Current through Register Vol. 46, No. 12, March 20, 2024
All reverse mortgage loans shall comply with the following
requirements:
(a) The security
instrument shall expressly and conspicuously bear a legend identifying the
security as a "reverse mortgage;"
(b) The mortgagor may prepay any reverse
mortgage loan without penalty at any time. The payment of any fees or charges,
such as a termination fee, that otherwise would be due at maturity without
prepayment shall not be deemed a penalty for these or any other
purposes;
(c) Mortgagees shall be
prohibited from using or attaching any property or asset of the mortgagor
except the real property securing the reverse mortgage loan;
(d) In the event that a mortgagee fails to
make payment of or remit to the mortgagor any monies required under any reverse
mortgage loan within 15 calendar days of its due date, the mortgagee shall
forfeit twice the interest that would have been earned on the outstanding loan
principal for the entire period during which payments to the mortgagor were
late, unless the mortgagee otherwise has the right to terminate the reverse
mortgage loan pursuant the "Lender's Limited Waiver of the Right of
Foreclosure" executed in accordance with section
79.7(d)
of this Part and due notice has been provided to the mortgagor or authorized
designee;
(e) No reverse mortgage
loan commitment or approval shall be issued by a lender until the applicant
presents a counseling acknowledgment (herein defined), provided in accordance
with 79.9(a)(4) of this Part and including the name address telephone number
and signature of the applicant and, if applicable, the non-mortgagor spouse and
the housing counselor, as well as, the date of the counseling which must be no
more than 6 months prior to the date of the signing of the commitment.
(1) A HUD Certificate of HECM Counseling may
be substituted for the counseling acknowledgment for R PL 280 -b
loans.
(2) All completed counseling
acknowledgments and HUD Certificates of HECM Counseling shall be maintained by
the mortgagee, for inspection by the superintendent, in an accurate,
reproducible, and accessible format for the entire term of the reverse mortgage
loan, and thereafter in accordance with applicable statutes;
(f) Interest shall only accrue
from the time monies are actually advanced to or on behalf of the mortgagor.
Accrued interest may be added to the loan principal;
(g) A reverse mortgage loan which provides
for the purchase of an annuity shall comply with the following conditions as
applicable:
(1) the company that issues the
annuity must have a rating of excellent or superior from A.M. Best Company and
must be licensed by the State of New York; and
(2) if a trustee holds the annuity in trust
during the life of the mortgagor, then:
(i)
the trustee must be a banking organization or a trust company which is
incorporated, chartered, organized or licensed under the laws of this State or
any other state or the United States;
(ii) pursuant to section
131(3) of the Banking Law,
any out-of-state trustee must appoint the superintendent as agent for service
of process for any matter arising from a reverse mortgage loan made to a New
York resident;
(iii) the trust
agreement must provide that it is governed by New York law;
(iv) payments derived from the annuity must
be paid by the trustee directly to the mortgagor irrespective of whether the
payment is made on behalf of the mortgagee; and
(v) the mortgagor must have a beneficial
interest in the trust irrespective of whether the mortgagee also has a
beneficial interest in the trust.
(h) Except for purchase money reverse
mortgage loans, the issuance of a commitment is a prerequisite to the closing
of any reverse mortgage loan and an applicant (or mortgagor) shall not be bound
for 3 business days after acceptance, in writing, of such commitment during
which time, such applicant (or mortgagor) reserves the right to cancel the
commitment but may still be responsible for fees actually paid to third
parties. An applicant may not waive the provisions of this
subsection.
(i) A mortgagee may, at
its option, for the period of time commencing at the end of the loan term, or
10 years after the reverse mortgage loan commences, whichever occurs first, and
ending at such time as the reverse mortgage loan is paid in full, receive no
more than 20 percent of the future appreciation of the property securing the
loan, i.e., "shared appreciation," or charge a fixed rate of interest on the
outstanding balance of monies advanced under the loan or any combination
thereof. Such appreciation shall not be considered interest for purposes of any
law regulating the maximum rate of interest which may be charged, taken or
received, including pursuant to sections
190.40 and
190.42 of the Penal Law. Loans which
contain "equity participation," may not provide for any other forms of equity
sharing or shared appreciation.
(j) All mortgagor shall retain the right to
lifetime possession of the real property that serves as security for a reverse
mortgage loan, as long as there is no event that would allow the mortgagee to
terminate the reverse mortgage loan pursuant to the "Lender's Limited Waiver of
the Right of Foreclosure" executed in accordance with section
79.7(d)
of this Part.
