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

§ 280-a. Reverse mortgage loans for persons seventy years of age or

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

the following meanings:

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

otherwise, in lump sums, or through a combination thereof.

(b) Term reverse mortgage loan. As used in this section, any reverse

mortgage loan that has a fixed term for payments to the mortgagor(s).

(c) Tenure reverse mortgage loan. As used in this section, any reverse

mortgage loan that does not have a fixed term for payments to the

mortgagor(s).

(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 seventy 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 seventy years of age or older

and whose income does not exceed eighty percent of the median income of

the county in which he or she resides.

(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 mortgagor shall be granted lifetime possession of the subject

premises of the real property which is the security for the reverse

mortgage loan, as long as such real property remains the mortgagors'

principal residence and subject to a limited waiver of the right of

foreclosure as determined by the superintendent of financial services;

and

(b) the term of the reverse mortgage, except for a tenure reverse

mortgage loan, shall be for a period of ten years or less; and

(c) the loan to value ratio shall be determined by the superintendent

of financial services; and

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

financial services shall adopt, for that period of time commencing at

the end of the loan term or ten years after the reverse mortgage loan

commences, whichever occurs first, and ending at such time as the

reverse mortgage loan is paid in full, the authorized lender, at its

option, may receive no more than twenty percent of the future

appreciation of the property securing the reverse mortgage loan as full

or partial consideration for the making of a reverse mortgage loan;

provided, however, that such future appreciation shall be limited by

such rules and regulations as the superintendent of financial services

may adopt or the authorized lender may charge a fixed rate of interest

on the outstanding balance of monies advanced under the reverse mortgage

agreement or any combination thereof. Said reverse mortgage loan shall

not come due and shall be extended until the voluntary relinquishment by

the mortgagors of possessory interest in such real property, the real

property no longer being the mortgagors' principal residence, the death

of the mortgagors, or such other events as may be determined by the

superintendent of financial services. Any such appreciation shall not be

considered interest for the purposes of any law regulating the maximum

rate of interest which may be charged, taken or received including

sections 190.40 and 190.42 of the penal law; and

(e) the authorized lender shall maintain an escrow account for the

purposes of paying real property taxes, insurance premiums of the

property securing the reverse mortgage loan, or for the payment of any

other fees and expenses as may be permitted by the superintendent of

financial services regulation; and

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

financial services may adopt, an authorized lender or any successor or

assign of such authorized lender which may 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

(g) an 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) to the extent determinable at or prior to the inception of the

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

reverse mortgage loan, the total interest payable on the reverse

mortgage 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

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

without penalty at any time during the reverse mortgage loan term; and

(i) 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

(j) 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 the authorized lender until the applicant

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

loan have been explained to them 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

(k) a reverse mortgage pursuant to this section shall expressly and

conspicuously bear a legend identifying it as such; and

(l) 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; and

(m) 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.

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

(a) 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;

(b) 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 costs 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.

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 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:

(a) any limitations on the taking of a percentage of the future

appreciation of the real property securing the reverse mortgage loan as

consideration for making the reverse mortgage loan;

(b) the execution by an authorized lender of a limited waiver of the

right of foreclosure;

(c) with the exception of the counseling statement prepared by the New

York state office for the aging pursuant to paragraph (j) of subdivision

two of this section, the form and contents of any disclosure statement

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 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 estate securing the reverse

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

shall result in the termination of the reverse mortgage loan.

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

reverse mortgage may be reappraised by an independent appraiser at the

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

9. The principal, including any accrued but unpaid interest, of a

reverse mortgage loan agreement entered into pursuant to this section

must 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 and 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 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.