S T A T E O F N E W Y O R K
________________________________________________________________________
1743
2011-2012 Regular Sessions
I N S E N A T E
January 12, 2011
___________
Introduced by Sens. GOLDEN, LARKIN -- read twice and ordered printed,
and when printed to be committed to the Committee on Aging
AN ACT to amend the real property law, in relation to reverse mortgage
loans
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
1 Section 1. Section 280 of the real property law, as added by chapter
2 613 of the laws of 1993 and subdivision 5 as amended by chapter 33 of
3 the laws of 1996, is amended to read as follows:
4 S 280. Reverse mortgage loans for persons [sixty] SIXTY-TWO years of
5 age or older. 1. For purposes of this section the following terms shall
6 have the following meanings:
7 (a) Reverse mortgage loans. A loan which is secured by a first mort-
8 gage on real property improved by a one- to four-family residence, COOP-
9 ERATIVE APARTMENT or condominium that is the residence of the
10 [mortgagor(s)] BORROWER OR BORROWERS the proceeds of which are advanced
11 to the [mortgagor(s)] BORROWER OR BORROWERS during the term of the loan
12 in equal installments, in advances through a line of credit or other-
13 wise, in lump sums, or through a combination thereof.
14 (b) [Term reverse mortgage loan. Any reverse mortgage loan that has a
15 fixed term to maturity.
16 (c) Tenure reverse mortgage loan. Any reverse mortgage loan that does
17 not have a fixed term to maturity, but rather] REVERSE MORTGAGE MATURI-
18 TY. A REVERSE MORTGAGE matures solely upon contingent events, such as
19 events including but not limited to death OF THE SURVIVING BORROWER or
20 the real property securing the loan no longer being the [mortgagors']
21 BORROWERS' principal residence.
22 [(d)] (C) Authorized lender. Any bank, trust company, national banking
23 association, savings bank, savings and loan association, federal savings
24 bank, federal savings and loan association, credit union, or federal
25 credit union or any licensed mortgage banker approved for the making of
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD04230-01-1
S. 1743 2
1 reverse mortgage loans by the superintendent of banks or any entity
2 exempted from licensing pursuant to section five hundred ninety of the
3 banking law and approved for the making of reverse mortgage loans by the
4 superintendent of banks.
5 [(e) Mortgagor] (D) BORROWER. A tenant in severalty who is [sixty]
6 SIXTY-TWO years of age or older, or if the real property is held by
7 tenants by the entirety or by joint tenancy, the youngest of which is
8 [sixty] SIXTY-TWO years of age or older.
9 [(f)] (E) Banking board. The board established pursuant to section
10 thirteen of the banking law.
11 [(g)] (F) Superintendent of banks. The position established pursuant
12 to section twelve of the banking law as the head of the banking depart-
13 ment and pursuant to section thirteen of the banking law as the chairman
14 and executive head of the banking board.
15 (G) MORTGAGOR. MORTGAGOR IS ONE WHO SIGNS THE MORTGAGE AS A BORROWER.
16 2. A reverse mortgage loan pursuant to this section shall be subject
17 to the following:
18 (a) the loan to value ratio shall be determined by the banking board;
19 and
20 (b) subject to such rules or regulations as the banking board shall
21 adopt, any authorized lender or any successor or assign of such author-
22 ized lender which suspends, ceases or makes late payments to a [mortga-
23 gor] BORROWER under a reverse mortgage loan shall be subject to forfei-
24 ture (as liquidated damages to such [mortgagor] BORROWER and not as a
25 penalty) of twice the interest which would otherwise have been earned
26 during the period in which payments were suspended, ceased or made late,
27 provided that said authorized lender or any successor or assign of such
28 authorized lender shall have the right to make payments pursuant to said
29 loan agreement within fifteen days of each payment date, without penal-
30 ty; and
31 (c) the outstanding balance may be prepaid in full by the [mortgagor]
32 BORROWER without penalty at any time [during the term and/or tenure of
33 the loan]; and
34 (d) an authorized lender is prohibited from using or attaching any
35 property or asset of the [mortgagor] BORROWER except the real property
36 INCLUDING A COOPERATIVE APARTMENT securing the reverse mortgage loan in
37 settlement of a reverse mortgage obligation; and
38 (e) the authorized lender must deliver to [an applicant] A BORROWER
39 such disclosures as may be required by the banking board which shall
40 describe the relevant portions of the reverse mortgage being offered,
41 and shall include but not be limited to the following items:
42 (i) [except for a tenure reverse mortgage loan, a schedule of payments
43 to and from the mortgagor and the total payments in dollars over the
44 term of the reverse mortgage loan for both the mortgagor and mortgagee
45 depending on the type of reverse mortgage loan being offered;
46 (ii)] a statement prominently displayed advising [applicants] BORROW-
