New York Adopts Reverse Mortgage Provisions
New York has enacted provisions relating to the regulation of reverse mortgages that are issued pursuant to the Federal Home Equity Conversation Mortgage Program. These provisions are effective as of March 5, 2020.
Definitions
The first section of the new provisions provides definitions for the terms “reverse mortgage loan,” “authorized lender,” and “superintendent.”
Prohibited Actions
The second section outlines several practices in which authorized lenders are prohibited from engaging. Authorized lenders shall not: 1) engage in unfair or deceptive practices while marketing or offering reverse mortgages; 2) use the words “public service announcement” in any commercial, mailing, or advertisement for reverse mortgages; or 3) represent that a reverse mortgage is anything other than a commercial product.
Mandatory Actions
The third section of the new provision sets forth a list of rules by which authorized lenders must abide. Authorized lenders must: 1) provide supplemental consumer protection materials with any form of solicitation for reverse mortgage products send via the mail; and 2) provide each reverse mortgage applicant with the telephone number and website provided by the federal Department of Housing and Urban Development for the purpose of receiving mortgage counseling.
Foreclosure
The provisions also set forth a verification process for cases where an authorized lender seeks to foreclose on a property secured by a reverse mortgage due to the mortgaged real property no longer being used as the mortgagor’s primary residence. First, the lender must send written notice to the mortgagor at the mortgaged real property notifying the mortgagor of an intent to foreclose. The authorized lender must additionally call the mortgagor if no responses to physical mailings regarding the foreclosure are received. If the mortgagor is unreachable by telephone, the authorized lender is required to make an in person visit to the mortgagor at the mortgaged real property prior to commencing any foreclosure proceedings. During the in person visit, the lender shall provide clear information as to who they are, explain that the visit pertains to a possible foreclosure of the reverse mortgage, and provide a telephone number to call for more information. The authorized lender is required to wait at least thirty days following the in person visit before initiating the foreclosure. If during the thirty day waiting period the mortgagor provides proof of residence or occupancy, foreclosure proceedings may not be commenced.
For the full text of Assembly Bill 5626, please refer to https://legislation.nysenate.gov/pdf/bills/2019/A5626.
Elizabeth Dailey, JD, is a Regulatory Compliance Director with CLA. She is a graduate of the University of New Hampshire and earned her juris doctor at New England Law. She is admitted to the Massachusetts Bar.
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