senate Bill S1743

2011-2012 Legislative Session

Provides for reverse mortgage loans on co-op apartments

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Archive: Last Bill Status - In Committee


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jan 04, 2012 referred to aging
Jan 12, 2011 referred to aging

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S1743 - Bill Details

Current Committee:
Senate Aging
Law Section:
Real Property Law
Laws Affected:
Amd ยงยง280 & 280-a, RP L
Versions Introduced in 2009-2010 Legislative Session:
S2035

S1743 - Bill Texts

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Provides for reverse mortgage loans on co-op apartments.

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BILL NUMBER:S1743

TITLE OF BILL:
An act
to amend the real property law,
in relation to reverse mortgage loans

PURPOSE OR GENERAL IDEA OF BILL:
To increase the minimum age allowed
for reverse mortgage loans from age sixty to age sixty-two, permit a
reverse mortgage on a cooperative apartment and delete term reverse
mortgage loans.

SUMMARY OF SPECIFIC PROVISIONS:
This bill will amend
the Real Property
Law to increase the minimum age allowed for reverse mortgage loans
from age sixty to age sixty-two, permit a reverse mortgage on a
cooperative apartment and delete term reverse mortgage loans.

JUSTIFICATION:
Since the FHA reverse mortgage program and the reverse
mortgage industry have evolved since the original bill was drafted in
the early 1980s and amended in 1994, a number of aspects of the
original and amended statute no longer apply, have become outdated
and have caused inconsistent interpretations by the New York Title
Insurance industry and by the Department of Taxation and Finance. The
changes reflect realistic practices that exist in New York and across
the country. The bill will reduce the costs to seniors that wish to
obtain a reverse mortgage. It will no longer discriminate against the
many seniors that live in cooperative apartments, as it permits such
seniors to obtain a reverse mortgage

PRIOR LEGISLATIVE HISTORY:
S.4061A 2007-08 -- Referred to Aging.
S.2035 2009-10 -- Referred to Aging, Advanced to Third Reading

FISCAL IMPLICATIONS:
Minimal.

EFFECTIVE DATE:
This act shall take effect immediately.

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                    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

S. 1743                             3

  [(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.

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