§ 6-O*2 — Reverse cooperative apartment unit loans for persons sixty-two years of age or older

New York § 6-O*2

• Jurisdiction: New York
• Law BNK: Banking
• Art. 1: Short Title; Definitions; Miscellaneous Provisions

Text

* § 6-o. Reverse cooperative apartment unit loans for persons\nsixty-two years of age or older. 1. For purposes of this section, the\nfollowing terms shall have the following meanings:\n (a) Reverse cooperative apartment unit loan. A loan which is secured\nby shares or membership in a cooperative apartment that is or intended\nto be the primary residence of the borrower or borrowers the proceeds of\nwhich are advanced to the borrower or borrowers during the term of the\nloan in equal installments, or in advances through a line of credit or\notherwise, in a lump sum, or through a combination thereof. Interest and\nfees will accrue during the life of the loan and will be added to the\nprincipal balance of the loan, but will not become due and payable until\nthe borrower(s) dies, permanently vacates the apartment or defaults on\nthe terms of the loan, and will continue to accrue until the loan is\npaid in full.\n (b) Loan payout options:\n (i) Term payment option. Under the term payment option, equal monthly\npayments are made by the lender to the borrower for a fixed term of\nmonths chosen by the borrower.\n (ii) Tenure payment option. Under the tenure payment option, equal\nmonthly payments are made by the lender to the borrower, until the loan\nis prepaid in full or becomes due and payable.\n (iii) Line of credit payment option. Under the line of credit payment\noption, payments are made by the lender to the borrower at times and in\namounts determined by the borrower as long as the amounts do not exceed\nthe maximum amount of loan proceeds.\n (iv) Single lump sum payment option. Under the single lump sum payment\noption, the borrower receives an amount from the lender that does not\nexceed the maximum amount of loan proceeds. Set asides required for\ndisbursements such as loan closing costs or for monthly maintenance\nfees, will be deducted from the amount of proceeds available to the\nborrower.\n (c) Authorized lender. Any bank, trust company, national banking\nassociation, savings bank, savings and loan association, federal savings\nbank, federal savings and loan association, credit union, or federal\ncredit union or any licensed mortgage banker approved for the making of\nreverse mortgage loans by the superintendent or any entity exempted from\nlicensing pursuant to section five hundred ninety of this chapter and\napproved for the making of reverse mortgage loans by the superintendent.\n (d) Borrower. A tenant in severalty who is sixty-two years of age or\nolder, or if the cooperative apartment unit is held by tenants by the\nentirety or by joint tenancy, the youngest of which is sixty-two years\nage or older.\n (e) Superintendent. The superintendent of financial services of this\nstate.\n (f) Department. The department of financial services of this state.\n (g) Third-party contact. The lender must ask the borrower if they want\nto designate a third-party contact, such as a family member, trusted\nfriend, advisor or other party whom the borrower would like to be\ncontacted. It shall be the borrower's discretion to choose if the\nthird-party contact is to be contacted if (i) the borrower has not\nreturned the occupancy form, and/or (ii) the loan is in default for any\nreason and the lender plans to proceed on collecting on the loan, i.e.,\ninitiating eviction or foreclosure and/or (iii) the borrower cannot be\nreached.\n 2. A cooperative apartment unit loan pursuant to this section shall be\nsubject to the following:\n (a) the borrower shall be granted lifetime possession of the subject\npremises of the cooperative apartment unit for which the shares or\nmembership are the security for the reverse cooperative apartment unit\nloan, as long as such apartment unit remains the borrowers' primary\nresidence and the borrower is not in default under the reverse\ncooperative apartment unit loan. The borrower or borrowers must certify\nannually on each anniversary of the loan, that they reside in the unit\nand that it is their primary residence;\n (b) annually the lender shall advise the borrower or borrowers of the\nname and contact information, if any, on file for a third-party contact\ndesignated pursuant to paragraph (g) of subdivision one of this section\nand ask if the borrower or borrowers want to update or change the\ninformation for the third-party contract;\n (c) subject to such rules or regulations as the superintendent may\nadopt, a reverse cooperative apartment unit loan shall be made at either\na fixed or variable rate of interest;\n (d) subject to such rules or regulations as the superintendent may\nadopt, the authorized lender may require a borrower to establish a set\naside account for the purposes of paying property taxes, maintenance or\ncooperative fees, insurance premiums of the cooperative apartment unit,\nor for the payment of any other fees and expenses;\n (e) a lender who fails to make loan advances as required in the loan\ndocuments, and fails to cure an actual default after notice as specified\nin the loan documents, shall forfeit any right to collect interest or\nservice charges under the contract. The lender's right to