N.Y. Real Property Law § 280: Reverse mortgage loans for persons sixty years of age or older

§ 280. Reverse mortgage loans for persons sixty years of age or older.

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

following meanings:

(a) Reverse mortgage loans. 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, in advances through a line of credit or otherwise,

in lump sums, or through a combination thereof.

(b) Term reverse mortgage loan. Any reverse mortgage loan that has a

fixed term to maturity.

(c) Tenure reverse mortgage loan. Any reverse mortgage loan that does

not have a fixed term to maturity, but rather matures solely upon

contingent events, such as events including but not limited to death or

the real property securing the loan no longer being the mortgagors'

principal residence.

(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 sixty 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 sixty years of age or older.

(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 loan to value ratio shall be determined by the superintendent

of financial services; and

(b) subject to such rules or regulations as the superintendent of

financial services shall adopt, any authorized lender or any successor

or assign of such authorized lender which 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

(c) the outstanding balance may be prepaid in full by the mortgagor

without penalty at any time during the term and/or tenure of the loan;

and

(d) 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

(e) the 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) the interest rate and, except for a tenure reverse mortgage loan,

the total interest payable on the 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

(f) 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; and

(g) 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 an authorized lender until the applicant

presents, in writing, a statement that the terms of the reverse mortgage

loan have been explained 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

(h) any such reverse mortgage shall expressly and conspicuously bear a

legend identifying it as such; and

(i) 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.

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

(a) 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 cost 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;

(b) provide for the maintenance of an escrow account by the authorized

lender for purposes of payment of real property taxes, insurance on the

property securing the loan, or any other fees and expenses as may be

permitted by superintendent of financial services regulation;

(c) 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.

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-a 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, the form and contents of any disclosure

statement, with the exception of the counseling statement prepared by

the New York state office for the aging pursuant to paragraph (g) of

subdivision two of this section, 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 reverse 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 property securing the reverse

mortgage loan to a person other than an original mortgagor or mortgagors

shall result in the termination of the loan.

8. In a term reverse mortgage loan, the real property securing the

reverse mortgage loan may be reappraised by an independent appraiser at

the end of the loan term. If the value of the real 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 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

may 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 or 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 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.

10. Any authorized lender offering reverse mortgage loans pursuant to

this section shall also offer reverse mortgage loans pursuant to section

two hundred eighty-a of this article. Subject to this section in the

event that an authorized lender makes reverse mortgage loans under this

section then that lender must make an equal number of reverse mortgage

loans pursuant to section two hundred eighty-a of this article. Such

loans shall be made to individuals who meet the requirements promulgated

in section two hundred eighty-a of this article provided that such

individual seeking the loan would otherwise qualify and be approved for

that loan. In the event that no or insufficient applications for reverse

mortgage loans pursuant to section two hundred eighty-a of this article

are made to a lender who has previously made reverse mortgage loans

pursuant to this section then there shall be no requirement for that

lender to make a reverse mortgage loan pursuant to section two hundred

eighty-a of this article. It shall also not be a requirement that an

authorized lender make any reverse mortgage loan to any individual who

would not qualify for such loan and/or would not otherwise be approved

for such loan.

11. Nothing contained in this section, section six-h of the banking

law or any other provision of law shall be construed to prohibit a

banking organization or licensed mortgage banker from providing reverse

mortgages to homeowners in this state under the federal housing

administration's home equity conversion mortgage insurance demonstration

program.