STATE OF NEW YORK
________________________________________________________________________
6172
2011-2012 Regular Sessions
IN ASSEMBLY
March 8, 2011
___________
Introduced by M. of A. WEPRIN -- read once and referred to the Committee
on Housing
AN ACT to amend the real property law, the banking law, the insurance
law, the public authorities law, the tax law, and the social services
law, in relation to reverse mortgage loans; and to repeal section
280-a of the real property law relating thereto
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 § 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, life estate, trust, leasehold or condominium that is
10 the residence of the [mortgagor(s)] borrower or borrowers the proceeds
11 of which are advanced to the [mortgagor(s)] borrower or borrowers during
12 the term of the loan using any one or more method of payments in equal
13 monthly installments using tenure or term payments, in advances through
14 a line of credit or otherwise, in lump sums, or through a combination
15 thereof using a modified tenure or modified term payments. A reverse
16 mortgage loan may be FHA insured (HECM) pursuant to subdivision four of
17 this section or a non FHA insured loan (proprietary).
18 (b) [Term reverse mortgage loan. Any reverse mortgage loan that has a
19 fixed term to maturity.
20 (c) Tenure reverse mortgage loan. Any reverse mortgage loan that does
21 not have a fixed term to maturity, but rather] Reverse mortgage maturi-
22 ty. A reverse mortgage matures solely upon contingent events, such as
23 events including but not limited to death [or] of the surviving borrow-
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD04174-03-1
A. 6172 2
1 er, the real property securing the loan no longer being the [mortga-
2 gors'] borrowers' principal residence or the subject property being
3 sold.
4 [(d)] (c) Authorized lender. Any bank, trust company, national banking
5 association, savings bank, savings and loan association, federal savings
6 bank, federal savings and loan association, credit union, or federal
7 credit union or any licensed mortgage banker approved for the making of
8 reverse mortgage loans by the superintendent of banks or any entity
9 exempted from licensing pursuant to section five hundred ninety of the
10 banking law and approved for the making of reverse mortgage loans by the
11 superintendent of banks.
12 [(e) Mortgagor] (d) Borrower. A tenant in severalty who is [sixty]
13 sixty-two years of age or older, or if the real property is held by
14 tenants by the entirety or by joint tenancy, the youngest of which is
15 [sixty] sixty-two years of age or older and signs the loan application.
16 However, a party with a remainder interest who has not signed the appli-
17 cation but signs the mortgage, signs the mortgage as an accommodation
18 and not as a borrower as defined in this section.
19 [(f)] (e) Banking board. The board established pursuant to section
20 thirteen of the banking law.
21 [(g)] (f) Superintendent of banks. The position established pursuant
22 to section twelve of the banking law as the head of the banking depart-
23 ment and pursuant to section thirteen of the banking law as the chairman
24 and executive head of the banking board.
25 (g) Mortgagor. Mortgagor is one who signs the mortgage as a borrower
26 or as a non-borrower when one holds a remainder interest, or signs as a
27 trustee.
28 (h) Home equity conversion mortgage (HECM). The FHA reverse mortgage
29 loan under the department of housing and urban development.
30 (i) Tenure payment. Equal monthly payments are made by the lender to
31 the borrower or borrowers as long as property remains the principal
32 residence unless the loan becomes due pursuant to paragraph (c) of this
33 subdivision.
34 (j) Term payment. Equal monthly payments are made by the lender to the
35 borrower or borrowers for a fixed term of months chosen by the borrower,
36 unless the loan becomes due pursuant to paragraph (c) of this subdivi-
37 sion.
38 (k) Line of credit. Payments are made by the lender to the borrower at
39 times and in amounts determined by the borrower or borrowers, as long as
40 the property remains principal residence, unless the loan becomes due
41 pursuant to paragraph (c) of this subdivision.
42 (l) Modified tenure. A tenure plan combined with a line of credit
43 feature.
44 (m) Modified term. A term plan combined with a line of credit feature.
45 (n) Full draw. All available funds are taken in a one-time single
46 payment.
47 (o) Partial draw. A portion of the available funds are taken in a
48 single payment.
