Adds new conditions on authorized lenders of reverse mortgages including: delivery of a plain language notice, providing the borrower with a reverse mortgage worksheet guide and counseling, and a lapse of seven days between the reverse mortgage counseling and acceptance of the borrower's final application.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7589
SPONSOR: Lupardo TITLE OF BILL: An act to amend the real property law, in relation to
conditions on lenders who extend reverse mortgages to persons over sixty
and seventy years old
PURPOSE:
To enhance protections for persons over sixty and seventy years old who
are considering entering into contracts for reverse mortgages.
SUMMARY OF PROVISIONS:
Section 1: Amends paragraphs (g), (h) and (i) of subdivision 2 of
section 280 of the Real Property Law to require statements be prepared
in plain language for persons sixty years of age or older by the Depart-
ment of Financial Services, who may consult with the Office for the
Aging, on the advisability and availability of counseling and informa-
tion services for persons considering entering into a reverse mortgage
contract. Also requires lenders provide prospective borrowers with a
reverse mortgage guide prepared by the Department of Financial Services
before such a loan application can be approved. Additionally, prohibits
lenders from accepting completed applications for reverse mortgage loans
from a prospective applicant or assessing fees upon a prospective appli-
cant until at least seven days from the date of counseling or receipt of
a signed affidavit waiving such counseling.
Section 2: Amends paragraphs (j), (k), (I) and (m) of subdivision 2 of
section 280-a of the Real Property Law to add the same provisions as
section 1 of this legislation for persons seventy years of age or older.
Section 3: Establishes the effective date.
JUSTIFICATION:
Reverse mortgages can be an attractive option for older adults living on
a fixed income to help cover the costs of basic living expenses, health
care or even reducing additional debt. However, the risks associated
with reverse mortgages are not always clear, including continuing obli-
gations and legal responsibilities that the mortgagor assumes. As such,
defaults on reverse mortgages hit a high of 10% in 2013. Although the
Department of Housing and Urban Development has enacted policy changes
to address the high default rates, there is still more to be done to
protect seniors.
In 2016, the Department of Financial Services opened an investigation
into the operations of several agencies that provide reverse mortgage
contracts after a dramatic increase in foreclosure cases involving
reverse mortgages in New York and allegations that vulnerable seniors
were being targeted. Because of the long-term impacts that a reverse
mortgage can have on a senior's financial security, it is imperative
that the State ensures that there are appropriate safeguards during the
contracting process. This legislation will help to ensure seniors are
aware of the risks associated with reverse mortgages by providing for a
seven day cooling off period prior to the final contract. During this
time, the senior will be given a worksheet intended to facilitate
consideration of the current state of the mortgagor's finances, provide
for an appropriate time to review the contract, as well as consider the
impacts of the reverse mortgage long-term. To that end, the senior will
be required to obtain financial counseling during this period unless
they specifically opt-out of such counseling through a signed affidavit.
At every stage in life, financial decisions can determine your standard
of living as well as your independence and security. For our seniors,
these decisions are arguably even more important because they are often
on a fixed income and the loss of housing can be devastating. As a
result, the transparency of the reverse mortgage contract process should
be proportionate to the impact that it will have on the mortgagor.
LEGISLATIVE HISTORY:
New bill.
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
This act shall take effect on the one hundred twentieth day after it
shall have become law.
STATE OF NEW YORK
________________________________________________________________________
7589
2017-2018 Regular Sessions
IN ASSEMBLY
May 3, 2017
___________
Introduced by M. of A. LUPARDO -- read once and referred to the Commit-
tee on Judiciary
AN ACT to amend the real property law, in relation to conditions on
lenders who extend reverse mortgages to persons over sixty and seventy
years old
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Paragraphs (g), (h) and (i) of subdivision 2 of section 280
2 of the real property law, as added by chapter 613 of the laws of 1993,
3 paragraph (i) as further amended by section 104 of part A of chapter 62
4 of the laws of 2011, are amended to read as follows:
5 (g) an authorized lender must deliver to the applicant, upon applica-
6 tion[, if available,] a plain language statement prepared by the [local
7 or county] department of financial services who may consult with the New
8 York state office for the aging, where appropriate, on the advisability
9 and availability of independent counseling and information services. In
10 addition to the plain language notice, no reverse mortgage loan applica-
11 tion shall be taken by a lender unless the lender provides the prospec-
12 tive borrower, prior to his or her meeting with a counseling agency on
13 reverse mortgages, with a reverse mortgage worksheet guide to be
14 prepared by the department of financial services who may consult with
15 the New York state office for the aging where appropriate. Further, no
16 reverse mortgage commitment shall be issued by an authorized lender
17 until the applicant presents, in writing, a statement that the terms of
18 the reverse mortgage loan have been explained by an attorney, a housing
19 and urban development certified counselor or any other counseling
20 service as indicated on the statement supplied by the [county or local
21 office for the aging] department of financial services or a signed affi-
