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A05820 Summary:

BILL NOA05820A
 
SAME ASNo Same As
 
SPONSORWeinstein
 
COSPNSRMosley, Abbate, Colton, Cymbrowitz, Galef, Zebrowski, Joyner, Ortiz, Rivera, Blake, Glick, Dinowitz, Carroll, D'Urso, Steck, Hyndman, Richardson, Davila, Aubry, Seawright, Abinanti, Wallace, Cahill, Lupardo
 
MLTSPNSRCook, Englebright, Nolan, Simon, Thiele
 
Add 280-b, RP L
 
Provides for the regulation of reverse mortgages that are issued under the federal home equity conversion mortgage program; prohibits the deceptive advertising and issuance of such mortgages; requires that independent counseling be provided to applicants for such mortgages; requires lenders to provide notice of duty of mortgagor to pay certain property related expenses when equity in the real property is low or depleted; prohibits foreclosure on mortgaged property based on the failure of the mortgagor to live on the property, until an inspection has been made at the property; establishes a proved right of action with treble damages for violations of such provisions.
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A05820 Actions:

BILL NOA05820A
 
02/16/2017referred to judiciary
05/09/2017reported referred to codes
05/16/2017reported
05/18/2017advanced to third reading cal.431
01/03/2018ordered to third reading cal.414
05/14/2018amended on third reading 5820a
06/05/2018passed assembly
06/05/2018delivered to senate
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A05820 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A5820A
 
SPONSOR: Weinstein
  TITLE OF BILL: An act to amend the real property law, in relation to regulation of reverse mortgages issued under the federal home equity conversion mortgage for seniors program   PURPOSE OF BILL: This bill places new regulations on reverse mortgage products pertaining to the marketing, origination, and management of these products issued in New York State under the federal home equity conversion mortgage program for seniors.   SUMMARY OF PROVISIONS: OF BILL: Section 1: Prevents any party from marketing reverse mortgage products as a public service, a government-sponsored program, or anything other than a commercial product. Further, a lender will not be permitted to engage in any unfair or deceptive practices in connection with the marketing or offering of reverse mortgage loans. Lenders or their agents must provide a consumer protection information sheet to be created by DFS in conjunction with any solicitation materi- als they send to a New York address. Lenders must provide a notice to seniors on their periodic account statements if financial obligations related to the mortgage are being paid through proceeds of the mortgage. This notice will provide the senior with the expected month and year of the full depletion of the funds. Lenders must notify seniors in plain language when their Life Expectancy Set Aside (LESA) or home equity line of credit is depleted to ten percent or less of its value, must notify them of their balance, and must notify them when it has been entirely depleted. The senior must also be informed at this point that they must continue to pay obli- gations such as mortgage insurance, homeowners insurance, and tax obli- gations in order to avoid default, and that the LESA or home equity line of credit will no longer pay these obligations. Further, if there is a default, the lender may only pay the amount of the arrears. Reverse mortgage lenders send out annual letters to seniors to verify that they're still using the home as a primary residence (a requirement of these financial products), but sometimes do not receive a response and then initiate foreclosure proceedings. Under the new law, lenders will be required to follow up with the senior and a primary contact via a phone call and a visit to the borrower's home before initiating fore- closure proceedings. They will be required to leave contact information upon visiting the home if a senior does not respond to the annual letter. Lenders will have to wait at least 30 days for a response from the senior, in addition to any time period required by any other section of law, before initiating a foreclosure action. Lenders will be barred from charging seniors any fees for visiting their home in order to verify their residence status. The bill's provisions will be conditions precedent to a lender bringing a foreclosure action on a HUD reverse mortgage. The bill's provisions will be enforceable via treble damages and attorney's fees for prevail- ing plaintiffs. Section 2: The act will take effect on the ninetieth day after it becomes a law, but the Department of Financial Services is authorized to immediately begin promulgating regulations necessary to implement the provisions of the act, and shall have one-hundred and eighty days to do so.   EXISTING LAW: Under current law, home equity conversion mortgages under the HUD program are not subject to these regulations.   JUSTIFICATION: Reverse mortgages are complicated and expensive financial products. Many seniors do not understand how they work or what their true longterm 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 must be better protected by clearer informa- tion and stricter regulations on the way that lenders market and manage these complicated products. This comprehensive new set of regulations will regulate the marketing, origination, and management of reverse mortgage products that fall under HUD's home equity conversion mortgage program for seniors, in the hope of preventing defaults and foreclosures.   LEGISLATIVE HISTORY: New bill, 2017.   FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: To be determined.   EFFECTIVE DATE: 90th day after it shall have become a law.
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A05820 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         5820--A
                                                                Cal. No. 414
 
