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A05821 Summary:

COSPNSRMosley, Jaffee, Abbate, Colton, Sepulveda, Cymbrowitz, Galef, Zebrowski, Joyner, Ortiz, Rivera, Blake, Glick, Dinowitz, Carroll, D'Urso, Steck, Hyndman, Vanel, Richardson, Davila, Aubry, Weprin, Seawright, Abinanti, Wallace, Cahill
MLTSPNSRCook, Englebright, Nolan, Simon, Thiele
Add 280-d, RP L
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.
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A05821 Actions:

02/16/2017referred to judiciary
05/09/2017reported referred to codes
05/18/2017advanced to third reading cal.432
01/03/2018ordered to third reading cal.415
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A05821 Memo:

submitted in accordance with Assembly Rule III, Sec 1(f)
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.
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A05821 Text:

                STATE OF NEW YORK
                               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.

        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.
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