A01508 Summary:

BILL NOA01508
 
SAME ASSAME AS S00760
 
SPONSORDinowitz
 
COSPNSRAubry, Cruz, Jacobson, Rosenthal L, Sayegh
 
MLTSPNSR
 
Add §6-o, Bank L; amd §9-611, UCC; add R3410, CPLR
 
Relates to authorizing reverse cooperative apartment unit loans for persons sixty-two years of age or older; provides additional consumer protections.
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A01508 Actions:

BILL NOA01508
 
01/11/2021referred to banks
04/26/2021reported referred to codes
05/04/2021reported referred to ways and means
06/10/2021reported referred to rules
06/10/2021reported
06/10/2021rules report cal.801
06/10/2021substituted by s760
 S00760 AMEND= BIAGGI
 01/06/2021REFERRED TO BANKS
 06/07/2021COMMITTEE DISCHARGED AND COMMITTED TO RULES
 06/07/2021ORDERED TO THIRD READING CAL.1522
 06/08/2021PASSED SENATE
 06/08/2021DELIVERED TO ASSEMBLY
 06/08/2021referred to ways and means
 06/10/2021substituted for a1508
 06/10/2021ordered to third reading rules cal.801
 06/10/2021passed assembly
 06/10/2021returned to senate
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A01508 Floor Votes:

There are no votes for this bill in this legislative session.
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A01508 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A1508
 
SPONSOR: Dinowitz
  TITLE OF BILL: An act to amend the banking law, the uniform commercial code and the civil practice law and rules, in relation to reverse cooperative apart- ment unit loans   PURPOSE: This bill would allow for owners of co-op apartments who are over the age of 62 the ability to obtain reverse mortgages on cooperative apart- ment unit loans.   SUMMARY OF PROVISIONS: Section 1 amends the banking law by adding a new section, 6-n providing definitions for reverse cooperative apartment unit loan, loan payout options, authorized lender, borrower, superintendent, department, and third-party contact Subsection 2 of section 1 states what the cooper- ative apartment unit loan would be subject to. Subsection 3 of section 1 explains what a reverse cooperative apartment unit loan may do. Subsection 4 of section 1 states that the superintendent shall adopt the rules and regulations as it considers appropriate to govern reverse cooperative apartment unit loan if it conforms to the requirements of the section, and explains the requirements to authorize a reverse coop- erative apartment unit loan. Subsection 5 of section 1 prohibits authorized lenders from any unfair or deceptive practices when marketing or offering reverse cooperative unit loans, including using language "public service announcement," or "government insured," or any similar language; nor can they represent the loan as anything other than a. commercial product. Subsection 6 of section 1 requires authorized lenders to include supple- mental consumer protection materials deemed appropriate by the super- intendent alongside any solicitation for reverse cooperative unit loan products mailed to a physical address within the state. Lenders are also required to provide applicants or potential applicants with the telephone number and website address provided by the department for reverse cooperative unit loan counseling. The superintendent is author- ized to promote rules and regulations as he or she deems necessary. Subsection 7 of section 1 outlines materials, notices, and information that authorized lenders must provide to borrowers. Subsection 8 of section 1 sets the procedure for foreclosure to be followed if the authorized lender determines a reverse cooperative apartment unit loan to be in default on the basis that the cooperative apartment is no longer the primary residence of or occupied by the borrower. Subsection 9 of section 1 sets that the priority of the lien of a reverse cooperative unit loan must date from the recording of the loan irrespective of the date of any advance of reverse loan proceedings or the date by which authorized lenders are entitled to accrued but unpaid charges. Subsection 10 of section 1 declares that nothing shall be construed to limit, impair or affect the priority of any other mortgages, deeds of trust, encumbrances or liens that was recorded or dated prior to the effective date. Subsection 11 of section 1 states that the sale or transfer of interest in the cooperative apartment unit loan to another borrower will lead to termination of the reverse loan. Subsection 12 of section 1 states that the principal, including any accrued but unpaid interest, of a reverse 'cooperative apartment unit loan agreement must be insured by the borrower. Subsection 13 of section 1 explains the proceedings should any person be injured by reason of any violation of this section or any rules and regulations regarding reverse cooperative apartment unit loans. Subsection 14 of section 1 provides the consequences for compliance or failure to comply with the provisions of this section. Section 2 amends subsection (f) of section 9-611 of the uniform commer- cial code by adding a new paragraph, 1-a, stating that the lender, assignee or loan servicer must give notice to the borrower and separate notice to the borrower's designated third-party 90 days prior to bring- ing any steps to dispose of its collateral and sets strict guidelines for what the notice shall look like and read as. Section 3 amends the civil practice law and rules by adding a new rule 3410 requiring a mandatory face-to-face meeting for foreclosure of reverse cooperative apartment unit loans and the guidelines for such meeting. Section 4 sets effective date.   JUSTIFICATION: In New York, about 75% of residential buildings are cooperatives. Many of those living in cooperative apartment units are elderly and are of low to middle income. The National Association of Housing Cooperatives (NAHC) and the Council of New York Cooperatives and Condominiums (CNYC) have spent the past sixteen years lobbying the Department of Housing and Urban Development (HUD) for the implementation of legislation for reverse cooperative apartment unit loans for aging individuals. The greatest hurdle is that co-ops are not real property. As of today, HUD continues to deny co-op owners from applying for reverse cooperative apartment unit loans. With the correct regulations and liability protection, the older population should be permitted to obtain reverse instead of being forced to relocate from their homes. With this bill, extended consumer protections will be added to the proc- ess of acquiring a reverse cooperative apartment unit loan and will ensure that the elderly community that so desperately wishes to stay in their homes will be able to do so.   LEGISLATIVE HISTORY: 12/13/19. Vetoed by Governor. Memo.213.   FISCAL IMPLICATIONS: None.   EFFECTIVE DATE: This act shall take effect 180 days after it has become a law.
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A01508 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          1508
 