47 ERS to consult with appropriate authorities regarding tax and estate
48 planning consequences of a reverse mortgage;
49 [(iii)] (II) where applicable a description of prepayment and refi-
50 nancing features;
51 [(iv)] (III) the interest rate and[, except for a tenure reverse mort-
52 gage loan,] the total interest payable on the loan;
53 [(v)] (IV) a statement concerning the compliance of the lender with
54 the criteria established by the banking board that an authorized lender
55 must meet before it may make reverse mortgage loans pursuant to this
56 section; and
S. 1743 3
1 [(vi)] (V) a statement setting forth those events which would termi-
2 nate the reverse mortgage loan; and
3 (f) in the event that an authorized lender or holder of the reverse
4 mortgage loan intends to initiate foreclosure proceedings the [mortga-
5 gor] BORROWER shall have the right to designate a third party who shall
6 be notified. In the event that the mortgagor has not designated a third
7 party to receive such notice of foreclosure, then the authorized lender
8 or the holder of said reverse mortgage loan shall notify the local or
9 county office for the aging of its intent to commence foreclosure
10 proceedings. Such entity shall take appropriate action to protect the
11 interests of the mortgagor; and
12 (g) an authorized lender must deliver to the [applicant] BORROWER,
13 upon application, if available, a statement prepared by the local or
14 county office for the aging on the advisability and availability of
15 independent counseling and information services. Further, no reverse
16 mortgage commitment shall be issued by an authorized lender until the
17 [applicant] BORROWER presents, in writing, a statement that the terms of
18 the reverse mortgage loan have been explained by an attorney, a housing
19 and urban development certified counselor or any other counseling
20 service as indicated on the statement supplied by the county or local
21 office for the aging or a signed affidavit indicating that the appli-
22 cant, although made aware of the importance of counseling and its local
23 availability through the provision of such information by the authorized
24 lender, chooses not to utilize any of the aforementioned available
25 services. The form of such statement and affidavit shall be developed by
26 the New York state office for the aging OR OTHER PROGRAMS APPROVED BY
27 THE STATE SUPERINTENDENT OF BANKING IN CONSULTATION WITH THE STATE
28 OFFICE FOR THE AGING; and
29 (h) any such reverse mortgage shall expressly and conspicuously bear a
30 legend identifying it as such; and
31 (i) subject to such rules or regulations as the banking board may
32 adopt, a reverse mortgage loan shall be made at either a fixed or vari-
33 able rate of interest.
34 3. A reverse mortgage loan pursuant to this section may:
35 (a) provide that the [mortgagor's] BORROWER'S closing costs, including
36 but not limited to loan or commitment fees, if any, insurance premiums,
37 house repairs, legal fees, the cost of annuities, the costs of third-
38 party counseling, the costs of existing mortgages or liens, and other
39 appropriate costs be included in the principal of the reverse mortgage
40 loan and disbursed out of the loan proceeds at closing;
41 (b) provide for the maintenance of an escrow account by the authorized
42 lender for purposes of payment of real property taxes, insurance on the
43 property securing the loan, or any other fees and expenses as may be
44 permitted by banking board regulation;
45 (c) provide that an authorized lender may, consistent with federal
46 laws and regulations, include a due-on-sale clause in its reverse mort-
47 gage loan agreement and at its option exercise and enforce such clause
48 in accordance with its terms.
49 4. The banking board shall adopt those rules or regulations as it
50 considers appropriate to govern reverse mortgage loans made pursuant to
51 this section. No reverse mortgage loan shall be made unless it conforms
52 to the requirements of this section and such rules and regulations as
53 the banking board may adopt except those reverse mortgage loans made
54 pursuant to section two hundred eighty-a of this article. A reverse
55 mortgage loan made by any authorized lender, national banking associ-
56 ation, federal savings and loan association or federal credit union in
S. 1743 4
1 conformity with applicable federal laws and regulations specifically
2 regulating reverse mortgage loans shall be deemed to conform to the
3 requirements of this section unless such reverse mortgage loan fails to
4 conform to such rules and regulations as the banking board has expressly
5 declared to be neither preempted by, nor otherwise inconsistent with
6 such federal laws or regulations. Those rules or regulations shall
7 include, but are not limited to, the form and contents of any disclosure
8 statement, with the exception of the counseling statement prepared by
9 the New York state office for the aging pursuant to paragraph (g) of
10 subdivision two of this section, that authorized lenders must provide to
11 [mortgagors] BORROWERS.
