NY State Senate Bill 2017-S4452

Senate Bill S4452

2017-2018 Legislative Session

Requires lenders foreclosing upon home equity conversion reverse mortgages to provide notice to the department of financial services and the mortgagors

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Archive: Last Bill Status - In Senate Committee Judiciary Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Actions

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 03, 2018	referred to judiciary
Feb 15, 2017	referred to judiciary

co-Sponsors

2017-S4452 (ACTIVE) - Details

See Assembly Version of this Bill:: A5821
Current Committee:: Senate Judiciary
Law Section:: Real Property Law
Laws Affected:: Add §280-d, RP L
Versions Introduced in 2019-2020 Legislative Session:: A5627

2017-S4452 (ACTIVE) - Summary

Requires an authorized lender which seeks to foreclose upon a reverse mortgage issued under the federal home equity conversion mortgage program to provide notice thereof to the department of financial services and to the mortgagor; directs such department to provide notice to the mortgagor of legal service organizations which may assist them with the default or foreclosure; prohibits authorized lenders from making advance payment of debts upon the mortgaged real property.

2017-S4452 (ACTIVE) - Sponsor Memo

                                 BILL NUMBER:  S4452

 TITLE OF BILL :  An act to amend the real property law, in relation
to the regulation of default and foreclosure of reverse mortgages
issued under the federal home equity conversion mortgage for seniors
program

 PURPOSE :

This bill will regulate certain activities of lenders when defaults
take place on reverse mortgages issued in New York State under HUD's
home equity conversion mortgage for seniors program.

 SUMMARY OF PROVISIONS :

Section 1: Lenders must now notify the Department of Financial
Services when engaging in foreclosure proceedings against a borrower,
and must also provide proof to the department that HUD has granted
prior approval to accelerate the loan, proof of the default and notice
to the borrower, and any other information required by the department.
The Department of Financial Services must then provide notice of the
foreclosure directly to the borrower, and must also provide
information regarding the borrower's rights and legal service
organizations available to assist the borrower during the foreclosure
process.

Lenders will also be required to engage in loss mitigation, as
specified by the Department of Financial Services, before foreclosing.

This section also prevents lenders from making advance payments on
mortgage insurance or tax liabilities. Lenders will only be entitled
to pay those moneys which are currently in arrears.

The new requirements will be conditions precedent to bringing a
foreclosure action against an HUD reverse mortgage. The provisions
will be enforceable by providing treble damages and attorney's fees to
prevailing plaintiffs.

Section 2: The act will take effect one hundred and twenty days after
it becomes law, but the Department of Financial Services is authorized
to immediately take any actions necessary to ensure the law's
implementation.

 EXISTING LAW :

Under current law, lenders are not required to notify DFS, and DFS is
not required to inform seniors of services available to help them in
the event of a default. Lenders are also currently allowed to make
advance payments on obligations associated with these reverse
mortgages.

 JUSTIFICATION :

Reverse mortgages are complicated and expensive financial products.
Many seniors do not understand how they work or what their true
long-term costs are. Exacerbating this problem are unscrupulous
lenders who market reverse mortgages as public services or
government-sponsored products. Inadequate regulation of this industry
resulted in a sharp uptick in defaults in 2016, as more seniors fell
into foreclosure on these products, losing not only their homes, but
also their most significant financial assets.

Foreclosures in the reverse mortgage industry have taken place against
seniors for making payments mere cents short of their tax, homeowners
insurance, or mortgage insurance bills. Lenders eager to tap the
equity in these homes are sometimes aggressive to foreclose and see a
return on their investment. Seniors can be better protected by
providing for stricter regulation of the foreclosure process.

Currently, lenders are not required to notify the Department of
Financial Services in the event of a default, and DFS does not
regularly provide information to seniors in reverse mortgage default
scenarios that can help seniors to keep their homes. This bill will
change that by requiring a notification to DFS, and by requiring DFS
to help seniors get in touch with a legal services organization to
help them manage the process.