                               2017-2018 Regular Sessions
 
                   IN ASSEMBLY
 
                                    February 16, 2017
                                       ___________
 
        Introduced  by  M.  of A. WEINSTEIN, MOSLEY, ABBATE, COLTON, CYMBROWITZ,
          GALEF, ZEBROWSKI,  JOYNER,  ORTIZ,  RIVERA,  BLAKE,  GLICK,  DINOWITZ,
          CARROLL, D'URSO, STECK, HYNDMAN, RICHARDSON, DAVILA, AUBRY, SEAWRIGHT,
          ABINANTI,  WALLACE,  CAHILL  --  Multi-Sponsored  by -- M. of A. COOK,
          ENGLEBRIGHT, NOLAN, SIMON, THIELE -- read once  and  referred  to  the
          Committee  on  Judiciary  --  ordered  to a third reading, amended and
          ordered reprinted, retaining its place on the order of third reading
 
        AN ACT to amend the real property law,  in  relation  to  regulation  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:
 
     1    Section  1.  The  real property law is amended by adding a new section
     2  280-b to read as follows:
     3    § 280-b. Federal home equity conversion mortgage regulation. 1.    For
     4  the purposes of this section, the following terms shall have the follow-
     5  ing meanings:
     6    (a)  Reverse  mortgage  loan.  A  reverse  mortgage loan as defined in
     7  section two hundred eighty of this article,  which  is  issued  in  this
     8  state  pursuant  to  the  home  equity  conversion  mortgage for seniors
     9  program operated by the federal Department of Housing and Urban Develop-
    10  ment.
    11    (b) Authorized lender. An authorized lender as defined in section  two
    12  hundred  eighty  of  this  article  authorized  to make reverse mortgage
    13  loans, as defined in this section.
    14    (c) Superintendent. The superintendent of  financial  services  estab-
    15  lished  pursuant  to  section  two hundred two of the financial services
    16  law.
    17    2. No authorized lender or any other party  or  entity  shall  in  any
    18  manner,  in  the marketing or offering of reverse mortgage loans, engage
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD07787-08-8

        A. 5820--A                          2
 
     1  in any unfair or deceptive practices in connection with the marketing or
     2  offering of reverse mortgage loans, and, additionally, shall not:
     3    (a)  use  the  words  "public service announcement" in any commercial,
     4  mailing, advertisement or writing relating thereto; or
     5    (b) use the words  "government  insured"  or  other  similar  language
     6  representing  that  reverse  mortgage  loans  are insured, supported and
     7  sponsored by any governmental entity in any commercial, mailing,  adver-
     8  tisement or writing relating thereto; or
     9    (c) represent that any such loan is other than a commercial product.
    10    3.  (a)  Every  authorized lender or its agent shall provide, with any
    11  solicitation for reverse mortgage products mailed to a physical  address
    12  within the state, supplemental consumer protection materials the content
    13  and form of which shall be specified by the superintendent or his or her
    14  designee.
    15    (b)  Every authorized lender shall provide each applicant or potential
    16  applicant for a reverse mortgage loan  with  the  telephone  number  and
    17  internet  website  address provided by the federal Department of Housing
    18  and Urban Development for the purposes of acquiring home equity  conver-
    19  sion mortgage counseling.
    20    (c)  The  superintendent  is  authorized  to promulgate such rules and
    21  regulations  as  he  or  she  shall  deem  necessary  to  implement  the
    22  provisions of this subdivision.
    23    4.  (a)  Reverse mortgages secured by residential real property within
    24  the state shall be subject to the rules and regulations of  the  federal
    25  Department  of Housing and Urban Development relating to the home equity
    26  conversion mortgage program.
    27    (b) For all borrowers whose tax payments, mortgage insurance payments,
    28  homeowners insurance payments, or payments stemming from any other prop-
    29  erty obligation or obligations are administered by the authorized  lend-
    30  er,  and where these payments are derived from the proceeds of the mort-
    31  gage, the authorized lender shall provide  on  the  borrower's  periodic
    32  account  statement  the current balance remaining in the borrower's line
    33  of credit or lifetime expectancy set aside, the projected annual proper-
    34  ty charges for that year, and a notice which reads in  at  least  twelve
    35  point  type:  "YOUR  TAXES AND INSURANCE ARE CURRENTLY BEING PAID BY THE
    36  PROCEEDS OF THIS MORTGAGE. THE  FUNDS  THAT  HAVE  BEEN  SET  ASIDE  ARE
    37  EXPECTED TO BE EXHAUSTED AFTER THE TAX AND INSURANCE PAYMENTS OF (SPECI-
    38  FY EXPECTED MONTH AND YEAR). IF THE PROCEEDS OF THIS MORTGAGE CANNOT PAY
    39  THE TAXES AND INSURANCE, YOU MUST PAY THESE OBLIGATIONS OR YOUR HOME MAY
    40  BE  LOST  TO  FORECLOSURE. PLEASE NOTE THAT AS TAX AND INSURANCE AMOUNTS
    41  CAN VARY YOU SHOULD CONTINUE TO REVIEW THIS NOTICE FOR CHANGES."
    42    (c) An authorized lender shall, by telephone  and  first  class  mail,
    43  inform  and  provide  notice  to a mortgagor when his or her home equity
    44  line of credit or life expectancy set aside is depleted to  ten  percent
    45  or  less  of its value. Such notice shall inform the mortgagor of his or
    46  her obligations relating to such real property including, but not limit-
    47  ed to, mortgage insurance, homeowners insurance and real property  taxes
    48  previously paid by such line of credit or life expectancy set aside, and
    49  that such obligations must continue to be paid when the home equity line
    50  of  credit  or life expectancy set aside is depleted.  Such notice shall
    51  use plain language, written in a clear and coherent manner  using  words
    52  with  common and every day meanings, appropriately divided and captioned
    53  by its various sections.
    54    (d) Each authorized lender shall, by telephone and first  class  mail,
    55  inform  and  provide  notice  to a mortgagor when his or her home equity
    56  line of credit or life expectancy set aside  is  depleted.  Such  notice