49 (p) Principal residence. The dwelling where the borrower maintains a
50 permanent place of abode and typically spends a majority of calendar
51 year. The property shall be considered to be the principal residence of
52 any borrower who is temporarily or permanently in a health care institu-
53 tion as long as the property is the principal residence of at least one
54 other borrower who is not in a health care institution.
55 (q) Proprietary reverse mortgage. A non FHA insured loan.
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1 (r) Counselor. Shall be an individual who has met all testing and
2 education requirements of the department of housing and urban develop-
3 ment and is included in the HUD approved roster, as long as said roster
4 shall be maintained.
5 (s) Counseling protocol. Each counselor shall follow HUD's detailed
6 counseling protocol, as updated and amended from time to time. The coun-
7 seling protocol for all reverse mortgage loans, shall include among
8 other things a discussion of: client needs and circumstances; features
9 of a reverse mortgage loan; borrower responsibility under a reverse
10 mortgage loan; costs to obtain a reverse mortgage; financial and tax
11 implications; alternatives to a reverse mortgage loan; elder abuse
12 issues and warnings about potential reverse mortgage insurance fraud
13 schemes. As long as required by HUD, the certificate can be withheld if
14 the borrower is unable to answer five out of ten questions about reverse
15 mortgage basics, after an explanation of the concept has been stated by
16 the counselor. The counseling protocol can be delivered face to face or
17 over the phone, at the sole option of the borrower.
18 (t) Counseling certificate. The counselor shall issue a counseling
19 certificate upon the completion of the session by either hand delivery
20 or through the postal service. Among other things, the certificate shall
21 contain the original signature of the counselor; counselor's ID number,
22 and the length of time of the session.
23 2. A reverse mortgage loan pursuant to this section shall be subject
24 to the following:
25 (a) [the loan to value ratio shall be determined by the banking board;
26 and
27 (b) subject to] such rules or regulations as the banking board shall
28 adopt, any authorized lender or any successor or assign of such author-
29 ized lender which suspends, ceases or makes late payments to a [mortga-
30 gor] borrower under a reverse mortgage loan shall be subject to forfei-
31 ture (as liquidated damages to such [mortgagor] borrower and not as a
32 penalty) of twice the interest which would otherwise have been earned
33 during the period in which payments were suspended, ceased or made late,
34 provided that said authorized lender or any successor or assign of such
35 authorized lender shall have the right to make payments pursuant to said
36 loan agreement within fifteen days of each payment date, without penal-
37 ty; and
38 [(c)] (b) the outstanding balance may be prepaid [in full] by the
39 [mortgagor] borrower without penalty at any time [during the term and/or
40 tenure of the loan]; provided, however, if said outstanding balance is
41 paid in full, the loan will be deemed satisfied and no longer be in
42 effect; and
43 [(d)] (c) an authorized lender is prohibited from using or attaching
44 any property or asset of the [mortgagor] borrower except the real prop-
45 erty including a cooperative apartment securing the reverse mortgage
46 loan in settlement of a reverse mortgage obligation; and
47 [(e)] (d) the authorized lender must deliver to [an applicant] a
48 borrower such disclosures as may be required by the banking board which
49 shall describe the relevant portions of the reverse mortgage being
50 offered, and shall include but not be limited to the following items:
51 (i) [except for a tenure reverse mortgage loan, a schedule of payments
52 to and from the mortgagor and the total payments in dollars over the
53 term of the reverse mortgage loan for both the mortgagor and mortgagee
54 depending on the type of reverse mortgage loan being offered;
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1 (ii)] a statement prominently displayed advising [applicants] borrow-
2 ers to consult with appropriate authorities regarding tax and estate
3 planning consequences of a reverse mortgage;
4 [(iii)] (ii) where applicable a description of prepayment and refi-
5 nancing features;
6 [(iv)] (iii) the interest rate and[, except for a tenure reverse mort-
7 gage loan,] the total interest payable on the loan;
8 [(v)] (iv) a statement concerning the compliance of the lender with
9 the criteria established by the banking board that an authorized lender
10 must meet before it may make reverse mortgage loans pursuant to this
11 section; and
12 [(vi)] (v) a statement setting forth those events which would termi-
13 nate the reverse mortgage loan; and
14 [(f)] (e) in the event that an authorized lender or holder of the
15 reverse mortgage loan intends to initiate foreclosure proceedings the
16 [mortgagor] borrower shall have the right to designate a third party who
17 shall be notified. In the event that the mortgagor has not designated a