                               2021-2022 Regular Sessions
 
                   IN ASSEMBLY
 
                                    January 11, 2021
                                       ___________
 
        Introduced  by  M.  of A. DINOWITZ, AUBRY, CRUZ, JACOBSON, L. ROSENTHAL,
          SAYEGH -- read once and referred to the Committee on Banks
 
        AN ACT to amend the banking law, the uniform  commercial  code  and  the
          civil  practice  law  and  rules,  in  relation to reverse cooperative
          apartment unit loans

          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.  The banking law is amended by adding a new section 6-o to
     2  read as follows:
     3    § 6-o. Reverse cooperative apartment unit loans for persons  sixty-two
     4  years  of  age  or older. 1. For purposes of this section, the following
     5  terms shall have the following meanings:
     6    (a) Reverse cooperative apartment unit loan. A loan which  is  secured
     7  by  shares  or membership in a cooperative apartment that is or intended
     8  to be the primary residence of the borrower or borrowers the proceeds of
     9  which are advanced to the borrower or borrowers during the term  of  the
    10  loan  in  equal installments, or in advances through a line of credit or
    11  otherwise, in a lump sum, or through a combination  thereof.    Interest
    12  and  fees  will  accrue during the life of the loan and will be added to
    13  the principal balance of the loan, but will not become due  and  payable
    14  until  the    borrower(s)  dies,  permanently  vacates  the apartment or
    15  defaults on the terms of the loan, and will continue to accrue until the
    16  loan is paid in full.
    17    (b) Loan payout options:
    18    (i) Term payment option. Under the term payment option, equal  monthly
    19  payments  are  made  by  the  lender to the borrower for a fixed term of
    20  months chosen by the borrower.
    21    (ii) Tenure payment option. Under the  tenure  payment  option,  equal
    22  monthly  payments are made by the lender to the borrower, until the loan
    23  is prepaid in full or becomes due and payable.
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD02964-01-1

        A. 1508                             2
 
     1    (iii) Line of credit payment option. Under the line of credit  payment
     2  option,  payments are made by the lender to the borrower at times and in
     3  amounts determined by the borrower as long as the amounts do not  exceed
     4  the maximum amount of loan proceeds.
     5    (iv) Single lump sum payment option. Under the single lump sum payment
     6  option,  the  borrower  receives an amount from the lender that does not
     7  exceed the maximum amount of loan  proceeds.  Set  asides  required  for
     8  disbursements  such  as  loan  closing  costs or for monthly maintenance
     9  fees, will be deducted from the amount  of  proceeds  available  to  the
    10  borrower.
    11    (c) Authorized lender. Any bank, trust company, national banking asso-
    12  ciation,  savings  bank,  savings  and loan association, federal savings
    13  bank, federal savings and loan association,  credit  union,  or  federal
    14  credit  union or any licensed mortgage banker approved for the making of
    15  reverse mortgage loans by the superintendent or any entity exempted from
    16  licensing pursuant to section five hundred ninety of  this  chapter  and
    17  approved for the making of reverse mortgage loans by the superintendent.
    18    (d)  Borrower.  A tenant in severalty who is sixty-two years of age or
    19  older, or if the cooperative apartment unit is held by  tenants  by  the
    20  entirety  or  by joint tenancy, the youngest of which is sixty-two years
    21  age or older.
    22    (e) Superintendent. The superintendent of financial services  of  this
    23  state.
    24    (f) Department. The department of financial services of this state.
    25    (g) Third-party contact. The lender must ask the borrower if they want
    26  to  designate  a  third-party  contact, such as a family member, trusted
    27  friend, advisor or other party  whom  the  borrower  would  like  to  be
    28  contacted. It shall be the borrower's discretion to choose if the third-
    29  party  contact  is  to be contacted if (i) the borrower has not returned
    30  the occupancy form, and/or (ii) the loan is in default  for  any  reason
    31  and  the lender plans to proceed on collecting on the loan, i.e., initi-
    32  ating eviction or  foreclosure  and/or  (iii)  the  borrower  cannot  be
    33  reached.
    34    2. A cooperative apartment unit loan pursuant to this section shall be
    35  subject to the following:
    36    (a)  the  borrower shall be granted lifetime possession of the subject
    37  premises of the cooperative apartment unit which is the security for the
    38  reverse cooperative apartment unit loan, as long as such apartment  unit
    39  remains  the  borrowers'  primary  residence  and the borrower is not in
    40  default under the reverse cooperative apartment unit loan. The  borrower
    41  or borrowers must certify annually on each anniversary of the loan, that
    42  they reside in the unit and that it is their primary residence;
    43    (b)  the lender shall ask the borrower if they designate a third party
    44  contact, collect such information from  the  borrower  and  update  such
    45  information annually on each anniversary of the loan;
    46    (c)  subject  to  such  rules or regulations as the superintendent may
    47  adopt, a reverse cooperative apartment unit loan shall be made at either
    48  a fixed or variable rate of interest;
    49    (d) subject to such rules or regulations  as  the  superintendent  may
    50  adopt,  the  authorized lender may require a borrower to establish a set
    51  aside account for the purposes of paying property taxes, maintenance  or
    52  cooperative  fees,  insurance  premiums  of  the  property  securing the
    53  reverse cooperative apartment unit loan, or for the payment of any other
    54  fees and expenses;
    55    (e) a lender who fails to make loan advances as required in  the  loan
    56  documents, and fails to cure an actual default after notice as specified