22 davit indicating that the applicant, although made aware of the impor-
23 tance of counseling and its local availability through the provision of
24 such information by the authorized lender, chooses not to utilize any of
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD07906-04-7
A. 7589 2
1 the aforementioned available services. The loan application shall not
2 be approved until the signed reverse mortgage worksheet guide is
3 provided to the lender. A copy of the reverse mortgage worksheet guide
4 shall be provided to the borrower that shall have information including,
5 but not limited to: how reverse mortgages can affect the borrower and
6 their heirs and estate; the consequences of defaulting on a reverse
7 mortgage; alternatives to a reverse mortgage; and the impact on the
8 borrower's eligibility for government assistance programs. The form of
9 such statement and affidavit shall be developed by the department of
10 financial services, who may consult with the New York state office for
11 the aging where appropriate; and
12 (h) a lender shall not accept a final and complete application for
13 reverse mortgage loan from a prospective applicant or assess any fees
14 upon a prospective applicant until a lapse of seven days from the date
15 of counseling, as evidenced by the counseling certification, and without
16 first receiving certification from the applicant or the applicant's
17 authorized representative that the applicant has received counseling
18 from an agency as described in paragraph (g) of this subdivision or
19 seven days from receipt of a signed affidavit expressly waiving such
20 counseling; and
21 (i) any such reverse mortgage shall expressly and conspicuously bear a
22 legend identifying it as such; and
23 [(i)] (j) subject to such rules or regulations as the superintendent
24 of financial services may adopt, a reverse mortgage loan shall be made
25 at either a fixed or variable rate of interest.
26 § 2. Paragraphs (j), (k), (l) and (m) of subdivision 2 of section
27 280-a of the real property law, as added by chapter 613 of the laws of
28 1993, paragraph (l) as further amended by section 104 of part A of chap-
29 ter 62 of the laws of 2011, are amended to read as follows:
30 (j) an authorized lender must deliver to the applicant upon applica-
31 tion[, if available,] a plain language statement prepared by the [local
32 or county] department of financial services, who may consult with the
33 New York state office for the aging, where appropriate, on the advis-
34 ability and availability of independent counseling and information
35 services. In addition to the plain language notice, no reverse mortgage
36 loan application shall be taken by a lender unless the lender provides
37 the prospective borrower, prior to his or her meeting with a counseling
38 agency on reverse mortgages, with a reverse mortgage worksheet guide to
39 be prepared by the department of financial services, who may consult
40 with the New York state office for the aging where appropriate. Further,
41 no reverse mortgage commitment shall be issued by the authorized lender
42 until the applicant presents, in writing, a statement that the terms of
43 the reverse mortgage loan have been explained to them by an attorney, a
44 housing and urban development certified counselor or any other coun-
45 seling service as indicated on the statement supplied by the [county or
46 local office for the aging] department of financial services or a signed
47 affidavit indicating that the applicant, although made aware of the
48 importance of counseling and its local availability through the
49 provision of such information by the authorized lender, chooses not to
50 utilize any of the aforementioned available services. The loan applica-
51 tion shall not be approved until the signed reverse mortgage worksheet
52 guide is provided to the lender. A copy of the reverse mortgage work-
53 sheet guide shall be provided to the borrower that shall have informa-
54 tion including, but not limited to: how reverse mortgages can affect
55 the borrower and their heirs and estate, the consequences of defaulting
56 on a reverse mortgage, alternatives to a reverse mortgage, and impacts
A. 7589 3
1 on the borrower's eligibility for governmental assistance programs. The
2 form of such statement and affidavit shall be developed by the depart-
3 ment of financial services, who may consult with the New York state
4 office for the aging where appropriate; and
5 (k) a lender shall not accept a final and complete application for a
6 reverse mortgage loan from a prospective applicant or assess any fees
7 upon a prospective applicant until a lapse of seven days from the date
8 of counseling, as evidenced by the counseling certification, and without
9 first receiving certification from the applicant or the applicant's
10 authorized representative that the applicant has received counseling
11 from an agency as described in paragraph (j) of this subdivision or
12 seven days from receipt of a signed affidavit expressly waiving such
13 counseling; and
14 (l) a reverse mortgage pursuant to this section shall expressly and
15 conspicuously bear a legend identifying it as such; and
16 [(l)] (m) subject to such rules or regulations as the superintendent
17 of financial services may adopt, a reverse mortgage loan shall be made
18 at either a fixed or variable rate of interest; and
19 [(m)] (n) in the event that an authorized lender or holder of the
20 reverse mortgage loan intends to initiate foreclosure proceedings the
21 mortgagor shall have the right to designate a third party who shall be
22 notified. In the event that the mortgagor has not designated a third
23 party to receive such notice of foreclosure, then the authorized lender
24 or the holder of said reverse mortgage loan shall notify the local or
25 county office for the aging of its intent to commence foreclosure
26 proceedings. Such entity shall take appropriate action to protect the
27 interests of the mortgagor.
28 § 3. This act shall take effect on the one hundred twentieth day after
29 it shall have become a law.
