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This entry was published on 2014-09-22
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SECTION 6-F
Alternative mortgage instruments made by banks, trust companies, savings banks, savings and loan associations and credit unions
Banking (BNK) CHAPTER 2, ARTICLE 1
§ 6-f. Alternative mortgage instruments made by banks, trust
companies, savings banks, savings and loan associations and credit
unions. 1. Notwithstanding any inconsistent provision of this chapter
or any other law of this state, the superintendent of financial services
is authorized to adopt such rules or regulations as shall permit banks,
trust companies, foreign banking corporations licensed to maintain a
branch or agency in this state, savings banks, savings and loan
associations, credit unions and persons and entities engaging in the
business described in section five hundred ninety of this chapter to
make residential mortgage loans and cooperative apartment unit loans
which provide for (a) periodic readjustments of the rate of interest
charged for the loan or successive terms of the loan or (b) terms of
loan which are shorter than the term of the mortgage or (c) repayment of
the principal amount of the loan by regular payments which are not equal
in amount throughout the term of the mortgage or (d) the lender thereof
to receive a share in the future appreciation of the property serving as
security for the loan under the circumstances set forth in the following
sentence or (e) any combination of paragraphs (a), (b), (c) and (d) of
this subdivision, subject to the provisions of subdivision two of this
section. Where the lender or holder of a residential mortgage loan or
cooperative apartment unit loan enters into a written agreement with the
borrower under which the lender or holder conditionally reduces an
amount of principal of such loan in order to assist a borrower at risk
of foreclosure to avoid such foreclosure, the lender or holder may enter
into a written agreement (a "shared appreciation agreement") with the
borrower under which the lender shall be entitled to share in the
appreciation of the market value of the real property or cooperative
shares and proprietary lease securing such loan between the effective
date of such reduction in principal amount until the date when the
property is sold, provided that the amount the lender is entitled to
receive under such shared appreciation agreement shall be the lesser of
(i) the amount of such reduction in principal, plus interest on such
amount from the date of such reduction to the date of payment at the
same rate of interest as applies to the remaining principal amount of
the residential mortgage loan, and (ii) fifty percent of the amount of
such appreciation. Such amounts shall be payable when the mortgagor
sells the residential real property or cooperative shares and
proprietary lease that secure the loan. Such shared appreciation
agreement shall expressly and conspicuously bear a legend at the top of
the agreement in at least fourteen-point type which shall include the
following: "In this agreement, you are giving away some of any future
increase in value of your home. Please read carefully." For purposes of
this subdivision, the appreciation of the property shall be measured as
the difference, if positive, between the gross sales proceeds (net of
any reasonable real estate commission) of the sale of the property and
the value of the property at the time of the closing of the shared
appreciation mortgage, as determined by an appraisal by an independent
New York state licensed real estate appraiser. Recovery of such
reduction in the principal amount shall not be deemed to be interest for
any purpose of the laws of this state.

Any shared appreciation agreement shall be accompanied by a notice,
which shall be on a separate page from the shared appreciation agreement
and shall contain the following heading in bold, fourteen-point type:
"Important disclosures about the contract in which you agree to give
away a part of any future increase in value of your home. Please read
carefully." The notice shall include the following disclosures:

(1) a statement that the lender will be entitled to share in any
appreciation of the market value of the mortgaged property that occurs
between the time of the loan modification and the time the property is
sold, up to the amount of principal forborne plus interest on such
amount at the applicable rate of interest on the mortgage but in no
event more than fifty percent of the amount of such appreciation, and
providing at least three examples of how such shared appreciation may
affect the borrower at the time the borrower sells the mortgaged
property, such examples to include (A) no appreciation in the value of
the mortgaged property, (B) appreciation of twenty percent and (C)
appreciation of fifty percent;

(2) a statement advising the borrower to seek independent counseling
from a lawyer, a HUD-certified mortgage counselor or a tax advisor
regarding (A) the trade-off between a current reduction in the size of
the mortgage, versus the promise to give up part of the future
appreciation of the home, and (B) the tax consequences of the principal
forgiveness and shared appreciation agreement, and providing a list of
the names and contact information of five HUD-certified mortgage
counselors in the county where the mortgaged property is located or, if
there are fewer than five such counselors in that county, the list may
include counselors in one or more neighboring counties;

(3) a statement on the potential effect of the shared appreciation
agreement on any future refinancing of the mortgage and the potential
effect of any prepayment or refinancing of the mortgage on the
appreciation sharing agreement; and

(4) such other disclosures as the superintendent of financial services
may require.

2. Any rules or regulations which are adopted by the superintendent of
financial services pursuant to subdivision one of this section:

(a) shall provide for disclosures and notices to the borrower with
respect to the terms and conditions of the loan and the mortgage, and
the superintendent of financial services may require the adoption of
uniform disclosure and notice forms for this purpose;

(b) shall provide for the conditions governing renewals of the term of
the loan;

(c) shall not permit any uninsured loan secured by residential real
property to be made in an amount exceeding ninety percent of the
appraised value of the property; and

(d) shall not allow, with respect to any specific alternative mortgage
instrument which permits a periodic readjustment of the rate charged on
the loan, for a greater change in rate than that permitted under federal
law or regulations to federally-chartered banking organizations located
in this state for loans made pursuant to an equivalent alternative
mortgage instrument.