N.Y. Real Prop. Law § 280-A

Current through 2024 NY Law Chapter 553

Section 280-A - Reverse mortgage loans for persons seventy years of age or older

1. For purposes of this section, the following terms shall have the following meanings:

(a) Reverse mortgage loan. A loan which is secured by a first mortgage on real property improved by a one to four-family residence 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.

(b) Term reverse mortgage loan. As used in this section, any reverse mortgage loan that has a fixed term for payments to the mortgagor(s).

(c) Tenure reverse mortgage loan. As used in this section, any reverse mortgage loan that does not have a fixed term for payments to the mortgagor(s).

(d) 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 reverse mortgage loans by the superintendent of financial services 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 financial services.

(e) Mortgagor. A tenant in severalty who is seventy 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 seventy years of age or older and whose income does not exceed eighty percent of the median income of the county in which he or she resides.

(f) Superintendent of financial services. The superintendent established pursuant to section two hundred two of the financial services law.

2. A reverse mortgage loan pursuant to this section shall be subject to the following:

(a) the mortgagor shall be granted lifetime possession of the subject premises of the real property which is the security for the reverse mortgage loan, as long as such real property remains the mortgagors' principal residence and subject to a limited waiver of the right of foreclosure as determined by the superintendent of financial services; and

(b) the term of the reverse mortgage, except for a tenure reverse mortgage loan, shall be for a period of ten years or less; and

(c) the loan to value ratio shall be determined by the superintendent of financial services; and

(d) subject to such rules or regulations as the superintendent of financial services shall adopt, for that period of time commencing at the end of the loan term or ten years after the reverse mortgage loan commences, whichever occurs first, and ending at such time as the reverse mortgage loan is paid in full, the authorized lender, at its option, may receive no more than twenty percent of the future appreciation of the property securing the reverse mortgage loan as full or partial consideration for the making of a reverse mortgage loan; provided, however, that such future appreciation shall be limited by such rules and regulations as the superintendent of financial services may adopt or the authorized lender may charge a fixed rate of interest on the outstanding balance of monies advanced under the reverse mortgage agreement or any combination thereof. Said reverse mortgage loan shall not come due and shall be extended until the voluntary relinquishment by the mortgagors of possessory interest in such real property, the real property no longer being the mortgagors' principal residence, the death of the mortgagors, or such other events as may be determined by the superintendent of financial services. Any such appreciation shall not be considered interest for the purposes of any law regulating the maximum rate of interest which may be charged, taken or received including sections 190.40 and 190.42 of the penal law; and

(e) the authorized lender shall maintain an escrow account for the purposes of paying real property taxes, insurance premiums of the property securing the reverse mortgage loan, or for the payment of any other fees and expenses as may be permitted by the superintendent of financial services regulation; and

(f) subject to such rules or regulations as the superintendent of financial services may adopt, an authorized lender or any successor or assign of such authorized lender which may suspends, ceases or makes late payments to a mortgagor under a reverse mortgage loan shall be subject to forfeiture (as liquidated damages to such mortgagor 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 penalty; and

(g) an authorized lender must deliver to an applicant such disclosures as may be required by the superintendent of financial services 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 to consult with appropriate authorities regarding tax and estate planning consequences of a reverse mortgage;

(iii) where applicable a description of prepayment and refinancing features;

(iv) to the extent determinable at or prior to the inception of the reverse mortgage loan, the interest rate and, except for a tenure reverse mortgage loan, the total interest payable on the reverse mortgage loan;

(v) a statement concerning the compliance of the lender with the criteria established by the superintendent of financial services that an authorized lender must meet before it may make reverse mortgage loans pursuant to this section; and

(vi) a statement setting forth those events which would terminate the reverse mortgage loan; and

(h) the outstanding balance may be prepaid in full by the mortgagor without penalty at any time during the reverse mortgage loan term; and

(i) an authorized lender is prohibited from using or attaching any property or asset of the mortgagor except the real property securing the reverse mortgage loan in settlement of a reverse mortgage obligation; and

(j) an authorized lender must deliver to the applicant 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 the authorized lender until the applicant presents, in writing, a statement that the terms of the reverse mortgage loan have been explained to them 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 applicant, 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; and

(k) a reverse mortgage pursuant to this section shall expressly and conspicuously bear a legend identifying it as such; and

(l) subject to such rules or regulations as the superintendent of financial services may adopt, a reverse mortgage loan shall be made at either a fixed or variable rate of interest; and

(m) in the event that an authorized lender or holder of the reverse mortgage loan intends to initiate foreclosure proceedings the mortgagor 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.

3. A reverse mortgage loan pursuant to this section may:

(a) provide that an authorized lender may, consistent with federal laws and regulations, include a due-on-sale clause in its reverse mortgage loan agreement and at its option exercise and enforce such clause in accordance with its terms;

(b) provide that the mortgagor's closing costs, including but not limited to loan or commitment fees if any, insurance premiums, house repairs, legal fees, the costs 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.

4. The superintendent of financial services 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 superintendent of financial services may adopt except those reverse mortgage loans made pursuant to section two hundred eighty of this article. A reverse mortgage loan made by any authorized lender, national banking association, federal savings and loan association or federal credit union in 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 superintendent of financial services 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:

(a) any limitations on the taking of a percentage of the future appreciation of the real property securing the reverse mortgage loan as consideration for making the reverse mortgage loan;

(b) the execution by an authorized lender of a limited waiver of the right of foreclosure;

(c) with the exception of the counseling statement prepared by the New York state office for the aging pursuant to paragraph (j) of subdivision two of this section, the form and contents of any disclosure statement that authorized lenders must provide to mortgagors.

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 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 mortgage, 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 estate securing the reverse mortgage loan to a person other than an original mortgagor or mortgagors shall result in the termination of the reverse mortgage loan.

8. In a term reverse mortgage loan, the real property securing the reverse mortgage may be reappraised by an independent appraiser at the end of the loan term. If the value of the property has appreciated, the term of the reverse mortgage may be extended or refinanced; however the total reverse mortgage loan amount may not exceed such amount or loan to value ratio as may be determined by the superintendent of financial services. 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.

9. The principal, including any accrued but unpaid interest, of a reverse mortgage loan agreement entered into pursuant to this section must be insured by the mortgagor. If such insurance is purchased from or otherwise provided by any agency of the state of New York, the mortgagor 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 and regulations as the superintendent of financial services may adopt. The authorized lender shall have the option to choose between refinancing or extending the reverse mortgage loan. Subject to obtaining an adequate increase in the insurance and subject to such rules and regulations as the superintendent of financial services may adopt, the total reverse mortgage loan amount shall not exceed such amount or ratio as may be determined by the superintendent of financial services. 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.

N.Y. Real Prop. Law § 280-A