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

§ 280. Reverse mortgage loans for persons sixty years of age or older.\n1. For purposes of this section the following terms shall have the\nfollowing meanings:\n (a) Reverse mortgage loans. A loan which is secured by a first\nmortgage on real property improved by a one- to four-family residence or\ncondominium that is the residence of the mortgagor(s) the proceeds of\nwhich are advanced to the mortgagor(s) during the term of the loan in\nequal installments, in advances through a line of credit or otherwise,\nin lump sums, or through a combination thereof.\n (b) Term reverse mortgage loan. Any reverse mortgage loan that has a\nfixed term to maturity.\n (c) Tenure reverse mortgage loan. Any reverse mortgage loan that does\nnot have a fixed term to maturity, but rather matures solely upon\ncontingent events, such as events including but not limited to death or\nthe real property securing the loan no longer being the mortgagors'\nprincipal residence.\n (d) 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 of financial services or\nany entity exempted from licensing pursuant to section five hundred\nninety of the banking law and approved for the making of reverse\nmortgage loans by the superintendent of financial services.\n (e) Mortgagor. A tenant in severalty who is sixty years of age or\nolder, or if the real property is held by tenants by the entirety or by\njoint tenancy, the youngest of which is sixty years of age or older.\n (f) Superintendent of financial services. The superintendent\nestablished pursuant to section two hundred two of the financial\nservices law.\n 2. A reverse mortgage loan pursuant to this section shall be subject\nto the following:\n (a) the loan to value ratio shall be determined by the superintendent\nof financial services; and\n (b) subject to such rules or regulations as the superintendent of\nfinancial services shall adopt, any authorized lender or any successor\nor assign of such authorized lender which suspends, ceases or makes late\npayments to a mortgagor under a reverse mortgage loan shall be subject\nto forfeiture (as liquidated damages to such mortgagor and not as a\npenalty) of twice the interest which would otherwise have been earned\nduring the period in which payments were suspended, ceased or made late,\nprovided that said authorized lender or any successor or assign of such\nauthorized lender shall have the right to make payments pursuant to said\nloan agreement within fifteen days of each payment date, without\npenalty; and\n (c) the outstanding balance may be prepaid in full by the mortgagor\nwithout penalty at any time during the term and/or tenure of the loan;\nand\n (d) an authorized lender is prohibited from using or attaching any\nproperty or asset of the mortgagor except the real property securing the\nreverse mortgage loan in settlement of a reverse mortgage obligation;\nand\n (e) the authorized lender must deliver to an applicant such\ndisclosures as may be required by the superintendent of financial\nservices which shall describe the relevant portions of the reverse\nmortgage being offered, and shall include but not be limited to the\nfollowing items:\n (i) except for a tenure reverse mortgage loan, a schedule of payments\nto and from the mortgagor and the total payments in dollars over the\nterm of the reverse mortgage loan for both the mortgagor and mortgagee\ndepending on the type of reverse mortgage loan being offered;\n (ii) a statement prominently displayed advising applicants to consult\nwith appropriate authorities regarding tax and estate planning\nconsequences of a reverse mortgage;\n (iii) where applicable a description of prepayment and refinancing\nfeatures;\n (iv) the interest rate and, except for a tenure reverse mortgage loan,\nthe total interest payable on the loan;\n (v) a statement concerning the compliance of the lender with the\ncriteria established by the superintendent of financial services that an\nauthorized lender must meet before it may make reverse mortgage loans\npursuant to this section; and\n (vi) a statement setting forth those events which would terminate the\nreverse mortgage loan; and\n (f) in the event that an authorized lender or holder of the reverse\nmortgage loan intends to initiate foreclosure proceedings the mortgagor\nshall have the right to designate a third party who shall be notified.\nIn the event that the mortgagor has not designated a third party to\nreceive such notice of foreclosure, then the authorized lender or the\nholder of said reverse mortgage loan shall notify the local or county\noffice for the aging of its intent to commence foreclosure proceedings.\nSuch entity shall take appropriate action to protect the interests of\nthe mortgagor; and\n (g) an authorized lender must deliver to the applicant, upon\napplication, if available, a statement prepared by the local or county\noffice for the aging on the advisability and availability of independent\ncounseling and information services. Further, no reverse mortgage\ncommitment shall be issued by an authorized lender until the applicant\npresents, in writing, a statement that the terms of the reverse mortgage\nloan have been explained by an attorney, a housing and urban development\ncertified counselor or any other counseling service as indicated on the\nstatement supplied by the county or local office for the aging or a\nsigned affidavit indicating that the applicant, although made aware of\nthe importance of counseling and its local availability through the\nprovision of such information by the authorized lender, chooses not to\nutilize any of the aforementioned available services. The form of such\nstatement and affidavit shall be developed by the New York state office\nfor the aging; and\n (h) any such reverse mortgage shall expressly and conspicuously bear a\nlegend identifying it as such; and\n (i) subject to such rules or regulations as the superintendent of\nfinancial services may adopt, a reverse mortgage loan shall be made at\neither a fixed or variable rate of interest.