S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   7724
 
                             I N  S E N A T E
 
                              January 7, 2022
                                ___________
 
 Introduced  by  Sen.  BIAGGI -- read twice and ordered printed, and when
   printed to be committed to the Committee on Rules
 
 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:
 
   Section  1.  Subdivision 2 of section 6-o of the banking law, as added
 by a chapter of the laws of 2021 amending the banking law,  the  uniform
 commercial code and the civil practice law and rules relating to reverse
 cooperative  apartment  unit  loans,  as  proposed  in legislative bills
 numbers A. 1508 and S. 760, is amended to read as follows:
   2. A cooperative apartment unit loan pursuant to this section shall be
 subject to the following:
   (a) the borrower shall be granted lifetime possession of  the  subject
 premises  of the cooperative apartment unit FOR which [is] the SHARES OR
 MEMBERSHIP ARE THE security for the reverse cooperative  apartment  unit
 loan,  as  long  as  such  apartment unit remains the borrowers' primary
 residence and the borrower is not in default under the  reverse  cooper-
 ative  apartment unit loan. The borrower or borrowers must certify annu-
 ally on each anniversary of the loan, that they reside in the  unit  and
 that it is their primary residence;
   (b) [the lender shall ask the borrower if they designate a third party
 contact,  collect  such  information  from  the borrower and update such
 information annually on each anniversary of the loan] ANNUALLY THE LEND-
 ER SHALL ADVISE THE BORROWER OR BORROWERS OF THE NAME AND CONTACT INFOR-
 MATION, IF ANY, ON FILE FOR A THIRD-PARTY CONTACT DESIGNATED PURSUANT TO
 PARAGRAPH (G) OF SUBDIVISION ONE OF THIS SECTION AND ASK IF THE BORROWER
 OR BORROWERS WANT TO UPDATE OR CHANGE THE INFORMATION FOR THE THIRD-PAR-
 TY CONTRACT;
   (c) subject to such rules or regulations  as  the  superintendent  may
 adopt, a reverse cooperative apartment unit loan shall be made at either
 a fixed or variable rate of interest;
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD02964-02-2
              

 S. 7724                             2
 
   (d)  subject  to  such  rules or regulations as the superintendent may
 adopt, the authorized lender may require a borrower to establish  a  set
 aside  account for the purposes of paying property taxes, maintenance or
 cooperative fees, insurance  premiums  of  the  [property  securing  the
 reverse  cooperative apartment unit loan] COOPERATIVE APARTMENT UNIT, or
 for the payment of any other fees and expenses;
   (e) a lender who fails to make loan advances as required in  the  loan
 documents, and fails to cure an actual default after notice as specified
 in  the  loan  documents, shall forfeit any right to collect interest or
 service charges under the contract. The  lender's right to  recovery  at
 loan  maturity  shall  be  limited to the outstanding  balance as of the
 date of lender's default, minus all interest.  However, a  lender  shall
 not be required to make loan advances under a loan if the borrower is in
 default under  the loan;
   (f)  the  outstanding  balance  may be prepaid in full by the borrower
 without penalty at any time during  the  reverse  cooperative  apartment
 unit loan term;
   (g)  an  authorized  lender  is prohibited from using or attaching any
 property or asset of the borrower or heirs of the  borrower  except  the
 SHARES OR MEMBERSHIP REPRESENTING AN OWNERSHIP INTEREST IN THE apartment
 unit  securing the reverse cooperative apartment unit loan in settlement
 of a reverse loan obligation--the loan is a non-recourse loan;
   (h) an authorized lender shall deliver to the applicant upon  applica-
 tion,  a statement [prepared] THAT COMPLIES WITH THE REQUIREMENTS ESTAB-
 LISHED by the department providing the contact information for New  York
 approved,  or U.S. Department of Housing and Urban Development approved,
 reverse mortgage housing counselors with  cooperative  housing  training
 [approved  by  the  department] whom the cooperative apartment owner can
 call for independent counseling and information  services.  Further,  no
 reverse  loan  commitment shall be issued by the authorized lender until
 the applicant presents, in writing, a form that certifies the  terms  of
 the  reverse cooperative apartment unit loan have been explained to them
 by a New York or  U.S.  Department  of  Housing  and  Urban  Development
 approved  reverse  mortgage  housing  counselor with cooperative housing
 training [approved by the department. The form  of  such  statement  and
 affidavit  and cooperative housing counseling services shall be approved
 by the superintendent];
   (i) an authorized lender shall deliver to an  applicant  such  disclo-
 sures  as may be required by the superintendent which shall describe the
 relevant portions of the reverse loan being offered, and  shall  include
 but not be limited to the following items:
   (i)  a  schedule  of  payments  to and from the borrower and the total
 payments in dollars over the life expectancy of the youngest borrower of
 the reverse cooperative apartment unit loan for the borrower;
   (ii) a statement prominently displayed advising applicants to  consult
 with  appropriate  authorities  regarding tax and estate planning conse-
 quences of a reverse cooperative apartment unit loan;
   (iii) where applicable a description  of  prepayment  and  refinancing
 features;
   (iv)  to  the  extent determinable at or prior to the inception of the
 reverse cooperative apartment unit loan, the interest rate and, an esti-
 mate of the total interest payable on the reverse cooperative  apartment
 unit loan;
   (v)  a  statement  concerning  the  compliance  of the lender with the
 criteria established by the superintendent  that  an  authorized  lender
 S. 7724                             3
 