18 third party to receive such notice of foreclosure, then the authorized
19 lender or the holder of said reverse mortgage loan shall notify the
20 local or county office for the aging of its intent to commence foreclo-
21 sure proceedings. Such entity shall take appropriate action to protect
22 the interests of the [mortgagor] borrower; and
23 [(g)] (f) for all reverse mortgage loans an authorized lender must
24 deliver to the [applicant] borrower, upon application, if available, a
25 statement prepared by the local or county office for the aging on the
26 [advisability and] availability of independent counseling [and informa-
27 tion services]. Further, no reverse mortgage [commitment shall be issued
28 by an authorized lender] processing of this loan shall begin until the
29 [applicant presents, in writing, a statement that the terms of the
30 reverse mortgage loan have been explained by an attorney, a housing and
31 urban development certified counselor or any other counseling service as
32 indicated on the statement supplied by the county or local office for
33 the aging or a signed affidavit indicating that the applicant, although
34 made aware of the importance of counseling and its local availability
35 through the provision of such information by the authorized lender,
36 chooses not to utilize any of the aforementioned available services. The
37 form of such statement and affidavit shall be developed by the New York
38 state office for the aging] borrower provides to an authorized lender or
39 broker the original counseling certificate allowed under the Federal
40 Housing Administration (FHA) or other programs approved by the state
41 superintendent of banking in consultation with the state office for the
42 aging; and
43 [(h)] (g) any such reverse mortgage shall expressly and conspicuously
44 bear a legend identifying it as such; and
45 [(i)] (h) subject to such rules or regulations as the banking board
46 may adopt, a reverse mortgage loan shall be made at either a fixed or
47 variable rate of interest.
48 (i) the processing of a reverse mortgage shall include the ordering of
49 an appraisal, a title search and a credit report or an FHA case number,
50 when applicable. A reverse mortgage loan cannot be processed, nor shall
51 a borrower incur any processing expense until the borrower completes the
52 required counseling. The processing or a reverse mortgage loan may only
53 proceed once the counseling is complete, as evidenced by the signed and
54 dated counseling certificate.
55 3. A reverse mortgage loan pursuant to this section may:
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1 (a) provide that the [mortgagor's] borrower's closing costs, including
2 but not limited to loan or commitment fees, if any, insurance premiums,
3 house repairs, legal fees, [the cost of annuities,] the costs of third-
4 party counseling, the costs of existing mortgages or liens, and other
5 appropriate costs be included in the principal of the reverse mortgage
6 loan and disbursed out of the loan proceeds at closing;
7 (b) provide for the maintenance of an escrow account by the authorized
8 lender for purposes of payment of real property taxes, insurance on the
9 property securing the loan, or any other fees and expenses as may be
10 permitted by banking board regulation;
11 (c) provide that an authorized lender may, consistent with federal
12 laws and regulations, include a due-on-sale clause in its reverse mort-
13 gage loan agreement and at its option exercise and enforce such clause
14 in accordance with its terms.
15 (d) the borrower shall not be required by an authorized lender or
16 broker to purchase an insurance or annuity product as a requirement or
17 condition of eligibility except for title insurance, hazard insurance,
18 flood or other peril insurance or other such product that are customary
19 and normal to the transaction.
20 4. The banking board shall adopt those rules or regulations as it
21 considers appropriate to govern reverse mortgage loans made pursuant to
22 this section. No reverse mortgage loan shall be made unless it conforms
23 to the requirements of this section and such rules and regulations as
24 the banking board may adopt [except those reverse mortgage loans made
25 pursuant to section two hundred eighty-a of this article]. A reverse
26 mortgage loan made by any authorized lender, national banking associ-
27 ation, federal savings and loan association or federal credit union in
28 conformity with applicable federal laws and regulations specifically
29 regulating reverse mortgage loans shall be deemed to conform to the
30 requirements of this section unless such reverse mortgage loan fails to
31 conform to such rules and regulations as the banking board has expressly
32 declared to be neither preempted by, nor otherwise inconsistent with
33 such federal laws or regulations. Those rules or regulations shall
34 include, but are not limited to, the form and contents of any disclosure
35 statement, with the exception of the counseling statement prepared by
36 the New York state office for the aging pursuant to paragraph [(g)] (f)
37 of subdivision two of this section, that authorized lenders must provide
38 to [mortgagors] borrowers.
