under section 1923.5, the lender must also hand over a notice in large type before counseling. It begins: "A REVERSE MORTGAGE IS A COMPLEX FINANCIAL TRANSACTION." More on what the session involves appears in this site's page on HUD reverse mortgage counseling.

California's Seven-Day Cooling-Off Period

After the counseling session, many families wonder whether a lender can rush them straight to the next step. California law answers that with a built-in pause. The borrower does not have to ask for it.

The rule is in Civil Code section 1923.2(k). A lender may not accept a final and complete application for a reverse mortgage, or charge the applicant any fees, until seven days have passed from the date of counseling, as shown on the counseling certification. The lender must also first receive the signed certification that counseling took place. The certification states that counseling was in person, unless it says the applicant chose another method.

In plain words, the week after counseling belongs to the family. It is time to reread the notes, talk with relatives, compare the loan against the other options above, and think about what fits. The statute's limit is on the lender. Until the seven days pass, no final application and no fees.

This pause comes before the loan. A separate protection, the right to cancel, comes after closing. The two work at different stages and do not replace each other.

The Right to Cancel After Closing

A family's worry after closing is often simpler: what if we change our minds? Here a federal consumer protection matters.

The Truth in Lending Act is a federal law about loan disclosures, and Regulation Z is the rule that carries it out. Regulation Z treats a reverse mortgage as a distinct kind of loan. Under 12 C.F.R. § 1026.33, it is a nonrecourse loan secured by the borrower's principal dwelling. Under that section, the loan generally comes due only after the consumer dies, the dwelling is transferred, or the consumer stops living there as a principal dwelling, other than in the case of default.

Canceling is called "rescission." According to the CFPB, most reverse mortgages carry a three-day right to cancel. "Within three business days after the loan is closed, you can cancel the deal for any reason, without penalty." The Federal Trade Commission describes the same right as at least three business days after closing.

So a reverse mortgage can be reversed, but only within that window. Once the window has passed, the loan stays in effect under its terms. Prepayment rules still let a borrower pay the loan off. Civil Code section 1923.2(a) permits prepayment in whole or in part at any time without penalty.

Non-Recourse Protection: What It Means for the Borrower and Heirs

The question behind this section is usually about children. Families want to know whether the people left behind could end up owing more than the house is worth.

"Non-recourse" means the lender can look only to the home for repayment, not to the borrower's other savings or the heirs' own money. Under 12 U.S.C. § 1715z-20(d)(7), a HECM must provide that the homeowner is not liable for any gap between the remaining loan balance and the amount the lender recovers. That recovery can come from the net sales proceeds of the home or from the insurance benefits HUD pays. The statute directs HUD to pay insured lenders the funds they are owed, including from the Mutual Mortgage Insurance Fund. The CFPB summarizes it this way: "neither you nor your heirs will have to pay back more than your home is worth."

What non-recourse does not do matters just as much. The balance still grows, because interest and charges are added to it over time. The borrower still must live in the home as a principal residence, pay the property taxes and insurance, and keep up the house. Under 24 C.F.R. § 206.39, the home must be the principal residence of each borrower, and of any Eligible Non-Borrowing Spouse, at closing.

The loan comes due when the last borrower dies, sells or moves out. Under 24 C.F.R. § 206.27(c), it also becomes due, with HUD's approval, in several other cases. These include when a borrower is absent for more than 12 consecutive months because of physical or mental illness and no other borrower lives there, or when property charges go unpaid. The same rule applies when another obligation under the mortgage is not performed.

California adds limits on absences in Civil Code section 1923.2(g). Under that subdivision, absences of up to 60 consecutive days do not make the loan due. Absences longer than 60 days but under one year also do not make the loan due if the borrower secured and protected the home in advance, in a way the lender accepts under the loan documents.

When the loan does come due, the CFPB notes that the homeowners or their heirs repay it, usually by selling the home. More detail is in this site's page on when the borrower dies.

California Licensing and Oversight of Reverse Mortgage Lenders

Advertising can make it hard to tell who is legitimate. A family's next concern is often who checks on lenders in the first place.

The California Department of Financial Protection and Innovation (DFPI) handles licensing under the California Residential Mortgage Lending Act (CRMLA). It explains that the California Residential Mortgage Lending Act "requires that any person engaged in the business of making or servicing residential mortgage loans within California do so only under the authority of a license." DFPI also lists exemptions, including banks, trust companies, insurance companies, licensed California real estate brokers and California finance lenders. The list continues on DFPI's page.

The California Department of Real Estate (DRE) licenses real estate brokers. In a February 19, 2026 alert, DRE warned of "reverse mortgages with misleading terms or fees." Its tips address:

• Paying in advance. DRE's tip is never to pay anyone for home loans or foreclosure relief before the work is done.
• Signing. DRE's tip is never to sign a home loan agreement that is not understood, has not been read, or has blank spaces.
• Advertising. DRE notes that anyone, including scammers without a license, can advertise.

The state also limits sales pressure. Under Civil Code section 1923.2(i), a lender may not require an annuity as a condition of a reverse mortgage. A lender also may not refer the borrower to buy an annuity or other financial or insurance product before closing or before the right to rescind expires. Customary title, hazard and flood insurance are an exception.

A family with a concern about a lender's conduct can raise it with the state agency that licenses that lender.

Protections for a Spouse Who Is Not on the Loan

For a married couple where only one spouse signs, the hard question is what happens to the other one. A non-borrowing spouse is someone who lives in the home and is married to the borrower but is not named on the reverse mortgage.

The risk is real. If the borrowing spouse dies or moves into care, the loan may become due. Federal law offers some protection. Under 12 U.S.C. § 1715z-20(j), HUD may not insure a HECM unless repayment is deferred until the homeowner's death, the sale of the home, or other events in HUD's rules. That subsection says "homeowner" includes the homeowner's spouse.

The regulation adds a "Deferral Period." Under 24 C.F.R. § 206.27(c)(3), the mortgage documents must defer the loan's due date for an Eligible Non-Borrowing Spouse. The deferral lasts until the death of the last Eligible Non-Borrowing Spouse, or until the Deferral Period requirements stop being met and are not cured. Whether a spouse stays depends on meeting those federal conditions, so remaining in the home is never automatic. HUD also counts the age of an eligible non-borrowing spouse in figuring the amount available.

Other relatives and caregivers in the home get no such deferral under the text above. California's worksheet in Civil Code section 1923.5 asks who lives in the home now and what they will do when the borrower dies or moves. It also asks who will pay off the loan. An independent counselor is the person who can walk every household member through these questions before closing. This site's page on non-borrowing spouses goes further.