 must  meet  before  it may make reverse cooperative apartment unit loans
 pursuant to this section;
   (vi) a statement setting forth those events which would cause the loan
 to become due and payable (or cause the borrower to default) the reverse
 cooperative apartment unit loan;
   (vii)  the  loan  is subject to a three day right of rescission by the
 borrower; and
   (viii) a financial statement setting forth an estimate  of  all  costs
 associated with the loan;
   (j) an authorized lender shall deliver to each borrower at the time of
 closing  of a reverse cooperative unit loan two copies of the borrower's
 right to cancel and  instructions  for  how  to  cancel  the  loan  THAT
 COMPLIES WITH THE REQUIREMENTS to be prescribed by the superintendent;
   (k) a reverse cooperative apartment unit loan pursuant to this section
 shall  expressly  and conspicuously bear a legend identifying it as such
 in at least fourteen-point font;
   (l) a reverse cooperative apartment unit loan shall clearly set  forth
 the terms for when the loan becomes due and payable, including:
   (i)  regardless of loan payout option chosen by the borrower, the loan
 note shall state that the outstanding loan balance will not be  due  and
 payable  in  full until the last borrower dies, or if a borrower conveys
 all of his or her title in the property and no  other  borrower  retains
 title to the property; and
   (ii) the loan note shall state that the outstanding loan balance shall
 be due and payable in full if any of the following occur:
   (1) the [property] COOPERATIVE APARTMENT UNIT ceases to be the primary
 residence  of a borrower for reasons other than death and the [property]
 COOPERATIVE APARTMENT UNIT is not the primary residence of at least  one
 other borrower;
   (2)  for a period of longer than twelve consecutive months, a borrower
 fails to occupy the [property] COOPERATIVE  APARTMENT  UNIT  because  of
 physical or mental illness and the [property] COOPERATIVE APARTMENT UNIT
 is not the primary residence of at least one other borrower; or
   (3) an obligation of the borrower under the loan note is not met;
   (m)  [in  the event that an authorized lender or holder of the reverse
 cooperative apartment unit loan determines the loan is  in  default  and
 intends  to  initiate proceedings pursuant to the note, the lender shall
 notify the borrower's third-party contact] WITHIN THIRTY  BUSINESS  DAYS
 OF  LEARNING  OF  THE OCCURRENCE OF ANY EVENT LISTED IN PARAGRAPH (L) OF
 THIS SUBDIVISION, THE MORTGAGEE SHALL NOTIFY  THE  MORTGAGOR  AND  THEIR
 AUTHORIZED DESIGNEE, IN WRITING, OF SUCH OCCURRENCE, ALONG WITH INFORMA-
 TION  ON THE RIGHT TO CURE. THE MORTGAGEE SHALL THEN ALLOW THE MORTGAGOR
 FORTY-FIVE CALENDAR DAYS TO CURE.  A  MORTGAGEE  MAY  ONLY  TERMINATE  A
 REVERSE  MORTGAGE  LOAN  IF  THE MORTGAGOR FAILS TO CURE ANY TERMINATION
 EVENT WITHIN SUCH FORTY-FIVE CALENDAR DAY PERIOD. In the event that  the
 borrower has not designated a third-party contact to receive such notice
 of foreclosure, then the authorized lender or the holder of said reverse
 cooperative  apartment unit 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
 borrower;
   (n) a reverse cooperative apartment unit loan secured by SHARES  OR  A
 MEMBERSHIP REPRESENTING AN OWNERSHIP INTEREST IN a unit in a cooperative
 housing  corporation  shall also be subject to the prior approval by the
 cooperative's board of directors; and
 S. 7724                             4
 