\n 3. A reverse mortgage loan pursuant to this section may:\n (a) provide that the mortgagor's closing costs, including but not\nlimited to loan or commitment fees, if any, insurance premiums, house\nrepairs, legal fees, the cost of annuities, the costs of third-party\ncounseling, the costs of existing mortgages or liens, and other\nappropriate costs be included in the principal of the reverse mortgage\nloan and disbursed out of the loan proceeds at closing;\n (b) provide for the maintenance of an escrow account by the authorized\nlender for purposes of payment of real property taxes, insurance on the\nproperty securing the loan, or any other fees and expenses as may be\npermitted by superintendent of financial services regulation;\n (c) provide that an authorized lender may, consistent with federal\nlaws and regulations, include a due-on-sale clause in its reverse\nmortgage loan agreement and at its option exercise and enforce such\nclause in accordance with its terms.\n 4. The superintendent of financial services shall adopt those rules or\nregulations as it considers appropriate to govern reverse mortgage loans\nmade pursuant to this section. No reverse mortgage loan shall be made\nunless it conforms to the requirements of this section and such rules\nand regulations as the superintendent of financial services may adopt\nexcept those reverse mortgage loans made pursuant to section two hundred\neighty-a of this article. A reverse mortgage loan made by any authorized\nlender, national banking association, federal savings and loan\nassociation or federal credit union in conformity with applicable\nfederal laws and regulations specifically regulating reverse mortgage\nloans shall be deemed to conform to the requirements of this section\nunless such reverse mortgage loan fails to conform to such rules and\nregulations as the superintendent of financial services has expressly\ndeclared to be neither preempted by, nor otherwise inconsistent with\nsuch federal laws or regulations. Those rules or regulations shall\ninclude, but are not limited to, the form and contents of any disclosure\nstatement, with the exception of the counseling statement prepared by\nthe New York state office for the aging pursuant to paragraph (g) of\nsubdivision two of this section, that authorized lenders must provide to\nmortgagors.\n 5. Notwithstanding any inconsistent provision of law, the priority of\nthe lien of a reverse mortgage, including the lien for all principal,\ninterest, fees, costs, shared appreciation and other charges assessed in\nconnection with the reverse mortgage, shall date from the recording of\nthe reverse mortgage irrespective of the date of any advance of reverse\nmortgage loan proceeds or the date by which an authorized lender shall\nbe entitled to shared appreciation or accrued but unpaid interest, fees,\ncosts or other charges.\n 6. 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 recorded or filed\nprior to the effective date of this section.\n 7. The sale or transfer of the real property securing the reverse\nmortgage loan to a person other than an original mortgagor or mortgagors\nshall result in the termination of the loan.\n 8. In a term reverse mortgage loan, the real property securing the\nreverse mortgage loan may be reappraised by an independent appraiser at\nthe end of the loan term. If the value of the real property has\nappreciated, the term of the reverse mortgage may be extended or\nrefinanced, however, the total reverse mortgage loan amount may not\nexceed such amount or ratio as may be determined by the superintendent\nof financial services. The refinancing of the reverse mortgage loan\nshall be provided by the original authorized lender or by any other\nauthorized lender designated by the mortgagee.\n 9. The principal, including any accrued but unpaid interest, of a\nreverse mortgage loan agreement entered into pursuant to this section\nmay be insured by the mortgagor. If such insurance is purchased from or\notherwise provided by any agency of the state of New York the mortgagor\nshall be granted the right, for a term reverse mortgage loan, to\nrefinance or extend the reverse mortgage loan at the end of the term,\nsubject to such rules or regulations as the superintendent of financial\nservices may adopt. The authorized lender shall have the option to\nchoose between refinancing or extending the reverse mortgage loan.\nSubject to obtaining an adequate increase in the insurance and subject\nto such rules and regulations as the superintendent of financial\nservices may adopt, the total reverse mortgage loan amount shall not\nexceed such amount or loan to value ratio as may be determined by the\nsuperintendent of financial services. The refinancing of the reverse\nmortgage loan shall be provided by the original authorized lender or by\nany other authorized lender designated by the mortgagee.\n 10. Any authorized lender offering reverse mortgage loans pursuant to\nthis section shall also offer reverse mortgage loans pursuant to section\ntwo hundred eighty-a of this article. Subject to this section in the\nevent that an authorized lender makes reverse mortgage loans under this\nsection then that lender must make an equal number of reverse mortgage\nloans pursuant to section two hundred eighty-a of this article. Such\nloans shall be made to individuals who meet the requirements promulgated\nin section two hundred eighty-a of this article provided that such\nindividual seeking the loan would otherwise qualify and be approved for\nthat loan. In the event that no or insufficient applications for reverse\nmortgage loans pursuant to section two hundred eighty-a of this article\nare made to a lender who has previously made reverse mortgage loans\npursuant to this section then there shall be no requirement for that\nlender to make a reverse mortgage loan pursuant to section two hundred\neighty-a of this article. It shall also not be a requirement that an\nauthorized lender make any reverse mortgage loan to any individual who\nwould not qualify for such loan and/or would not otherwise be approved\nfor such loan.\n 11. Nothing contained in this section, section six-h of the banking\nlaw or any other provision of law shall be construed to prohibit a\nbanking organization or licensed mortgage banker from providing reverse\nmortgages to homeowners in this state under the federal housing\nadministration's home equity conversion mortgage insurance demonstration\nprogram.\n