        A. 1508                             3
 
     1  in  the  loan  documents, shall forfeit any right to collect interest or
     2  service charges under the contract. The  lender's right to  recovery  at
     3  loan  maturity  shall  be  limited to the outstanding  balance as of the
     4  date  of  lender's default, minus all interest.  However, a lender shall
     5  not be required to make loan advances under a loan if the borrower is in
     6  default under  the loan;
     7    (f) the outstanding balance may be prepaid in  full  by  the  borrower
     8  without  penalty  at  any  time during the reverse cooperative apartment
     9  unit loan term;
    10    (g) an authorized lender is prohibited from  using  or  attaching  any
    11  property  or  asset  of the borrower or heirs of the borrower except the
    12  apartment unit securing the reverse cooperative apartment unit  loan  in
    13  settlement  of  a  reverse  loan  obligation--the loan is a non-recourse
    14  loan;
    15    (h) an authorized lender shall deliver to the applicant upon  applica-
    16  tion,  a  statement  prepared  by  the  department providing the contact
    17  information for New York approved, or U.S.  Department  of  Housing  and
    18  Urban  Development  approved,  reverse  mortgage housing counselors with
    19  cooperative housing training approved by the department whom the cooper-
    20  ative apartment owner can call for independent counseling  and  informa-
    21  tion  services.  Further,  no reverse loan commitment shall be issued by
    22  the authorized lender until the applicant presents, in writing,  a  form
    23  that  certifies the terms of the reverse cooperative apartment unit loan
    24  have been explained to them by a New York or U.S. Department of  Housing
    25  and  Urban  Development approved reverse mortgage housing counselor with
    26  cooperative housing training approved by the  department.  The  form  of
    27  such statement and affidavit and cooperative housing counseling services
    28  shall be approved by the superintendent;
    29    (i)  an  authorized  lender shall deliver to an applicant such disclo-
    30  sures as may be required by the superintendent which shall describe  the
    31  relevant  portions  of the reverse loan being offered, and shall include
    32  but not be limited to the following items:
    33    (i) a schedule of payments to and from  the  borrower  and  the  total
    34  payments in dollars over the life expectancy of the youngest borrower of
    35  the reverse cooperative apartment unit loan for the borrower;
    36    (ii)  a statement prominently displayed advising applicants to consult
    37  with appropriate authorities regarding tax and  estate  planning  conse-
    38  quences of a reverse cooperative apartment unit loan;
    39    (iii)  where  applicable  a  description of prepayment and refinancing
    40  features;
    41    (iv) to the extent determinable at or prior to the  inception  of  the
    42  reverse cooperative apartment unit loan, the interest rate and, an esti-
    43  mate  of the total interest payable on the reverse cooperative apartment
    44  unit loan;
    45    (v) a statement concerning the  compliance  of  the  lender  with  the
    46  criteria  established  by  the  superintendent that an authorized lender
    47  must meet before it may make reverse cooperative  apartment  unit  loans
    48  pursuant to this section;
    49    (vi) a statement setting forth those events which would cause the loan
    50  to become due and payable (or cause the borrower to default) the reverse
    51  cooperative apartment unit loan;
    52    (vii)  the  loan  is subject to a three day right of rescission by the
    53  borrower; and
    54    (viii) a financial statement setting forth an estimate  of  all  costs
    55  associated with the loan;