   (o) no reverse cooperative apartment unit loan  shall  be  subject  to
 mandatory binding arbitration.
   § 2. Paragraph (a) of subdivision 6 of section 6-o of the banking law,
 as  added by a chapter of the laws of 2021 amending the banking law, the
 uniform commercial code and the civil practice law and rules relating to
 reverse cooperative apartment unit loans,  as  proposed  in  legislative
 bills numbers A. 1508 and S. 760, is amended to read as follows:
   (a)  Every authorized lender and assignee must obtain a surety bond in
 the amount of one hundred thousand dollars for  the  benefit  of  claims
 against  the lender/assignee for failure to perform their obligations to
 the borrower. The superintendent will hold the surety bond. In addition,
 a lender or assignee shall maintain an  irrevocable  standby  letter  of
 credit  from  a  financial institution approved by the superintendent in
 favor of the lender or assignee in  an  amount  necessary  to  fund  all
 reverse  mortgage  loan  requirements  anticipated  over the next twelve
 months for loans then on the lender's books and  those  expected  to  be
 made  over the next twelve months or three million dollars, whichever is
 greater. The initial term of the letter of credit shall be at least  two
 years. A lender or assignee also shall maintain a minimum capital of ten
 million  dollars.  A lender may rely upon its parent company to meet the
 minimum capital requirements. [The requirements for a letter  of  credit
 shall  not  apply  to  loans  that are fully funded at consummation. The
 minimum capital requirements shall not apply  to  lenders  or  assignees
 that  sell  loans in the secondary market to a financially viable finan-
 cial institution, and the superintendent shall define  the  requirements
 of what constitutes a "financially viable financial institution prior to
 any secondary market sale".]
   § 3. Paragraph (b) of subdivision 7 of section 6-o of the banking law,
 as  added by a chapter of the laws of 2021 amending the banking law, the
 uniform commercial code and the civil practice law and rules relating to
 reverse cooperative apartment unit loans,  as  proposed  in  legislative
 bills numbers A. 1508 and S. 760, is amended to read as follows:
   (b)  by telephone and first class mail, inform and provide notice to a
 borrower when his or her home equity line of credit or  life  expectancy
 set  aside  is  depleted  to twenty percent [or less of its value]. Such
 notice shall inform the borrower of his or her obligations  relating  to
 [such  real  property] THE COOPERATIVE APARTMENT UNIT including, but not
 limited to, mortgage insurance, homeowners insurance and  real  property
 taxes  previously  paid  by  such  line of credit or life expectancy set
 aside, and that such obligations must continue to be paid when the  home
 equity  line  of  credit  or life expectancy set aside is depleted. Such
 notice shall use plain language, written in a clear and coherent  manner
 using  words  with  common and every day meanings, appropriately divided
 and captioned by its various sections. If the lender  or  its  agent  is
 unable  to contact the borrower by telephone, notice must be sent to the
 third-party contact if authorized by the borrower.
   § 4. Subdivision 11 of section 6-o of the banking law, as added  by  a
 chapter  of  the  laws  of  2021  amending  the banking law, the uniform
 commercial code and the civil practice law and rules relating to reverse
 cooperative apartment unit  loans,  as  proposed  in  legislative  bills
 numbers A. 1508 and S. 760, is amended to read as follows:
   11.  The sale or transfer of the interest in the cooperative apartment
 unit [securing the reverse cooperative apartment unit loan] to a  person
 other  than an original borrower or borrowers shall result in the termi-
 nation of the reverse loan.
 S. 7724                             5
 