recovery at\nloan maturity shall be limited to the outstanding balance as of the date\nof lender's default, minus all interest. However, a lender shall not be\nrequired to make loan advances under a loan if the borrower is in\ndefault under the loan;\n (f) the outstanding balance may be prepaid in full by the borrower\nwithout penalty at any time during the reverse cooperative apartment\nunit loan term;\n (g) an authorized lender is prohibited from using or attaching any\nproperty or asset of the borrower or heirs of the borrower except the\nshares or membership representing an ownership interest in the apartment\nunit securing the reverse cooperative apartment unit loan in settlement\nof a reverse loan obligation--the loan is a non-recourse loan;\n (h) an authorized lender shall deliver to the applicant upon\napplication, a statement that complies with the requirements established\nby the department providing the contact information for New York\napproved, or U.S. Department of Housing and Urban Development approved,\nreverse mortgage housing counselors with cooperative housing training\nwhom the cooperative apartment owner can call for independent counseling\nand information services. Further, no reverse loan commitment shall be\nissued by the authorized lender until the applicant presents, in\nwriting, a form that certifies the terms of the reverse cooperative\napartment unit loan have been explained to them by a New York or U.S.\nDepartment of Housing and Urban Development approved reverse mortgage\nhousing counselor with cooperative housing training;\n (i) an authorized lender shall deliver to an applicant such\ndisclosures as may be required by the superintendent which shall\ndescribe the relevant portions of the reverse loan being offered, and\nshall include but not be limited to the following items:\n (i) a schedule of payments to and from the borrower and the total\npayments in dollars over the life expectancy of the youngest borrower of\nthe reverse cooperative apartment unit loan for the borrower;\n (ii) a statement prominently displayed advising applicants to consult\nwith appropriate authorities regarding tax and estate planning\nconsequences of a reverse cooperative apartment unit loan;\n (iii) where applicable a description of prepayment and refinancing\nfeatures;\n (iv) to the extent determinable at or prior to the inception of the\nreverse cooperative apartment unit loan, the interest rate and, an\nestimate of the total interest payable on the reverse cooperative\napartment unit loan;\n (v) a statement concerning the compliance of the lender with the\ncriteria established by the superintendent that an authorized lender\nmust meet before it may make reverse cooperative apartment unit loans\npursuant to this section;\n (vi) a statement setting forth those events which would cause the loan\nto become due and payable (or cause the borrower to default) the reverse\ncooperative apartment unit loan;\n (vii) the loan is subject to a three day right of rescission by the\nborrower; and\n (viii) a financial statement setting forth an estimate of all costs\nassociated with the loan;\n (j) an authorized lender shall deliver to each borrower at the time of\nclosing of a reverse cooperative unit loan two copies of the borrower's\nright to cancel and instructions for how to cancel the loan that\ncomplies with the requirements to be prescribed by the superintendent;\n (k) a reverse cooperative apartment unit loan pursuant to this section\nshall expressly and conspicuously bear a legend identifying it as such\nin at least fourteen-point font;\n (l) a reverse cooperative apartment unit loan shall clearly set forth\nthe terms for when the loan becomes due and payable, including:\n (i) regardless of loan payout option chosen by the borrower, the loan\nnote shall state that the outstanding loan balance will not be due and\npayable in full until the last borrower dies, or if a borrower conveys\nall of his or her title in the property and no other borrower retains\ntitle to the property; and\n (ii) the loan note shall state that the outstanding loan balance shall\nbe due and payable in full if any of the following occur:\n (1) the cooperative apartment unit ceases to be the primary residence\nof a borrower for reasons other than death and the cooperative apartment\nunit is not the primary residence of at least one other borrower;\n (2) for a period of longer than twelve consecutive months, a borrower\nfails to occupy the cooperative apartment unit because of physical or\nmental illness and the cooperative apartment unit is not the primary\nresidence of at least one other borrower; or\n (3) an obligation of the borrower under the loan note is not met;\n (m) within thirty business days of learning of the occurrence of any\nevent listed in paragraph (l) of this subdivision, the mortgagee shall\nnotify the mortgagor and their authorized designee, in writing, of such\noccurrence, along with information on the right to cure. The mortgagee\nshall then allow the mortgagor forty-five calendar days to cure. A\nmortgagee may only terminate a reverse mortgage loan if the mortgagor\nfails to cure any termination event within such forty-five calendar day\nperiod. In the event that the borrower has not designated a third-party\ncontact to receive such notice of foreclosure, then the authorized\nlender or the holder of said reverse cooperative apartment unit loan\nshall notify the local or county office for the aging of its intent to\ncommence foreclosure proceedings. Such entity shall take appropriate\naction to protect the interests of the borrower;\n (n) a reverse cooperative apartment unit loan secured by shares or a\nmembership representing an ownership interest in a unit in a cooperative\nhousing corporation shall also be subject to the prior approval by the\ncooperative's board of directors; and\n (o) no reverse cooperative apartment unit loan shall be subject to\nmandatory binding arbitration.