        A. 1508                             4
 
     1    (j) an authorized lender shall deliver to each borrower at the time of
     2  closing  of a reverse cooperative unit loan two copies of the borrower's
     3  right to cancel and instructions for  how  to  cancel  the  loan  to  be
     4  prescribed by the superintendent;
     5    (k) a reverse cooperative apartment unit loan pursuant to this section
     6  shall  expressly  and conspicuously bear a legend identifying it as such
     7  in at least fourteen-point font;
     8    (l) a reverse cooperative apartment unit loan shall clearly set  forth
     9  the terms for when the loan becomes due and payable, including:
    10    (i)  regardless of loan payout option chosen by the borrower, the loan
    11  note shall state that the outstanding loan balance will not be  due  and
    12  payable  in  full until the last borrower dies, or if a borrower conveys
    13  all of his or her title in the property and no  other  borrower  retains
    14  title to the property; and
    15    (ii) the loan note shall state that the outstanding loan balance shall
    16  be due and payable in full if any of the following occur:
    17    (1)  the property ceases to be the primary residence of a borrower for
    18  reasons other than death and the property is not the  primary  residence
    19  of at least one other borrower;
    20    (2)  for a period of longer than twelve consecutive months, a borrower
    21  fails to occupy the property because of physical or mental  illness  and
    22  the  property is not the primary residence of at least one other borrow-
    23  er; or
    24    (3) an obligation of the borrower under the loan note is not met;
    25    (m) in the event that an authorized lender or holder  of  the  reverse
    26  cooperative  apartment  unit  loan determines the loan is in default and
    27  intends to initiate proceedings pursuant to the note, the  lender  shall
    28  notify the borrower's third-party contact. In the event that the borrow-
    29  er  has  not  designated a third-party contact to receive such notice of
    30  foreclosure, then the authorized lender or the holder  of  said  reverse
    31  cooperative  apartment unit loan shall notify the local or county office
    32  for the aging of its intent to commence  foreclosure  proceedings.  Such
    33  entity  shall  take  appropriate  action to protect the interests of the
    34  borrower;
    35    (n) a reverse cooperative apartment unit loan secured by a unit  in  a
    36  cooperative  housing  corporation  shall  also  be  subject to the prior
    37  approval by the cooperative's board of directors; and
    38    (o) no reverse cooperative apartment unit loan  shall  be  subject  to
    39  mandatory binding arbitration.
    40    3.  A reverse cooperative apartment unit loan pursuant to this section
    41  may:
    42    (a) provide that an authorized lender  may,  consistent  with  federal
    43  laws  and regulations, include a due-on-sale clause in its reverse coop-
    44  erative apartment unit loan agreement and at  its  option  exercise  and
    45  enforce such clause in accordance with its terms; and
    46    (b)  provide  that  the  borrower's  closing  costs, including but not
    47  limited to loan or commitment fees if any, insurance premiums,  repairs,
    48  legal fees, the costs of third party counseling, the costs of paying off
    49  any existing mortgages or liens, and other appropriate costs be included
    50  in  the  principal  of  the  reverse cooperative apartment unit loan and
    51  disbursed out of the loan proceeds at closing.
    52    4. The superintendent shall adopt such rules or regulations as  he  or
    53  she considers appropriate to govern a reverse cooperative apartment unit
    54  loan  made  pursuant  to  this section. No reverse cooperative apartment
    55  unit loan shall be made unless it conforms to the requirements  of  this
    56  section and such rules and regulations as the superintendent may adopt.