39 5. Notwithstanding any inconsistent provision of law, the priority of
40 the lien of a reverse mortgage, including the lien for all principal,
41 interest, fees, costs, shared appreciation and other charges assessed in
42 connection with the reverse mortgage, shall date from the recording of
43 the reverse mortgage irrespective of the date of any advance of reverse
44 mortgage loan proceeds or the date by which an authorized lender shall
45 be entitled to shared appreciation or accrued but unpaid interest, fees,
46 costs or other charges.
47 6. Nothing in this section shall be construed to limit, impair or
48 otherwise affect the priority under applicable law of any other mort-
49 gage, deed of trust, encumbrance or lien which was recorded or filed
50 prior to the effective date of this section.
51 7. The sale or transfer of the real property securing the reverse
52 mortgage loan [to a person other than an original mortgagor or mortga-
53 gors] shall result in the termination of the loan.
54 8. [In a term reverse mortgage loan, the real property securing the
55 reverse mortgage loan may be reappraised by an independent appraiser at
56 the end of the loan term. If the value of the real property has appre-
A. 6172 6
1 ciated, the term of the reverse mortgage may be extended or refinanced,
2 however, the total reverse mortgage loan amount may not exceed such
3 amount or ratio as may be determined by the banking board. The refinanc-
4 ing of the reverse mortgage loan shall be provided by the original
5 authorized lender or by any other authorized lender designated by the
6 mortgagee.
7 9. The principal, including any accrued but unpaid interest, of a
8 reverse mortgage loan agreement entered into pursuant to this section
9 may be insured by the mortgagor. If such insurance is purchased from or
10 otherwise provided by any agency of the state of New York the mortgagor
11 shall be granted the right, for a term reverse mortgage loan, to refi-
12 nance or extend the reverse mortgage loan at the end of the term,
13 subject to such rules or regulations as the banking board may adopt. The
14 authorized lender shall have the option to choose between refinancing or
15 extending the reverse mortgage loan. Subject to obtaining an adequate
16 increase in the insurance and subject to such rules and regulations as
17 the banking board may adopt, the total reverse mortgage loan amount
18 shall not exceed such amount or loan to value ratio as may be determined
19 by the banking board. The refinancing of the reverse mortgage loan shall
20 be provided by the original authorized lender or by any other authorized
21 lender designated by the mortgagee.
22 10. Any authorized lender offering reverse mortgage loans pursuant to
23 this section shall also offer reverse mortgage loans pursuant to section
24 two hundred eighty-a of this article. Subject to this section in the
25 event that an authorized lender makes reverse mortgage loans under this
26 section then that lender must make an equal number of reverse mortgage
27 loans pursuant to section two hundred eighty-a of this article. Such
28 loans shall be made to individuals who meet the requirements promulgated
29 in section two hundred eighty-a of this article provided that such indi-
30 vidual seeking the loan would otherwise qualify and be approved for that
31 loan. In the event that no or insufficient applications for reverse
32 mortgage loans pursuant to section two hundred eighty-a of this article
33 are made to a lender who has previously made reverse mortgage loans
34 pursuant to this section then there shall be no requirement for that
35 lender to make a reverse mortgage loan pursuant to section two hundred
36 eighty-a of this article. It shall also not be a requirement that an
37 authorized lender make any reverse mortgage loan to any individual who
38 would not qualify for such loan and/or would not otherwise be approved
39 for such loan.
40 11.] Nothing contained in this section, section six-h of the banking
41 law or any other provision of law shall be construed to prohibit a bank-
42 ing organization or licensed mortgage banker from providing reverse
43 mortgages to homeowners in this state under the federal housing adminis-
44 tration's home equity conversion mortgage insurance [demonstration]
45 program.