        A. 5820--A                          3
 
     1  shall  inform  the  mortgagor  of his or her obligations relating to the
     2  mortgaged real property including, but not limited to,  mortgage  insur-
     3  ance,  homeowners  insurance  and real property taxes, and that the home
     4  equity  line  of  credit or life expectancy set aside will no longer pay
     5  these obligations.  Such notice shall use plain language, written  in  a
     6  clear  and  coherent  manner using words with common and every day mean-
     7  ings, appropriately divided and captioned by its various sections.
     8    5. No authorized lender shall make an advance payment  for  any  obli-
     9  gation arising from mortgaged real property. Furthermore, in the event a
    10  mortgagor defaults upon the payment of mortgage insurance premium, home-
    11  owners'  insurance premium or real property tax related to the mortgaged
    12  property, the authorized lender may only pay those premiums and/or taxes
    13  which are in arrears.
    14    6. In the event that an authorized lender  seeks  to  foreclose  on  a
    15  reverse  mortgage  loan on the basis that the mortgaged real property is
    16  no longer the primary residence of or  occupied  by  the  mortgagor,  if
    17  during  the  verification  of  the  mortgagor's primary residence and/or
    18  occupancy no responses are received in  response  to  mailings  relating
    19  thereto,  such  lender  shall  cause  a telephone call to be made to the
    20  mortgagor, or if the mortgagor is unreachable by telephone, a designated
    21  third-party specified by the mortgagor, and an in  person  visit  to  be
    22  made to the mortgagor at the mortgaged real property to be made prior to
    23  the  commencement of any foreclosure proceeding.  During such visit, the
    24  authorized lender or its agent shall provide clear information as to who
    25  they are, that the visit pertains to the reverse  mortgage,  the  reason
    26  for  the home visit, and the telephone number to call for further infor-
    27  mation.  The authorized lender must wait at least thirty days  following
    28  such  visit,  in  addition to any additional time or notice requirements
    29  specified by any other provision of law, before initiating a foreclosure
    30  action on the basis that the mortgaged real property is  no  longer  the
    31  primary  residence  of  the  mortgagor.  If  the  mortgagor contacts the
    32  authorized lender and provides proof of  residence  or  occupancy  after
    33  such  visit  but  before  the  commencement of a foreclosure action, the
    34  authorized lender shall  be  barred  from  initiating  such  foreclosure
    35  action.   Furthermore, no authorized lender shall charge a mortgagor any
    36  fee for any such visit and inspection. This prohibition on  the  imposi-
    37  tion  of  fees  shall  include  any and all inspections conducted by the
    38  authorized lender to verify the status of the reverse mortgage,  or  any
    39  suspected or actual default condition.
    40    7.  Both  the authorized lender and the mortgagor shall be represented
    41  by an attorney or attorneys at the time of the closing  on  the  reverse
    42  mortgage,  and  each such party shall have at least one attorney present
    43  to conduct the closing.
    44    8. Any person who has been injured by reason of any violation of  this
    45  section  or  any  violation  of the rules and regulations of the federal
    46  Department of Housing and Urban Development relating to the home  equity
    47  conversion  mortgage  program may bring an action in his or her own name
    48  to recover treble  his  or  her  actual  damages,  plus  the  prevailing
    49  plaintiff's reasonable attorney's fees.
    50    9.  Compliance with the provisions of this section shall be conditions
    51  precedent to commencing an  action  to  foreclose  upon  a  home  equity
    52  conversion  mortgage which is subject to the provisions of this section,
    53  and the failure to comply therewith shall be a  complete  defense  to  a
    54  foreclosure action.
    55    §  2.  This  act shall take effect on the ninetieth day after it shall
    56  have become a law; provided, that, effective immediately the superinten-

        A. 5820--A                          4
 
     1  dent of financial services is authorized  and  directed  to  amend,  add
     2  and/or  repeal  any  rules  and  regulations  necessary to implement the
     3  provision of this act within 180 days after this act shall have become a
     4  law.
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