        A. 1508                             5
 
     1    5.  No  authorized  lender  or  any other party or entity shall in any
     2  manner, in the marketing or offering of  reverse  cooperative  apartment
     3  unit  loans,  engage  in any unfair or deceptive practices in connection
     4  with the marketing or offering of  reverse  cooperative  apartment  unit
     5  loans, and, additionally, shall not:
     6    (a)  use  the  words  "public service announcement" in any commercial,
     7  mailing, advertisement or writing relating thereto;
     8    (b) use the words  "government  insured"  or  other  similar  language
     9  representing  that reverse cooperative apartment unit loans are insured,
    10  supported and sponsored by any governmental entity  in  any  commercial,
    11  mailing, advertisement or writing relating thereto; or
    12    (c) represent that any such loan is other than a commercial product.
    13    6.  (a) Every authorized lender and assignee must obtain a surety bond
    14  in the amount of one hundred thousand dollars for the benefit of  claims
    15  against  the lender/assignee for failure to perform their obligations to
    16  the borrower. The superintendent will hold the surety bond. In addition,
    17  a lender or assignee shall maintain an  irrevocable  standby  letter  of
    18  credit  from  a  financial institution approved by the superintendent in
    19  favor of the lender or assignee in  an  amount  necessary  to  fund  all
    20  reverse  mortgage  loan  requirements  anticipated  over the next twelve
    21  months for loans then on the lender's books and  those  expected  to  be
    22  made  over the next twelve months or three million dollars, whichever is
    23  greater. The initial term of the letter of credit shall be at least  two
    24  years. A lender or assignee also shall maintain a minimum capital of ten
    25  million  dollars.  A lender may rely upon its parent company to meet the
    26  minimum capital requirements. The requirements for a  letter  of  credit
    27  shall  not  apply  to  loans  that are fully funded at consummation. The
    28  minimum capital requirements shall not apply  to  lenders  or  assignees
    29  that  sell  loans in the secondary market to a financially viable finan-
    30  cial institution, and the superintendent shall define  the  requirements
    31  of what constitutes a "financially viable financial institution prior to
    32  any secondary market sale".
    33    (b)  Every  authorized  lender  or  its  agent shall provide, with any
    34  solicitation for reverse cooperative apartment unit loan products mailed
    35  to a physical address within the state, supplemental consumer protection
    36  materials the content and form of which shall be specified by the super-
    37  intendent or his or her designee.
    38    (c) Every authorized lender shall provide each applicant or  potential
    39  applicant  for  a reverse cooperative apartment unit loan with the tele-
    40  phone number and internet website address provided by the department for
    41  the purposes of acquiring reverse cooperative apartment unit loan  coun-
    42  seling.
    43    (d)  The  superintendent  is  authorized  to promulgate such rules and
    44  regulations  as  he  or  she  shall  deem  necessary  to  implement  the
    45  provisions of this subdivision.
    46    7. For reverse cooperative apartment unit loans, authorized lender and
    47  their agents shall:
    48    (a)  provide  a monthly account statement, and for all borrowers whose
    49  maintenance fees, special assessments mortgage insurance payments, home-
    50  owners insurance payments, or payments stemming from any other  property
    51  obligation or obligations are administered by the authorized lender, and
    52  where  these  payments  are  derived  from the proceeds of the loan, the
    53  authorized lender shall provide on the borrower's account statement  the
    54  current  balance  remaining in the borrower's line of credit or lifetime
    55  expectancy set aside, the projected annual  property  charges  for  that
    56  year, and a notice which reads in at least fourteen point type:

        A. 1508                             6

     1    "YOUR  MAINTENANCE  FEES  AND  SPECIAL ASSESSMENTS ARE CURRENTLY BEING
     2  PAID BY THE PROCEEDS OF THIS LOAN. THE FUNDS THAT HAVE  BEEN  SET  ASIDE
     3  ARE  EXPECTED  TO  BE  EXHAUSTED  AFTER THE MAINTENANCE FEES AND SPECIAL
     4  ASSESSMENT PAYMENTS  OF  (SPECIFY  EXPECTED  MONTH  AND  YEAR).  IF  THE
     5  PROCEEDS  OF  THIS  LOAN  CANNOT  PAY  THE  MAINTENANCE FEES AND SPECIAL
     6  ASSESSMENTS, YOU MUST PAY THESE OBLIGATIONS OR YOUR COOP SHARES  MAY  BE
     7  LOST  TO  FORECLOSURE.  PLEASE  NOTE  THAT  MAINTENANCE FEES AND SPECIAL
     8  ASSESSMENTS CAN VARY SO YOU SHOULD CONTINUE TO REVIEW  THIS  NOTICE  FOR
     9  CHANGES."
    10    (b)  by telephone and first class mail, inform and provide notice to a
    11  borrower when his or her home equity line of credit or  life  expectancy
    12  set  aside  is  depleted  to  twenty  percent or less of its value. Such
    13  notice shall inform the borrower of his or her obligations  relating  to
    14  such  real  property  including, but not limited to, mortgage insurance,
    15  homeowners insurance and real property taxes  previously  paid  by  such
    16  line  of  credit or life expectancy set aside, and that such obligations
    17  must continue to be paid when the home equity line  of  credit  or  life
    18  expectancy  set aside is depleted. Such notice shall use plain language,
    19  written in a clear and coherent manner using words with common and every
    20  day  meanings,  appropriately  divided  and  captioned  by  its  various
    21  sections.  If  the lender or its agent is unable to contact the borrower
    22  by telephone, notice must be sent to the third-party contact if  author-
    23  ized by the borrower.
    24    (c)  Each  authorized lender shall, by telephone and first class mail,
    25  inform and provide notice to a borrower when his or her home equity line
    26  of credit or life expectancy set aside is depleted.  Such  notice  shall
    27  inform  the  borrower  of his or her obligations relating to the cooper-
    28  ative apartment unit including, but not limited to, mortgage  insurance,
    29  homeowners  insurance  and real property taxes, and that the home equity
    30  line of credit or life expectancy set aside will  no  longer  pay  these
    31  obligations.  Such  notice  shall use plain language, written in a clear
    32  and coherent manner using words with  common  and  every  day  meanings,
    33  appropriately divided and captioned by its various sections.
    34    8. In the event that an authorized lender determines a reverse cooper-
    35  ative apartment unit loan to be in default on the basis that the cooper-
    36  ative apartment is no longer the primary residence of or occupied by the
    37  borrower, if during the verification of the borrower's primary residence
    38  and/or  occupancy  no  responses  are  received  in response to mailings
    39  relating thereto, such lender shall cause a telephone call to be made to
    40  the borrower, or if the borrower is unreachable  by  telephone,  to  the
    41  third-party  contact if designated, and an in person visit to be made to
    42  the borrower at the cooperative  apartment  to  be  made  prior  to  the
    43  commencement  of any proceeding to enforce the lender's rights under the
    44  note. During such visit,  the  authorized  lender  or  its  agent  shall
    45  provide clear information as to who they are, that the visit pertains to
    46  the  reverse  cooperative  apartment  unit loan, the reason for the home
    47  visit, and the telephone number to call  for  further  information.  The
    48  authorized  lender  must wait at least thirty days following such visit,
    49  in addition to any additional time or notice requirements  specified  by
    50  any  other  provision  of law, before initiating a foreclosure action on
    51  the basis that the cooperative apartment is no longer the primary  resi-
    52  dence  of  the  borrower. If the borrower contacts the authorized lender
    53  and provides proof of residence or occupancy after such visit but before
    54  the commencement of a proceeding to enforce the  lender's  rights  under
    55  the  note,  the  authorized  lender shall be barred from initiating such
    56  action.  Furthermore, no authorized lender shall charge a  borrower  any