\n 3. A reverse cooperative apartment unit loan pursuant to this section\nmay:\n (a) provide that an authorized lender may, consistent with federal\nlaws and regulations, include a due-on-sale clause in its reverse\ncooperative apartment unit loan agreement and at its option exercise and\nenforce such clause in accordance with its terms; and\n (b) provide that the borrower's closing costs, including but not\nlimited to loan or commitment fees if any, insurance premiums, repairs,\nlegal fees, the costs of third party counseling, the costs of paying off\nany existing mortgages or liens, and other appropriate costs be included\nin the principal of the reverse cooperative apartment unit loan and\ndisbursed out of the loan proceeds at closing.\n 4. The superintendent shall adopt such rules or regulations as he or\nshe considers appropriate to govern a reverse cooperative apartment unit\nloan made pursuant to this section. No reverse cooperative apartment\nunit loan shall be made unless it conforms to the requirements of this\nsection and such rules and regulations as the superintendent may adopt.\n 5. No authorized lender or any other party or entity shall in any\nmanner, in the marketing or offering of reverse cooperative apartment\nunit loans, engage in any unfair or deceptive practices in connection\nwith the marketing or offering of reverse cooperative apartment unit\nloans, and, additionally, shall not:\n (a) use the words "public service announcement" in any commercial,\nmailing, advertisement or writing relating thereto;\n (b) use the words "government insured" or other similar language\nrepresenting that reverse cooperative apartment unit loans are insured,\nsupported and sponsored by any governmental entity in any commercial,\nmailing, advertisement or writing relating thereto; or\n (c) represent that any such loan is other than a commercial product.\n 6. (a) Every authorized lender and assignee must obtain a surety bond\nin the amount of one hundred thousand dollars for the benefit of claims\nagainst the lender/assignee for failure to perform their obligations to\nthe borrower. The superintendent will hold the surety bond. In addition,\na lender or assignee shall maintain an irrevocable standby letter of\ncredit from a financial institution approved by the superintendent in\nfavor of the lender or assignee in an amount necessary to fund all\nreverse mortgage loan requirements anticipated over the next twelve\nmonths for loans then on the lender's books and those expected to be\nmade over the next twelve months or three million dollars, whichever is\ngreater. The initial term of the letter of credit shall be at least two\nyears. A lender or assignee also shall maintain a minimum capital of ten\nmillion dollars. A lender may rely upon its parent company to meet the\nminimum capital requirements.\n (b) Every authorized lender or its agent shall provide, with any\nsolicitation for reverse cooperative apartment unit loan products mailed\nto a physical address within the state, supplemental consumer protection\nmaterials the content and form of which shall be specified by the\nsuperintendent or his or her designee.\n (c) Every authorized lender shall provide each applicant or potential\napplicant for a reverse cooperative apartment unit loan with the\ntelephone number and internet website address provided by the department\nfor the purposes of acquiring reverse cooperative apartment unit loan\ncounseling.\n (d) The superintendent is authorized to promulgate such rules and\nregulations as he or she shall deem necessary to implement the\nprovisions of this subdivision.\n 7. For reverse cooperative apartment unit loans, authorized lender and\ntheir agents shall:\n (a) provide a monthly account statement, and for all borrowers whose\nmaintenance fees, special assessments mortgage insurance payments,\nhomeowners insurance payments, or payments stemming from any other\nproperty obligation or obligations are administered by the authorized\nlender, and where these payments are derived from the proceeds of the\nloan, the authorized lender shall provide on the borrower's account\nstatement the current balance remaining in the borrower's line of credit\nor lifetime expectancy set aside, the projected annual property charges\nfor that year, and a notice which reads in at least fourteen point type:\n "YOUR MAINTENANCE FEES AND SPECIAL ASSESSMENTS ARE CURRENTLY BEING\nPAID BY THE PROCEEDS OF THIS LOAN. THE FUNDS THAT HAVE BEEN SET ASIDE\nARE EXPECTED TO BE EXHAUSTED AFTER THE MAINTENANCE FEES AND SPECIAL\nASSESSMENT PAYMENTS OF (SPECIFY EXPECTED MONTH AND YEAR). IF THE\nPROCEEDS OF THIS LOAN CANNOT PAY THE MAINTENANCE FEES AND SPECIAL\nASSESSMENTS, YOU MUST PAY THESE OBLIGATIONS OR YOUR COOP SHARES MAY BE\nLOST TO FORECLOSURE. PLEASE NOTE THAT MAINTENANCE FEES AND SPECIAL\nASSESSMENTS CAN VARY SO YOU SHOULD CONTINUE TO REVIEW THIS NOTICE FOR\nCHANGES."