(k) The security
agreement must include the following:
(1) a
list of termination events;
(2) the
mortgagee's obligation to notify the mortgagor or authorized designee, in
writing, of any event that could lead to termination; and
(3) the name of a third-party, if any, chosen
by the mortgagor as an authorized designee to whom the mortgagee is obligated
to send written notice of any event that could lead to termination.
(l) Reverse mortgage loan
applicants are required to wait 3 days after submitting an application before
signing a commitment or in any way proceeding with a reverse mortgage loan. The
3-day period cannot be waived.
(m)
Requirements Specific to R PL 280 and R PL 280 -a loans
(1) the maximum loan to value ratio for any
loan at the time of loan closing shall not exceed 80 percent of the anticipated
value of the property at anticipated loan maturity or at any time prior
thereto. The loan to value ratio shall be calculated by dividing the numerator,
as defined in paragraph (i) of this subdivision, by the denominator, as defined
in paragraph (ii) of this subdivision.
(i) The
numerator of the ratio shall include all principal, all accrued loan interest,
all fees, costs and payments incurred in connection with the origination of the
loan including but not limited to charges for the purchase of annuities, the
payment of real estate taxes and insurance to the extent that a set aside
account is established to fund real estate tax and insurance obligations or the
lender has committed to advance funds to pay for such taxes and insurance on
the property securing the reverse mortgage loan and any shared appreciation
assuming:
(A)no prepayment of the reverse
mortgage loan;
(B) any loan
amounts, such as credit lines and set aside accounts, which may be drawn at the
discretion of the mortgagor or by the mortgagee are drawn fully at the earliest
opportunity;
(C) the historical
interest rate if fixed or, if variable, the yearly average of the base index
and margin chosen by the lender; and
(D)if applicable, a projected appreciation or
depreciation rate for home prices which is determined by the same factor as is
used in the denominator set forth in paragraph (2) of this
subdivision.
(ii) The
denominator of the ratio shall be determined by increasing or decreasing the
appraised value of the real property (as determined at loan closing, or no
earlier than 30 calendar days prior, by an independent certified or licensed
appraiser as provided for in article 6-E of the Executive Law) by a factor that
the creditor reasonably believes will be the average annual increase or
decrease in the value of the real property securing the reverse mortgage loan
from the loan closing until the anticipated loan maturity; provided, however,
that this factor shall in no event exceed the average of the yearly changes in
the Consumer Price Index for the geographic area closest to the real property
for the eight years preceding the year in which the loan is made without the
superintendent's prior written approval.
(iii) For a term reverse mortgage loan, the
anticipated loan maturity shall be the date of maturity of the loan.
(iv) For a tenure reverse mortgage loan, the
superintendent may, in his or her discretion, review and approve the data and
assumptions used to establish the anticipated loan maturity for each reverse
mortgage loan.
(2) As an
alternative to subdivision (1) of this section, the parties may agree that the
total obligation of the mortgagor to the mortgagee arising from the reverse
mortgage loan shall be no greater than 80 percent of the future appraised value
of the property at maturity, calculated in accordance with the standards set
forth in subsection (1)(i) above. The 80 percent cap shall be exclusive of any
actual losses incurred by the mortgagee as a direct result of a breach of a
loan covenant by the mortgagor. The difference between the principal and
accrued interest and 80 percent of the actual value of the property at maturity
shall be known as "equity participation."
(3) At the end of the term for all R PL 280
and R PL 280 -a term loans, the mortgagor may request that the real property
securing the loan be reappraised to increase the payments made to the mortgagor
or to extend the loan term. Except for term loans insured by any agency of the
State of New York, such reappraisal may be performed at the mortgagee's sole
discretion. In all cases, the mortgagee may require the mortgagor to pay the
cost of such reappraisal in advance. In the event the value of the property has
increased, the mortgagee may increase the loan payments or extend the loan term
(and, for term loans insured by any agency of the State of New York, must
increase the loan payment(s) or extend the loan term), subject to the
following:
(i) The loan-to-value ratio
limitations, as determined pursuant to this Part as of the date on which the
increase or extension would begin, shall not be exceeded.
(ii) Any existing insurance coverage shall be
increased to insure the additional amounts to be due.
(iii)The mortgagor shall execute all
documents reasonably requested by the mortgagee and pay all reasonable fees and
costs associated with the increase in payments or the extension of the loan
term provided that such fees and costs have been previously disclosed in
writing to the mortgagor.
(4) A lender must, in accordance with the
financial assessment form provided by the Department, review all applicants for
financial fitness as it relates to the payment of an applicant's property
charges. In the event that the results of the financial assessment require a
set aside account to be established, such account may bear interest at a rate
that is different from the interest rate on other advances made pursuant to the
terms of the reverse mortgage loan. A mortgagee may only charge interest on
advances actually made from the set aside account and not on the entire balance
in the set aside account.