   § 5. Paragraph 1-a of subsection (f) of section 9-611 of  the  uniform
 commercial  code, as added by a chapter of the laws of 2021 amending the
 banking law, the uniform commercial code and the civil practice law  and
 rules  relating to reverse cooperative apartment unit loans, as proposed
 in  legislative  bills numbers A. 1508 and S. 760, is amended to read as
 follows:
   (1-a) Notwithstanding any other provision of law,  with  regard  to  a
 reverse cooperative apartment unit loan, at least forty-five days before
 a  secured  party,  as  defined under Section 9-102(a)(73), or its agent
 takes any steps to dispose of its collateral, as provided for in Section
 9-610, the secured party or its agent shall give notice to the borrower,
 and separate notice to the borrower's designated third-party if one  has
 been  designated  in at least fourteen-point type except for the heading
 which shall be in at least sixteen-point type. The notice shall  include
 the following:
      YOU COULD LOSE YOUR COOPERATIVE APARTMENT UNIT TO FORECLOSURE.
                PLEASE READ THE FOLLOWING NOTICE CAREFULLY.
 Date
 Borrower's address
 Loan Number:
 Property Address:
 Dear Borrower(s) {or heirs of Debtor?}:
 As  of  ___________,  your reverse cooperative apartment unit loan is in
 default. Under New York State Law, we are  required  to  send  you  this
 notice to inform you that you may be at risk of losing your home.
 Your  reverse  loan is in default because you have not complied with the
 following conditions of your loan:
 _____ You are not occupying your  cooperative  apartment  unit  as  your
 primary residence
 _____ You did not submit the required annual certificate of occupancy
 _____ The named borrower on the reverse loan has died
 _____ You did not pay maintenance on your unit to the cooperative corpo-
 ration,  and  {servicer}  paid your maintenance for you on the following
 date(s)  in  the  following   amount(s):________________________________
 ____________________________________
 _____ You did not make required repairs to your unit
 If  the claim is based on your failure to pay maintenance to the cooper-
 ative corporation, you can cure this default by making  the  payment  of
 $____________  for  the  advances we made towards these payments on your
 behalf.
 You have the right to dispute the claims listed above by contacting  us,
 by  calling  ___________ or sending a letter to __________________. This
 may include proof of payments made for water  and  sewer  charges  or  a
 current declaration page from your insurance company, or any other proof
 to dispute the servicer's claim.
 OPTIONS  MAY  BE  AVAILABLE  FOR YOU TO CURE YOUR DEFAULT. SOME OF THESE
 OPTIONS ARE LISTED BELOW.  YOU  MAY  CONTACT  {SERVICER}  AT  {TOLL-FREE
 NUMBER} TO DISCUSS YOUR OPTIONS.
 If  you  are  in default for failure to pay maintenance, you may qualify
 for a re-payment plan to cure the default balance owed.
 Attached to this notice is a list of New  York  approved  housing  coun-
 seling agencies and legal services in your area which provide free coun-
 seling.   A   statewide   listing   by   county  is  also  available  at
 [http://www.dfs.ny.gov/consumer/mortg nys  np  counseling  agencies.htm]
 HTTPS://WWW.DFS.NY.GOV/CONSUMERS/HELP_FOR_HOMEOWNERS/NEW_YORK_STATE_NON-
 S. 7724                             6
 