12 5. Notwithstanding any inconsistent provision of law, the priority of
13 the lien of a reverse mortgage, including the lien for all principal,
14 interest, fees, costs, shared appreciation and other charges assessed in
15 connection with the reverse mortgage, shall date from the recording of
16 the reverse mortgage irrespective of the date of any advance of reverse
17 mortgage loan proceeds or the date by which an authorized lender shall
18 be entitled to shared appreciation or accrued but unpaid interest, fees,
19 costs or other charges.
20 6. Nothing in this section shall be construed to limit, impair or
21 otherwise affect the priority under applicable law of any other mort-
22 gage, deed of trust, encumbrance or lien which was recorded or filed
23 prior to the effective date of this section.
24 7. The sale or transfer of the real property securing the reverse
25 mortgage loan [to a person other than an original mortgagor or mortga-
26 gors] shall result in the termination of the loan.
27 8. [In a term reverse mortgage loan, the real property securing the
28 reverse mortgage loan may be reappraised by an independent appraiser at
29 the end of the loan term. If the value of the real property has appre-
30 ciated, the term of the reverse mortgage may be extended or refinanced,
31 however, the total reverse mortgage loan amount may not exceed such
32 amount or ratio as may be determined by the banking board. The refinanc-
33 ing of the reverse mortgage loan shall be provided by the original
34 authorized lender or by any other authorized lender designated by the
35 mortgagee.
36 9.] The principal, including any accrued but unpaid interest, of a
37 reverse mortgage loan agreement entered into pursuant to this section
38 may be insured by the mortgagor. [If such insurance is purchased from
39 or otherwise provided by any agency of the state of New York the mortga-
40 gor shall be granted the right, for a term reverse mortgage loan, to
41 refinance or extend the reverse mortgage loan at the end of the term,
42 subject to such rules or regulations as the banking board may adopt.]
43 The authorized lender shall have the option to choose between refinanc-
44 ing or extending the reverse mortgage loan. Subject to obtaining an
45 adequate increase in the insurance and subject to such rules and regu-
46 lations as the banking board may adopt, the total reverse mortgage loan
47 amount shall not exceed such amount or loan to value ratio as may be
48 determined by the banking board. The refinancing of the reverse mortgage
49 loan shall be provided by the original authorized lender or by any other
50 authorized lender designated by the mortgagee.
51 [10] 9. Any authorized lender offering reverse mortgage loans pursuant
52 to this section shall also offer reverse mortgage loans pursuant to
53 section two hundred eighty-a of this article. Subject to this section in
54 the event that an authorized lender makes reverse mortgage loans under
55 this section then that lender must make an equal number of reverse mort-
56 gage loans pursuant to section two hundred eighty-a of this article.
S. 1743 5
1 Such loans shall be made to individuals who meet the requirements
2 promulgated in section two hundred eighty-a of this article provided
3 that such individual seeking the loan would otherwise qualify and be
4 approved for that loan. In the event that no or insufficient applica-
5 tions for reverse mortgage loans pursuant to section two hundred eight-
6 y-a of this article are made to a lender who has previously made reverse
7 mortgage loans pursuant to this section then there shall be no require-
8 ment for that lender to make a reverse mortgage loan pursuant to section
9 two hundred eighty-a of this article. It shall also not be a requirement
10 that an authorized lender make any reverse mortgage loan to any individ-
11 ual who would not qualify for such loan and/or would not otherwise be
12 approved for such loan.
13 [11] 10. Nothing contained in this section, section six-h of the bank-
14 ing law or any other provision of law shall be construed to prohibit a
15 banking organization or licensed mortgage banker from providing reverse
16 mortgages to homeowners in this state under the federal housing adminis-
17 tration's home equity conversion mortgage insurance [demonstration]
18 program.
19 S 2. Paragraph (a) of subdivision 1 of section 280-a of the real prop-
20 erty law, as added by chapter 613 of the laws of 1993, is amended to
21 read as follows:
22 (a) Reverse mortgage loan. A loan which is secured by a first mortgage
23 on real property improved by a one to four-family residence, COOPERATIVE
24 APARTMENT or condominium that is the residence of the mortgagor(s) the
25 proceeds of which are advanced to the mortgagor(s) during the term of
26 the loan in equal installments, or in advances through a line of credit
27 or otherwise, in lump sums, or through a combination thereof.
28 S 3. This act shall take effect immediately.