§ 6-F — Alternative mortgage instruments made by banks, trust companies, savings banks, savings and loan associations and credit unions

§ 6-f. Alternative mortgage instruments made by banks, trust\ncompanies, savings banks, savings and loan associations and credit\nunions. 1. Notwithstanding any inconsistent provision of this chapter\nor any other law of this state, the superintendent of financial services\nis authorized to adopt such rules or regulations as shall permit banks,\ntrust companies, foreign banking corporations licensed to maintain a\nbranch or agency in this state, savings banks, savings and loan\nassociations, credit unions and persons and entities engaging in the\nbusiness described in section five hundred ninety of this chapter to\nmake residential mortgage loans and cooperative apartment unit loans\nwhich provide for (a) periodic readjustments of the rate of interest\ncharged for the loan or successive terms of the loan or (b) terms of\nloan which are shorter than the term of the mortgage or (c) repayment of\nthe principal amount of the loan by regular payments which are not equal\nin amount throughout the term of the mortgage or (d) the lender thereof\nto receive a share in the future appreciation of the property serving as\nsecurity for the loan under the circumstances set forth in the following\nsentence or (e) any combination of paragraphs (a), (b), (c) and (d) of\nthis subdivision, subject to the provisions of subdivision two of this\nsection. Where the lender or holder of a residential mortgage loan or\ncooperative apartment unit loan enters into a written agreement with the\nborrower under which the lender or holder conditionally reduces an\namount of principal of such loan in order to assist a borrower at risk\nof foreclosure to avoid such foreclosure, the lender or holder may enter\ninto a written agreement (a "shared appreciation agreement") with the\nborrower under which the lender shall be entitled to share in the\nappreciation of the market value of the real property or cooperative\nshares and proprietary lease securing such loan between the effective\ndate of such reduction in principal amount until the date when the\nproperty is sold, provided that the amount the lender is entitled to\nreceive under such shared appreciation agreement shall be the lesser of\n(i) the amount of such reduction in principal, plus interest on such\namount from the date of such reduction to the date of payment at the\nsame rate of interest as applies to the remaining principal amount of\nthe residential mortgage loan, and (ii) fifty percent of the amount of\nsuch appreciation. Such amounts shall be payable when the mortgagor\nsells the residential real property or cooperative shares and\nproprietary lease that secure the loan. Such shared appreciation\nagreement shall expressly and conspicuously bear a legend at the top of\nthe agreement in at least fourteen-point type which shall include the\nfollowing: "In this agreement, you are giving away some of any future\nincrease in value of your home. Please read carefully." For purposes of\nthis subdivision, the appreciation of the property shall be measured as\nthe difference, if positive, between the gross sales proceeds (net of\nany reasonable real estate commission) of the sale of the property and\nthe value of the property at the time of the closing of the shared\nappreciation mortgage, as determined by an appraisal by an independent\nNew York state licensed real estate appraiser. Recovery of such\nreduction in the principal amount shall not be deemed to be interest for\nany purpose of the laws of this state.\n Any shared appreciation agreement shall be accompanied by a notice,\nwhich shall be on a separate page from the shared appreciation agreement\nand shall contain the following heading in bold, fourteen-point type:\n"Important disclosures about the contract in which you agree to give\naway a part of any future increase in value of your home. Please read\ncarefully." The notice shall include the following disclosures:\n (1) a statement that the lender will be entitled to share in any\nappreciation of the market value of the mortgaged property that occurs\nbetween the time of the loan modification and the time the property is\nsold, up to the amount of principal forborne plus interest on such\namount at the applicable rate of interest on the mortgage but in no\nevent more than fifty percent of the amount of such appreciation, and\nproviding at least three examples of how such shared appreciation may\naffect the borrower at the time the borrower sells the mortgaged\nproperty, such examples to include (A) no appreciation in the value of\nthe mortgaged property, (B) appreciation of twenty percent and (C)\nappreciation of fifty percent;\n (2) a statement advising the borrower to seek independent counseling\nfrom a lawyer, a HUD-certified mortgage counselor or a tax advisor\nregarding (A) the trade-off between a current reduction in the size of\nthe mortgage, versus the promise to give up part of the future\nappreciation of the home, and (B) the tax consequences of the principal\nforgiveness and shared appreciation agreement, and providing a list of\nthe names and contact information of five HUD-certified mortgage\ncounselors in the county where the mortgaged property is located or, if\nthere are fewer than five such counselors in that county, the list may\ninclude counselors in one or more neighboring counties;\n (3) a statement on the potential effect of the shared appreciation\nagreement on any future refinancing of the mortgage and the potential\neffect of any prepayment or refinancing of the mortgage on the\nappreciation sharing agreement; and\n (4) such other disclosures as the superintendent of financial services\nmay require.\n 2. Any rules or regulations which are adopted by the superintendent of\nfinancial services pursuant to subdivision one of this section:\n (a) shall provide for disclosures and notices to the borrower with\nrespect to the terms and conditions of the loan and the mortgage, and\nthe superintendent of financial services may require the adoption of\nuniform disclosure and notice forms for this purpose;\n (b) shall provide for the conditions governing renewals of the term of\nthe loan;\n (c) shall not permit any uninsured loan secured by residential real\nproperty to be made in an amount exceeding ninety percent of the\nappraised value of the property; and\n (d) shall not allow, with respect to any specific alternative mortgage\ninstrument which permits a periodic readjustment of the rate charged on\nthe loan, for a greater change in rate than that permitted under federal\nlaw or regulations to federally-chartered banking organizations located\nin this state for loans made pursuant to an equivalent alternative\nmortgage instrument.\n