\n (b) by telephone and first class mail, inform and provide notice to a\nborrower when his or her home equity line of credit or life expectancy\nset aside is depleted to twenty percent. Such notice shall inform the\nborrower of his or her obligations relating to the cooperative apartment\nunit including, but not limited to, mortgage insurance, homeowners\ninsurance and real property taxes previously paid by such line of credit\nor life expectancy set aside, and that such obligations must continue to\nbe paid when the home equity line of credit or life expectancy set aside\nis depleted. Such notice shall use plain language, written in a clear\nand coherent manner using words with common and every day meanings,\nappropriately divided and captioned by its various sections. If the\nlender or its agent is unable to contact the borrower by telephone,\nnotice must be sent to the third-party contact if authorized by the\nborrower.\n (c) Each authorized lender shall, by telephone and first class mail,\ninform and provide notice to a borrower when his or her home equity line\nof credit or life expectancy set aside is depleted. Such notice shall\ninform the borrower of his or her obligations relating to the\ncooperative apartment unit including, but not limited to, mortgage\ninsurance, homeowners insurance and real property taxes, and that the\nhome equity line of credit or life expectancy set aside will no longer\npay these obligations. Such notice shall use plain language, written in\na clear and coherent manner using words with common and every day\nmeanings, appropriately divided and captioned by its various sections.\n 8. In the event that an authorized lender determines a reverse\ncooperative apartment unit loan to be in default on the basis that the\ncooperative apartment is no longer the primary residence of or occupied\nby the borrower, if during the verification of the borrower's primary\nresidence and/or occupancy no responses are received in response to\nmailings relating thereto, such lender shall cause a telephone call to\nbe made to the borrower, or if the borrower is unreachable by telephone,\nto the third-party contact if designated, and an in person visit to be\nmade to the borrower at the cooperative apartment to be made prior to\nthe commencement of any proceeding to enforce the lender's rights under\nthe note. During such visit, the authorized lender or its agent shall\nprovide clear information as to who they are, that the visit pertains to\nthe reverse cooperative apartment unit loan, the reason for the home\nvisit, and the telephone number to call for further information. The\nauthorized lender must wait at least thirty days following such visit,\nin addition to any additional time or notice requirements specified by\nany other provision of law, before initiating a foreclosure action on\nthe basis that the cooperative apartment is no longer the primary\nresidence of the borrower. If the borrower contacts the authorized\nlender and provides proof of residence or occupancy after such visit but\nbefore the commencement of a proceeding to enforce the lender's rights\nunder the note, the authorized lender shall be barred from initiating\nsuch action. Furthermore, no authorized lender shall charge a borrower\nany fee for any such visit and inspection. This prohibition on the\nimposition of fees shall include any and all inspections conducted by\nthe authorized lender to verify the status of the reverse cooperative\napartment unit loan, or any suspected or actual default condition.\n 9. Notwithstanding any inconsistent provision of law, the priority of\nthe lien of a reverse cooperative apartment unit loan, including the\nlien for all principal, interest, fees, costs, and other charges\nassessed in connection with the reverse loan, shall date from the filing\nof a UCC-1 notice for the loan irrespective of the date of any advance\nof reverse loan proceeds or the date by which an authorized lender shall\nbe entitled to accrued but unpaid interest, fees, costs or other\ncharges.\n 10. Nothing in this section shall be construed to limit, impair or\notherwise affect the priority, under applicable law, of any other\nmortgage, deed of trust, encumbrance or lien which was filed prior to\nthe effective date of this section.\n 11. The sale or transfer of the interest in the cooperative apartment\nunit to a person other than an original borrower or borrowers shall\nresult in the termination of the reverse loan.\n 12. Any person who has been injured by reason of any violation of this\nsection or any violation of the rules and regulations of the department\nrelating to the reverse cooperative apartment unit loan program may\nbring an action in his or her own name to recover treble his or her\nactual damages, plus the prevailing plaintiff's reasonable attorneys'\nfees.\n 13. Compliance with the provisions of this section shall be conditions\nprecedent to commencing an action to foreclose upon a reverse\ncooperative apartment unit loan which is subject to the provisions of\nthis section, and the failure to comply therewith shall be a complete\ndefense to such action.\n * NB There are 2 § 6-o's\n