Lenders sometimes also make large advance payments on obligations tied
to reverse mortgages in the event of a default. Then, to resolve the
default, lenders will demand that the advance payments be paid back,
resulting in massive financial liabilities to seniors that they may
not have the cash on hand to satisfy in order to become current on
their mortgage payments and cure a default. This new section would
allow lenders to make payments only on obligations that are currently
in arrears.

 LEGISLATIVE HISTORY :

This is a new bill.

 FISCAL IMPLICATIONS :

To be determined.

 LOCAL FISCAL IMPLICATIONS :

None.

2017-S4452 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   4452
 
                        2017-2018 Regular Sessions
 
                             I N  S E N A T E
 
                             February 15, 2017
                                ___________
 
 Introduced  by  Sen.  KLEIN  -- read twice and ordered printed, and when
   printed to be committed to the Committee on Judiciary
 
 AN ACT to amend the real property law, in relation to the regulation  of
   default  and foreclosure of reverse mortgages issued under the federal
   home equity conversion mortgage for seniors program

   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  The  real property law is amended by adding a new section
 280-d to read as follows:
   § 280-D. FEDERAL HOME EQUITY CONVERSION MORTGAGE DEFAULT AND  FORECLO-
 SURE  REGULATION.  1.  FOR  THE  PURPOSES OF THIS SECTION, THE FOLLOWING
 TERMS SHALL HAVE THE FOLLOWING MEANINGS:
   (A) REVERSE MORTGAGE LOAN. A  REVERSE  MORTGAGE  LOAN  AS  DEFINED  IN
 SECTION  TWO  HUNDRED  EIGHTY  OF  THIS ARTICLE, WHICH IS ISSUED IN THIS
 STATE PURSUANT TO  THE  HOME  EQUITY  CONVERSION  MORTGAGE  FOR  SENIORS
 PROGRAM OPERATED BY THE FEDERAL DEPARTMENT OF HOUSING AND URBAN DEVELOP-
 MENT.
   (B)  AUTHORIZED LENDER. AN AUTHORIZED LENDER AS DEFINED IN SECTION TWO
 HUNDRED EIGHTY OF THIS  ARTICLE  AUTHORIZED  TO  MAKE  REVERSE  MORTGAGE
 LOANS, AS DEFINED IN THIS SECTION.
   (C)  DEPARTMENT.  THE  DEPARTMENT  OF  FINANCIAL  SERVICES ESTABLISHED
 PURSUANT TO SECTION ONE HUNDRED TWO OF THE FINANCIAL SERVICES LAW.
   2. IN THE EVENT OF A DEFAULT OR FORECLOSURE UPON  A  REVERSE  MORTGAGE
 LOAN,  THE  AUTHORIZED  LENDER, UPON THE COMMENCEMENT OF THE FORECLOSURE
 PROCEEDING, SHALL TRANSMIT TO THE  DEPARTMENT  PROOF  THAT  THE  FEDERAL
 DEPARTMENT  OF  HOUSING AND URBAN DEVELOPMENT HAS GRANTED PRIOR APPROVAL
 TO ACCELERATE THE LOAN, PROOF OF THE DEFAULT NOTICE TO THE MORTGAGOR AND
 ANY SUCH INFORMATION RELATING TO THE LOANS  AND  THE  MORTGAGOR  AS  THE
 DEPARTMENT  SHALL DETERMINE TO BE NECESSARY. UPON RECEIPT OF SUCH INFOR-
 MATION, THE DEPARTMENT SHALL PROVIDE NOTICE OF AND INFORMATION  RELATING
 TO  THE FORECLOSURE TO THE MORTGAGOR. SUCH NOTICE SHALL INCLUDE A NOTICE
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.