 PROFIT_HOUSING_COUNSELING_AGENCIES. You may also call your local Depart-
 ment of Aging for a referral or call 311 if you live in New York City.
 Qualified  free help is available; watch out for companies or people who
 charge a fee for these services.
 You may also contact  {SERVICER}  directly  at  __________  and  ask  to
 discuss  all  possible  options  to  allow  you to cure your default and
 prevent the foreclosure of your home. While  we  cannot  ensure  that  a
 resolution  is possible, we encourage you to take immediate steps to try
 to achieve a resolution.  The longer you wait, the fewer options you may
 have.
 If you have not taken any actions to resolve this matter  within  ninety
 days  from  the  date  this notice was mailed, we will have the right to
 take your cooperative shares from you.
 If you need further information, please call the New York State  Depart-
 ment  of Financial Services' toll-free helpline at 877-226-5697 or visit
 the Department's website at http://www.dfs.ny.gov.
 IMPORTANT: You have the right to remain in your unit until you receive a
 court order telling you to leave the property. If a  foreclosure  action
 is filed against you in court, you still have the right to remain in the
 unit  until a court orders you to leave. You legally remain the owner of
 your cooperative shares and are  responsible  for  the  unit  until  the
 shares  are  transferred  to  a new owner through a sale. However, there
 will be no court proceeding before the shares are transferred to  a  new
 owner. After the shares are transferred, the new owner may begin a court
 proceeding to evict you from the unit.
 This notice is not an eviction notice.
   § 6. Subdivision (a) of rule 3410 of the civil practice law and rules,
 as  added by a chapter of the laws of 2021 amending the banking law, the
 uniform commercial code and the civil practice law and rules relating to
 reverse cooperative apartment unit loans,  as  proposed  in  legislative
 bills numbers A. 1508 and S. 760, is amended to read as follows:
   (a) For purposes of this rule, default shall only include a borrower's
 breach  of  an  obligation  under  the reverse mortgage cooperative loan
 agreement, and shall not  include  death  of  the  borrower,  EXCEPT  AS
 DETAILED  IN  PARAGRAPH  ONE  OF  SUBDIVISION  (I)  OF THIS RULE, or the
 borrower's permanent vacating of the cooperative unit.
   § 7.  The opening paragraph of subdivision (b) of  rule  3410  of  the
 civil  practice law and rules, as added by a chapter of the laws of 2021
 amending the banking law, the uniform  commercial  code  and  the  civil
 practice  law  and  rules relating to reverse cooperative apartment unit
 loans, as proposed in legislative bills numbers A. 1508 and S.  760,  is
 amended to read as follows:
   In  any  action  [recovery]  involving  a  borrower's  default under a
 reverse cooperative apartment unit loan, as defined in paragraph (a)  of
 subdivision  one  of  section six-o of the banking law, the lender shall
 file a petition with the supreme court of the county in which the  coop-
 erative apartment is located stating that the loan is in default and the
 reason  for  the  default.  The  petition must be served on the borrower
 pursuant to section three hundred eight of this chapter. Within ten days
 of the date of service of the notice to  the  borrower,  the  petitioner
 must  file  a  specialized  request  for  judicial intervention with the
 clerk. Within sixty days of receipt of the notice or on  such  adjourned
 date as has been agreed to by the parties, the court shall hold a manda-
 tory  settlement  conference  for  the  purpose  of  holding  settlement
 discussions pertaining to the relative rights  and  obligations  of  the
 parties under the loan documents, including, but not limited to:
 S. 7724                             7

   §  8.  This  act  shall  take  effect on the same date and in the same
 manner as a chapter of the laws of 2021 amending the  banking  law,  the
 uniform commercial code and the civil practice law and rules relating to
 reverse  cooperative  apartment  unit  loans, as proposed in legislative
 bills  numbers  A. 1508 and S. 760, takes effect. Effective immediately,
 the addition, amendment and/or repeal of any rule or  regulation  neces-
 sary  for  the  implementation  of  this  act  on its effective date are
 authorized to be made and completed on or before such effective date.