46 § 2. Section 280-a of the real property law is REPEALED.
47 § 3. Subdivision 1 of section 281 of the real property law, as amended
48 by chapter 613 of the laws of 1993, paragraph (a) as amended by chapter
49 183 of the laws of 1999, is amended to read as follows:
50 1. (a) For the purposes of this section, a "credit line mortgage"
51 shall mean any mortgage or deed of trust, other than a mortgage or deed
52 of trust made pursuant to a building loan contract as defined in subdi-
53 vision thirteen of section two of the lien law, which states that it
54 secures indebtedness under a note, credit agreement or other financing
55 agreement that reflects the fact that the parties reasonably contemplate
56 entering into a series of advances, payments and readvances, and that
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1 limits the aggregate amount at any time outstanding to a maximum amount
2 specified in such mortgage or deed of trust. For purposes of this
3 section, "credit line mortgage" shall include a reverse mortgage loan as
4 defined in [sections] section two hundred eighty [and two hundred eight-
5 y-a] of this article except that such a credit line mortgage of the
6 reverse mortgage loan type shall not be subject to the twenty year limi-
7 tation set forth in subdivision two of this section.
8 (b) Payments made by an authorized lender pursuant to any credit line
9 reverse mortgage made in accordance with section [two hundred eighty-a]
10 two hundred eighty of this article during any one year shall be limited
11 to such amount [or ratio] as may be determined by the banking board. [In
12 the event that a borrower does not take payment under such credit line
13 during the course of any year then that borrower shall have the ability
14 to increase the yearly payments by that amount available but not
15 borrowed during previous years.]
16 § 4. The opening paragraph of section 6-h of the banking law, as
17 amended by chapter 613 of the laws of 1993, is amended to read as
18 follows:
19 Notwithstanding any inconsistent provision of law, in addition to any
20 other power exercised by it, every authorized lender, as defined by
21 section two hundred eighty [or two hundred eighty-a] of the real proper-
22 ty law, shall have the power to offer reverse mortgage loans (1) which
23 conform to the provisions of section two hundred eighty [or two hundred
24 eighty-a] of the real property law and the rules and regulations promul-
25 gated by the banking board; or (2) which conform to the requirements of
26 the federal housing administration's home equity conversion mortgage
27 insurance [demonstration] program for as long as such program exists as
28 provided for in section 1715Z-20 of title 12 of the United States Code.
29 "Reverse mortgage" shall mean the mortgage, deed of trust or other secu-
30 rity instrument relating to a particular reverse mortgage loan trans-
31 action.
32 § 5. Paragraph (s) of subdivision 1 of section 14 of the banking law,
33 as amended by chapter 613 of the laws of 1993, is amended to read as
34 follows:
35 (s) To permit authorized lenders, as defined by section two hundred
36 eighty [or two hundred eighty-a] of the real property law, to offer
37 reverse mortgage loans which shall conform to the provisions of section
38 two hundred eighty [or two hundred eighty-a] of the real property law.
39 § 6. The opening paragraph of paragraph 1 of subsection (c) of section
40 6501 of the insurance law, as amended by chapter 555 of the laws of
41 2003, is amended to read as follows:
42 an amortized instrument of indebtedness evidencing a loan secured by a
43 first lien on real estate which at the time the loan is made is not less
44 than eighty percent but not more than one hundred three percent of the
45 fair market value of the real estate with any percentage in excess of
46 one hundred percent being used to finance the fees and closing costs on
47 such indebtedness, except, however, for reverse mortgage loans made
48 pursuant to [sections] section two hundred eighty [and two hundred
49 eighty-a] of the real property law; provided that:
50 § 7. Subdivision 16 of section 2426 of the public authorities law, as
51 added by chapter 613 of the laws of 1993, is amended to read as follows:
52 16. Reverse mortgage. A reverse mortgage loan pursuant to section two
53 hundred eighty [or two hundred eighty-a] of the real property law shall
54 mean a loan which is secured by a first mortgage on real property
55 improved by a one to four-family residence or condominium or cooperative
56 apartment that is the residence of the [mortgagor] borrower, the
A. 6172 8
1 proceeds of which are advanced to the mortgagor during the loan term in
2 equal installments, in advances through a line of credit or otherwise,
3 in lump sums, or through a combination thereof. A reverse mortgage may
4 be structured to provide for the addition of accrued but unpaid interest
5 to principal, and mortgage insurance premium in the amount of one and
6 one-quarter percent of the outstanding balance remaining or such other
7 amount as may be required by the Federal Department of Housing and Urban
8 Development. Such reverse mortgage loan may provide for an initial lump-
9 sum advance wherein the mortgagor may receive an amount necessary to pay
10 closing costs, including but not limited to loan or commitment fees, if
11 any, insurance premiums, the cost of house repairs, legal fees, [the
12 cost of annuities,] the costs of third party counseling, the amount
13 necessary to pay off existing mortgages or liens, and other appropriate
14 costs.