        A. 1508                             7
 
     1  fee  for  any such visit and inspection. This prohibition on the imposi-
     2  tion of fees shall include any and  all  inspections  conducted  by  the
     3  authorized lender to verify the status of the reverse cooperative apart-
     4  ment unit loan, or any suspected or actual default condition.
     5    9.  Notwithstanding any inconsistent provision of law, the priority of
     6  the lien of a reverse cooperative apartment  unit  loan,  including  the
     7  lien  for  all  principal,  interest,  fees,  costs,  and  other charges
     8  assessed in connection with the reverse loan, shall date from the filing
     9  of a UCC-1 notice for the loan irrespective of the date of  any  advance
    10  of reverse loan proceeds or the date by which an authorized lender shall
    11  be  entitled to accrued but unpaid interest, fees, costs or other charg-
    12  es.
    13    10. Nothing in this section shall be construed  to  limit,  impair  or
    14  otherwise  affect the priority, under applicable law, of any other mort-
    15  gage, deed of trust, encumbrance or lien which was filed  prior  to  the
    16  effective date of this section.
    17    11.  The sale or transfer of the interest in the cooperative apartment
    18  unit securing the reverse cooperative apartment unit loan  to  a  person
    19  other  than an original borrower or borrowers shall result in the termi-
    20  nation of the reverse loan.
    21    12. Any person who has been injured by reason of any violation of this
    22  section or any violation of the rules and regulations of the  department
    23  relating  to  the  reverse  cooperative  apartment unit loan program may
    24  bring an action in his or her own name to  recover  treble  his  or  her
    25  actual  damages,  plus  the prevailing plaintiff's reasonable attorneys'
    26  fees.
    27    13. Compliance with the provisions of this section shall be conditions
    28  precedent to commencing an action to foreclose upon  a  reverse  cooper-
    29  ative  apartment  unit  loan  which is subject to the provisions of this
    30  section, and the failure to comply therewith shall be a complete defense
    31  to such action.
    32    § 2. Subsection (f) of section 9-611 of the uniform commercial code is
    33  amended by adding a new paragraph 1-a to read as follows:
    34    (1-a) Notwithstanding any other provision of law,  with  regard  to  a
    35  reverse cooperative apartment unit loan, at least forty-five days before
    36  a  secured  party,  as  defined under Section 9-102(a)(73), or its agent
    37  takes any steps to dispose of its collateral, as provided for in Section
    38  9-610, the secured party or its agent shall give notice to the borrower,
    39  and separate notice to the borrower's designated third-party if one  has
    40  been  designated  in at least fourteen-point type except for the heading
    41  which shall be in at least sixteen-point type. The notice shall  include
    42  the following:
    43       YOU COULD LOSE YOUR COOPERATIVE APARTMENT UNIT TO FORECLOSURE.
    44                 PLEASE READ THE FOLLOWING NOTICE CAREFULLY.
    45  Date
    46  Borrower's address
    47  Loan Number:
    48  Property Address:
    49  Dear Borrower(s) {or heirs of Debtor?}:
    50  As  of  ___________,  your reverse cooperative apartment unit loan is in
    51  default. Under New York State Law, we are  required  to  send  you  this
    52  notice to inform you that you may be at risk of losing your home.
    53  Your  reverse  loan is in default because you have not complied with the
    54  following conditions of your loan:
    55  _____ You are not occupying your  cooperative  apartment  unit  as  your
    56  primary residence