                                                            LBD07842-03-7

 S. 4452                             2
 
 OF THE MORTGAGOR'S RIGHTS IN THE FORECLOSURE PROCESS AND CONTACT  INFOR-
 MATION  FOR  LEGAL SERVICE ORGANIZATIONS WHICH MAY BE ABLE TO ASSIST THE
 MORTGAGOR WITH THE MORTGAGE DEFAULT AND/OR FORECLOSURE.
   3.  NO  REVERSE MORTGAGE LOAN COMMITMENT SHALL BE ISSUED BY AN AUTHOR-
 IZED LENDER UNLESS SUCH COMMITMENT PROVIDES IN WRITING NOTICE  THAT  THE
 DEPARTMENT  WILL  BE  PROVIDED NOTICE OF ANY DEFAULT OR FORECLOSURE UPON
 THE LOAN SO AS TO PROVIDE ASSISTANCE TO THE MORTGAGOR.
   4. NO AUTHORIZED LENDER SHALL MAKE AN ADVANCE PAYMENT  FOR  ANY  OBLI-
 GATION ARISING FROM MORTGAGED REAL PROPERTY. FURTHERMORE, IN THE EVENT A
 MORTGAGOR DEFAULTS UPON THE PAYMENT OF MORTGAGE INSURANCE PREMIUM, HOME-
 OWNERS  INSURANCE  PREMIUM OR REAL PROPERTY TAX RELATED TO THE MORTGAGED
 PROPERTY, THE AUTHORIZED LENDER MAY ONLY PAY THOSE PREMIUMS AND/OR TAXES
 WHICH ARE IN ARREARS.
   5.  THE DEPARTMENT SHALL ISSUE REGULATIONS WHICH SHALL REQUIRE MORTGA-
 GEES TO ENGAGE IN MANDATORY LOSS MITIGATION PROCEDURES TO  BE  SPECIFIED
 BY  THE  DEPARTMENT.  THESE LOSS MITIGATION PROCEDURES SHALL COMPLY WITH
 ANY RESTRICTIONS ON LOSS MITIGATION ISSUED BY THE FEDERAL DEPARTMENT  OF
 HOUSING AND URBAN DEVELOPMENT FOR REVERSE MORTGAGES AND SHALL BE UPDATED
 WHEN  NECESSARY  TO ENSURE COMPLIANCE WITH FEDERAL RULES.  THE MORTGAGEE
 SHALL PROVIDE INFORMATION TO THE DEPARTMENT ABOUT LOANS  RECEIVING  SUCH
 LOSS  MITIGATION ASSISTANCE.  THIS INCLUDES MAINTAINING LOAN LEVEL, LOSS
 MITIGATION DATA AND PROVIDING THE DEPARTMENT WITH THE FOLLOWING INFORMA-
 TION FOR LOANS ASSOCIATED WITH A REPAYMENT PLAN:
   (A) MONTHLY SURPLUS INCOME;
   (B) TERM OF REPAYMENT PLAN;
   (C) AMOUNT OF MONTHLY REPAYMENT PLAN PAYMENT;
   (D) DUE DATE OF NEXT MONTHLY PAYMENT;
   (E) WHEN A MORTGAGOR EXPERIENCES A HARDSHIP; AND
   (F) REASON FOR HARDSHIP.
   6. ANY PERSON WHO HAS BEEN INJURED BY REASON OF ANY VIOLATION OF  THIS
 SECTION MAY BRING AN ACTION IN HIS OR HER OWN NAME TO RECOVER TREBLE HIS
 OR HER ACTUAL DAMAGES, PLUS THE PREVAILING PLAINTIFF'S REASONABLE ATTOR-
 NEY'S FEES.
   7.  THE  REQUIREMENTS OF THIS SECTION SHALL BE CONDITIONS PRECEDENT TO
 COMMENCING AN ACTION TO FORECLOSE UPON A HOME EQUITY CONVERSION MORTGAGE
 WHICH IS SUBJECT TO THE PROVISIONS  OF  THIS  SECTION,  AND  FAILURE  TO
 COMPLY THEREWITH SHALL BE A COMPLETE DEFENSE TO A FORECLOSURE ACTION.
   § 2. This act shall take effect on the one hundred twentieth day after
 it shall have become a law; provided, however, that effective immediate-
 ly,  any  actions  necessary  for  the implementation of this act on its
 effective date are authorized and directed to be completed on or  before
 such date.

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Senate Bill S4452

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Sponsored By

Jeffrey D. Klein