§ 279 — Graduated payment mortgage

New York § 279

• Jurisdiction: New York
• Law RPP: Real Property
• Art. 8: Conveyances and Mortgages

Text

§ 279. Graduated payment mortgage. 1. A "graduated payment mortgage"\nmeans a mortgage which provides: (i) monthly payments of principal and\ninterest which are lower during the initial years of the mortgage; and\n(ii) that the graduation rate for the monthly payments, the term of\ngraduation and the interest rate are fixed throughout the term of the\nloan; and (iii) monthly payments of principal and interest shall be\nsufficient to pay all interest and to effect full repayment of principal\nwithin the term of the mortgage as fixed at its origination.\n 2. Every graduated payment mortgage shall be subject to the following:\n (a) the average annual rate of increase for principal and interest\npayments shall not exceed:\n (i) 7.5 percent per annum for a mortgage with a graduation period of\nfive years or less;\n (ii) 6.5 percent per annum for a mortgage with a graduation period of\nsix years;\n (iii) 5.5 percent per annum for a mortgage with a graduation period of\nseven years;\n (iv) 4.5 percent per annum for a mortgage with a graduation period of\neight years;\n (v) 3.5 percent per annum for a mortgage with a graduation period of\nnine years; and\n (vi) 3 percent per annum for a mortgage with a graduation period of\nten years.\n (b) periodic payments of principal and interest shall not change more\nthan once per annum and increases shall be limited to the first ten\nyears of the term of the mortgage.\n (c) payments of principal and interest are required in amounts\nsufficient to pay all interest and full repayment of principal within a\nperiod not to exceed forty years.\n 3. Graduated payment mortgages may be offered only if the lender:\n (a) offers the prospective borrower a non-graduated payment mortgage\nloan at the prevailing rate being offered by that lender;\n (b) provides the mortgagor with the option to convert the graduated\npayment mortgage loan to a non-graduated payment mortgage loan at a\npre-determined time agreed upon between the borrower and lender and at\nthe same rate of interest provided for the graduated payment mortgage\nloan; and\n (c) discloses in advance on a uniform disclosure statement, prescribed\nby the superintendent of financial services, the relevant provisions of\nthe graduated payment mortgage loan including:\n (i) a side by side comparison of interest rates and other terms that\ndiffer between a non-graduated payment mortgage loan and a graduated\npayment mortgage loan;\n (ii) payment schedules for both types of loans and the total payment\nin dollars over the full term of each loan;\n (iii) a statement prominently displayed that borrowers have the option\nto elect a non-graduated payment mortgage loan; and\n (iv) a description of the conversion option.\n 4. Failure of any lender to comply with any of the foregoing\nprovisions shall not render the mortgage void or unenforceable unless\notherwise provided by law.\n 5. The provisions of this section shall be applicable only to a\nmortgage on real property improved by a one to six family residence\ngiven by a natural person to secure a loan or to any agreement or note\nmade by a natural person in pursuance of any loan for the purpose of\nfinancing the purchase of or refinancing an existing ownership interest\nin certificates of stock or other evidence of an ownership interest in,\nand a proprietary lease from, a corporation or partnership formed for\nthe purpose of the cooperative ownership of real estate, unsecured\nexcept to the extent of an assignment or transfer of the stock\ncertificates or other evidence of ownership interest of the borrower and\nthe proprietary lease within ninety days from the making of the loan\nwhich would otherwise conform to the provisions of this section but is\nnot otherwise entitled to be recorded as a mortgage.\n