Requires an authorized lender which seeks to foreclose upon a reverse mortgage issued under the federal home equity conversion mortgage program to provide notice thereof to the department of financial services and to the mortgagor; directs such department to provide notice to the mortgagor of legal service organizations which may assist them with the default or foreclosure; prohibits authorized lenders from making advance payment of debts upon the mortgaged real property.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A5821
SPONSOR: Weinstein TITLE OF BILL:
An act to amend the real property law, in relation to the regulation of
default and foreclosure of reverse mortgages issued under the federal
home equity conversion mortgage for seniors program
PURPOSE OF BILL:
This bill will regulate certain activities of lenders when defaults take
place on reverse mortgages issued in New York State under HUD's home
equity conversion mortgage for seniors program.
SUMMARY OF PROVISIONS OF BILL:
Section 1: Lenders must now notify the Department of Financial Services
when engaging in foreclosure proceedings against a borrower, and must
also provide proof to the department that HUD has granted prior approval
to accelerate the loan, proof of the default and notice to the borrower,
and any other information required by the department. The Department of
Financial Services must then provide notice of the foreclosure directly
to the borrower, and must also provide information regarding the borrow-
er's rights and legal service organizations available to assist the
borrower during the foreclosure process.
Lenders will also be required to engage in loss mitigation, as specified
by the Department of Financial Services, before foreclosing.
This section also prevents lenders from making advance payments on mort-
gage insurance or tax liabilities. Lenders will only be entitled to pay
those moneys which are currently in arrears.
The new requirements will be conditions precedent to bringing a foreclo-
sure action against an HUD reverse mortgage. The provisions will be
enforceable by providing treble damages and attorney's fees to prevail-
ing plaintiffs.
Section 2: The act will take effect one hundred and twenty days after it
becomes law, but the Department of Financial Services is authorized to
immediately take any actions necessary to ensure the law's implementa-
tion.
EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER:
Under current law, lenders are not required to notify DFS, and DFS is
not required to inform seniors of services available to help them in the
event of a default. Lenders are also currently allowed to make advance
payments on obligations associated with these reverse mortgages.
JUSTIFICATION:
Reverse mortgages are complicated and expensive financial products.
Many seniors do not understand how they work or what their true long-
term 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 signif-
icant 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 can be better protected by providing for
stricter regulation of the foreclosure process.
Currently, lenders are not required to notify the Department of Finan-
cial Services in the event of a default, and DFS does not regularly
provide information to seniors in reverse mortgage default scenarios
that can help seniors to keep their homes. This bill will change that by
requiring a notification to DFS, and by requiring DFS to help seniors
get in touch with a legal services organization to help them manage the
process.
Lenders sometimes also make large advance payments on obligations tied
to reverse mortgages in the event of a default. Then, to resolve the
default, lenders will demand that the advance payments be paid back,
resulting in massive financial liabilities to seniors that they may not
have the cash on hand to satisfy in order to become current on their
mortgage payments and cure a default. This new section would allow lend-
ers to make payments only on obligations that are currently in arrears.
LEGISLATIVE HISTORY:
New bill, 2017.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
To be determined.
EFFECTIVE DATE:
120th day after it shall have become a law.
STATE OF NEW YORK
________________________________________________________________________
5821
2017-2018 Regular Sessions
IN ASSEMBLY
February 16, 2017
___________
Introduced by M. of A. WEINSTEIN -- read once and referred to the
Committee on Judiciary
AN ACT to amend the real property law, in relation to the regulation of
default and foreclosure 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-d to read as follows:
3 § 280-d. Federal home equity conversion mortgage default and foreclo-
4 sure regulation. 1. For the purposes of this section, the following
5 terms shall have the following 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) Department. The department of financial services established
15 pursuant to section one hundred two of the financial services law.
16 2. In the event of a default or foreclosure upon a reverse mortgage
17 loan, the authorized lender, upon the commencement of the foreclosure
18 proceeding, shall transmit to the department proof that the federal
19 Department of Housing and Urban Development has granted prior approval
20 to accelerate the loan, proof of the default notice to the mortgagor and
21 any such information relating to the loans and the mortgagor as the
22 department shall determine to be necessary. Upon receipt of such infor-
23 mation, the department shall provide notice of and information relating
24 to the foreclosure to the mortgagor. Such notice shall include a notice
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD07842-03-7
A. 5821 2
1 of the mortgagor's rights in the foreclosure process and contact infor-
2 mation for legal service organizations which may be able to assist the
3 mortgagor with the mortgage default and/or foreclosure.
4 3. No reverse mortgage loan commitment shall be issued by an author-
5 ized lender unless such commitment provides in writing notice that the
6 department will be provided notice of any default or foreclosure upon
7 the loan so as to provide assistance to the mortgagor.
8 4. 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 5. The department shall issue regulations which shall require mortga-
15 gees to engage in mandatory loss mitigation procedures to be specified
16 by the department. These loss mitigation procedures shall comply with
17 any restrictions on loss mitigation issued by the federal Department of
18 Housing and Urban Development for reverse mortgages and shall be updated
19 when necessary to ensure compliance with federal rules. The mortgagee
20 shall provide information to the department about loans receiving such
21 loss mitigation assistance. This includes maintaining loan level, loss
22 mitigation data and providing the department with the following informa-
23 tion for loans associated with a repayment plan:
24 (a) monthly surplus income;
25 (b) term of repayment plan;
26 (c) amount of monthly repayment plan payment;
27 (d) due date of next monthly payment;
28 (e) when a mortgagor experiences a hardship; and
29 (f) reason for hardship.
30 6. Any person who has been injured by reason of any violation of this
31 section may bring an action in his or her own name to recover treble his
32 or her actual damages, plus the prevailing plaintiff's reasonable attor-
33 ney's fees.
34 7. The requirements of this section shall be conditions precedent to
35 commencing an action to foreclose upon a home equity conversion mortgage
36 which is subject to the provisions of this section, and failure to
37 comply therewith shall be a complete defense to a foreclosure action.
38 § 2. This act shall take effect on the one hundred twentieth day after
39 it shall have become a law; provided, however, that effective immediate-
40 ly, any actions necessary for the implementation of this act on its
41 effective date are authorized and directed to be completed on or before
42 such date.