        A. 1508                             8
 
     1  _____ You did not submit the required annual certificate of occupancy
     2  _____ The named borrower on the reverse loan has died
     3  _____ You did not pay maintenance on your unit to the cooperative corpo-
     4  ration,  and  {servicer}  paid your maintenance for you on the following
     5  date(s)  in  the  following   amount(s):________________________________
     6  ____________________________________
     7  _____ You did not make required repairs to your unit
     8  If  the claim is based on your failure to pay maintenance to the cooper-
     9  ative corporation, you can cure this default by making  the  payment  of
    10  $____________  for  the  advances we made towards these payments on your
    11  behalf.
    12  You have the right to dispute the claims listed above by contacting  us,
    13  by  calling  ___________ or sending a letter to __________________. This
    14  may include proof of payments made for water  and  sewer  charges  or  a
    15  current declaration page from your insurance company, or any other proof
    16  to dispute the servicer's claim.
    17  OPTIONS  MAY  BE  AVAILABLE  FOR YOU TO CURE YOUR DEFAULT. SOME OF THESE
    18  OPTIONS ARE LISTED BELOW.  YOU  MAY  CONTACT  {SERVICER}  AT  {TOLL-FREE
    19  NUMBER} TO DISCUSS YOUR OPTIONS.
    20  If  you  are  in default for failure to pay maintenance, you may qualify
    21  for a re-payment plan to cure the default balance owed.
    22  Attached to this notice is a list of New  York  approved  housing  coun-
    23  seling agencies and legal services in your area which provide free coun-
    24  seling.   A   statewide   listing   by   county  is  also  available  at
    25  http://www.dfs.ny.gov/consumer/mortg  nys  np  counseling  agencies.htm.
    26  You  may also call your local Department of Aging for a referral or call
    27  311 if you live in New York City.
    28  Qualified free help is available; watch out for companies or people  who
    29  charge a fee for these services.
    30  You  may  also  contact  {SERVICER}  directly  at  __________ and ask to
    31  discuss all possible options to allow  you  to  cure  your  default  and
    32  prevent  the  foreclosure  of  your  home. While we cannot ensure that a
    33  resolution is possible, we encourage you to take immediate steps to  try
    34  to achieve a resolution.  The longer you wait, the fewer options you may
    35  have.
    36  If  you  have not taken any actions to resolve this matter within ninety
    37  days from the date this notice was mailed, we will  have  the  right  to
    38  take your cooperative shares from you.
    39  If  you need further information, please call the New York State Depart-
    40  ment of Financial Services' toll-free helpline at 877-226-5697 or  visit
    41  the Department's website at http://www.dfs.ny.gov.
    42  IMPORTANT: You have the right to remain in your unit until you receive a
    43  court  order  telling you to leave the property. If a foreclosure action
    44  is filed against you in court, you still have the right to remain in the
    45  unit until a court orders you to leave. You legally remain the owner  of
    46  your  cooperative  shares  and  are  responsible  for the unit until the
    47  shares are transferred to a new owner through  a  sale.  However,  there
    48  will  be  no court proceeding before the shares are transferred to a new
    49  owner. After the shares are transferred, the new owner may begin a court
    50  proceeding to evict you from the unit.
    51  This notice is not an eviction notice.
    52    § 3. The civil practice law and rules is amended by adding a new  rule
    53  3410 to read as follows:
    54    Rule 3410. Face-to-face meeting for foreclosure of reverse cooperative
    55  apartment  unit loans. (a) For purposes of this rule, default shall only
    56  include a borrower's breach of an obligation under the reverse  mortgage