15 § 8. Paragraph (b) of subdivision 3-b of section 2428 of the public
16 authorities law, as added by chapter 613 of the laws of 1993, is amended
17 to read as follows:
18 (b) the reverse mortgage loan is issued pursuant to section two
19 hundred eighty [or two hundred eighty-a] of the real property law;
20 § 9. Subdivision 2 of section 252-a of the tax law, as amended by
21 chapter 613 of the laws of 1993, is amended to read as follows:
22 2. Reverse mortgages conforming to the provisions of section two
23 hundred eighty [or two hundred eighty-a] of the real property law secur-
24 ing obligations of mortgagors or exempted therefrom pursuant to subdivi-
25 sion four of section two hundred eighty [or subdivision four of section
26 two hundred eighty-a] of the real property law shall be exempt from any
27 tax or fee imposed by this article. In each case where an exemption is
28 claimed under this subdivision, the lender shall provide documentation
29 in a format approved by the commissioner [of taxation and finance] to
30 enable recording officers to affirmatively determine when a mortgage
31 being presented for recording is a reverse mortgage conforming to such
32 provisions of the real property law and entitled to an exemption under
33 this subdivision. Where such documentation is not furnished, the maximum
34 principal debt or obligation which shall be the measure of the tax
35 imposed by and pursuant to the authority of this article in the case of
36 a reverse mortgage shall be the proceeds of the loan which the author-
37 ized lender is obligated to lend the borrower at the execution of such
38 mortgage or at any time thereafter but determined without regard to any
39 contingency relating to the addition of any unpaid interest to principal
40 or relating to any percentage of the future appreciation of the property
41 securing the loan as consideration or additional consideration for the
42 making of the loan. Provided, however, if subsequent to the recording of
43 such mortgage, the proceeds which the authorized lender is obligated to
44 lend the borrower are increased at any time, such new or further indebt-
45 edness or obligation shall be the measure of the tax at such time unless
46 at that time an exemption is applicable under the first sentence of this
47 subdivision or otherwise.
48 § 10. Section 131-x of the social services law, as amended by section
49 73 of part B of chapter 436 of the laws of 1997, is amended to read as
50 follows:
51 § 131-x. Reverse mortgage loans. Notwithstanding any other incon-
52 sistent provisions of law and to the extent permissible under federal
53 law, regulation or waiver, the proceeds of a reverse mortgage loan made
54 in conformity with the requirements of section two hundred eighty [or
55 two hundred eighty-a] of the real property law or exempted therefrom
56 pursuant to subdivision four of section two hundred eighty [or subdivi-
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1 sion four of section two hundred eighty-a] of the real property law
2 shall not be considered as income or resources of the mortgagor for any
3 purpose under any law relating to food stamps, public assistance, veter-
4 an assistance, safety net assistance, low-income home energy assistance,
5 federal supplemental security income benefits and/or additional state
6 payments, medical assistance, any prescription drug plan or other
7 payments, allowances, benefits or services available pursuant to this
8 chapter; provided, however, that for applicants or for recipients of
9 safety net assistance, any such reverse mortgage loan proceeds shall be
10 disregarded as income and/or resources only in the event that, and for
11 so long as, federal laws and regulations exempt loan proceeds in the
12 determination of eligibility for both the aid to families with dependent
13 children and supplemental security income programs.
14 § 11. This act shall take effect immediately.
