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