        A. 1508                             9
 
     1  cooperative  loan agreement, and shall not include death of the borrower
     2  or the borrower's permanent vacating of the cooperative unit.
     3    (b)  In  any  action  recovery  involving a borrower's default under a
     4  reverse cooperative apartment unit loan, as defined in paragraph (a)  of
     5  subdivision  one  of  section six-o of the banking law, the lender shall
     6  file a petition with the supreme court of the county in which the  coop-
     7  erative apartment is located stating that the loan is in default and the
     8  reason  for  the  default.  The  petition must be served on the borrower
     9  pursuant to section three hundred eight of this chapter. Within ten days
    10  of the date of service of the notice to  the  borrower,  the  petitioner
    11  must  file  a  specialized  request  for  judicial intervention with the
    12  clerk. Within sixty days of receipt of the notice or on  such  adjourned
    13  date as has been agreed to by the parties, the court shall hold a manda-
    14  tory  settlement  conference  for  the  purpose  of  holding  settlement
    15  discussions pertaining to the relative rights  and  obligations  of  the
    16  parties under the loan documents, including, but not limited to:
    17    1.  determining  whether  the  parties  can reach a mutually agreeable
    18  resolution to help the borrower avoid  losing  his  or  her  cooperative
    19  apartment  unit,  and evaluating the potential for a resolution or other
    20  workout options may be agreed; or
    21    2. whatever other purposes the court deems appropriate.
    22    (c) At any meeting held pursuant to this  rule,  the  lender  and  the
    23  borrower  shall  appear in person or by counsel, and each party's repre-
    24  sentative at the meeting shall be fully authorized  to  dispose  of  the
    25  matter.  If  the  borrower is appearing without counsel, the court shall
    26  inform the borrower of the nature of the action and his  or  her  rights
    27  and  responsibilities.  Where  appropriate,  the  court  may  permit the
    28  borrower or a representative of the borrower or the defendant to  attend
    29  the settlement conference telephonically or by video-conference.
    30    (d) Upon the filing of the notice of default with the court, the court
    31  shall  send  either a copy of the notice or the borrower's name, address
    32  and telephone number (if available) to a housing  counseling  agency  or
    33  agencies  on  a  list  designated  by  the department for the geographic
    34  region in which the borrower resides. Such information shall be used  by
    35  the designated housing counseling agency or agencies exclusively for the
    36  purpose  of making the borrower aware of housing counseling and foreclo-
    37  sure prevention services and options available to them.
    38    (e) The court shall promptly send a notice to parties advising them of
    39  the time and place of the meeting, the purpose of the  meeting  and  the
    40  requirements  of  this rule. The notice shall be in a form prescribed by
    41  the court, and shall advise the parties of the documents that they shall
    42  bring to the meeting.
    43    (f) Both the lender and the borrower shall negotiate in good faith  to
    44  reach  a  mutually  agreeable resolution, including but not limited to a
    45  re-payment agreement, or any other loss mitigation, if possible. Compli-
    46  ance with the obligation to negotiate in good  faith  pursuant  to  this
    47  rule  shall  be measured by the totality of the circumstances, including
    48  but not limited to the following factors:
    49    1. compliance with the requirements of this rule and applicable  regu-
    50  lations pertaining to the face-to-face meeting process;
    51    2. compliance with applicable lending and servicing laws, rules, regu-
    52  lations,  investor directives, and loss mitigation standards or options;
    53  and
    54    3. conduct consistent with  efforts  to  reach  a  mutually  agreeable
    55  resolution,  including  but not limited to, avoiding unreasonable delay,
    56  appearing at the meeting with authority to fully dispose of the  matter,

        A. 1508                            10
 
     1  avoiding  moving forward to take possession while loss mitigation appli-
     2  cations and attempts are pending, and providing accurate information  to
     3  the department and all parties.
     4    Neither  of the parties' failure to make the offer or accept the offer
     5  made by the other party is sufficient to establish a failure to  negoti-
     6  ate in good faith.
     7    (g) Upon a finding by the court that the plaintiff failed to negotiate
     8  in good faith pursuant to subdivision (f) of this rule, the court shall,
     9  at  a  minimum, toll the accumulation and collection of interest, costs,
    10  and fees during any undue delay  caused  by  the  plaintiff,  and  where
    11  appropriate, the court may also impose one or more of the following:
    12    1.  compel  production  of any documents requested by the court or the
    13  court's designee during the settlement conference;
    14    2. impose a civil penalty payable to the state that is  sufficient  to
    15  deter  repetition  of the conduct and in an amount not to exceed twenty-
    16  five thousand dollars;
    17    3. the court may award actual damages, fees, including  attorney  fees
    18  and  expenses  to  the  defendant  as a result of plaintiff's failure to
    19  negotiate in good faith; or
    20    4. award any other relief that the court deems just and proper.
    21    (h) A party to a default action may not charge, impose,  or  otherwise
    22  require  payment  from  the  other party for any cost, including but not
    23  limited to attorneys' fees, for appearance at or  participation  in  the
    24  settlement conference process.
    25    (i) This rule shall not apply if:
    26    1.  the  borrower dies and there is no surviving borrower, unless: (i)
    27  the last surviving borrower's spouse, if any, is a resident of the prop-
    28  erty subject to foreclosure;  or  (ii)  the  last  surviving  borrower's
    29  successor  in interest who by bequest or through intestacy, owns, or has
    30  a claim to the ownership of the property subject to foreclosure, and who
    31  was a resident of such property at  the  time  of  death  of  such  last
    32  surviving  borrower;  or  the borrower does not reside in the unit after
    33  such non-occupancy by the borrower as verified by  the  lender  and  the
    34  lender  has  taken  action as   required by subdivision eight of section
    35  six-o of the banking law; or
    36    2. a repayment plan or other workout consistent  with  the  borrower's
    37  circumstances is entered into to bring the borrower's account current or
    38  otherwise cure the default thus making a meeting unnecessary.
    39    §  4. The superintendent of financial services shall convene a working
    40  group comprised of industry and consumer representatives  to  study  the
    41  availability  of  reverse  mortgage  counselors  within the state of New
    42  York, and assess their experience and availability to provide counseling
    43  in connection with non-government  insured  reverse  mortgages,  and  to
    44  address any other matters the superintendent deems necessary pursuant to
    45  this  act.    The  superintendent  shall report on its findings and make
    46  recommendations based upon such findings.
    47    § 5. This act shall take effect on the one hundred eightieth day after
    48  it shall have become a law.  Effective immediately, the addition, amend-
    49  ment and/or repeal of any rule or regulation necessary for the implemen-
    50  tation of this act on its effective date are authorized to be  made  and
    51  completed on or before such effective date.
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