(a) Upon accepting
an application or charging any fee authorized under section
79.8(a)
of this Part, each loan applicant must be provided with a counseling packet,
including the following documents, as is relevant to the type of loan being
offered:
(1) A counseling statement - the
following notice, or a notice to like effect, in Times New Roman, 28-point type
face, on a separate sheet:
A reverse mortgage loan is a complex financial product that
provides a means of using the equity you have built up in your home, or the
value of your home, as a source of additional income. If you decide to obtain a
reverse mortgage loan, you will sign binding legal documents that will have
important legal and financial implications for you and your estate.
It is therefore important that you consult a housing
counselor, in addition to, tax, legal and financial advisers regarding
entitlements and tax and estate planning consequences of a reverse mortgage
loan.
Your lender must provide a list, approved by the Department
of Financial Services, of housing counselors available in your
community.
Senior citizen advocacy groups advice against using the
proceeds of a reverse mortgage loan to purchase an annuity or related financial
product. If you are considering obtaining lump sum proceeds for this purpose or
any other purpose, you should discuss the financial implications of doing so
with your tax, legal and financial advisors, as well as, your housing counselor
and family members.
IMPORTANT NOTICE REGARDING THE COOLING-OFF PERIOD: New York
State requires a 3-day cooling-off period after the submission of an
application for a reverse mortgage loan. During this 3-day period of time, you
cannot be required to sign a commitment or in any way proceed with the loan.
The purpose of this requirement is to provide you with time to consider whether
to secure a reverse mortgage loan. Potential borrowers are advised to seek
additional information from a housing counselor or other appropriate
professional during this 3-day period. The 3-day cooling-off period cannot be
waived.
Interest accrues from the time monies are advanced to or on
behalf of the mortgagor.
You have a right to designate a third party to be notified in
writing of any event that could lead to termination of the reverse mortgage
loan and to whom a copy of any foreclosure documents must be
furnished.
(2) Additional
disclosures - an additional notice including the following information:
(i) the disclosing party's toll-free
telephone number for questions, comments or complaints. If there is no
toll-free telephone number, the disclosing party must disclose that it will
accept collect calls;
(ii) the
telephone number and internet website address provided by the Federal
Department of Housing and Urban Development for the purposes of acquiring
reverse mortgage loan counseling;
(iii) a notice that the mortgagor or
applicant can submit written complaints to the New York State Department of
Financial Services, Mortgage Banking, at the address and website set forth in
section
1.1 of
Supervisory Policy G 1 of this Title;
(iv) a list of every event which would allow
the mortgagee to terminate or accelerate the loan or could otherwise result in
the forced sale of the mortgaged property. Such events shall be explained
clearly and in a manner which ensures that the applicant reasonably understands
their implications. If applicable, the list shall be accompanied by an explicit
warning that the mortgagor may be compelled to move out of his or her home at
the expiration of the loan term;
(v) the only asset of the mortgagor which may
be used to satisfy the reverse mortgage loan is the real property securing the
loan, subject to any limitation thereon as the mortgagor and mortgagee may
agree to pursuant to section
79.5(c)
of this Part;
(vi) the loan may be
prepaid at any time without penalty, how the value of the home will be
determined at the time of prepayment, and the method by which the then
outstanding loan balance will be prepaid;
(vii) all fees, costs and payments to be paid
by the mortgagor;
(viii) a
description of any conditions or limitations on the refinancing or extension of
any loan, and if applicable, the mortgagor' right to refinance or extend the
loan;
(ix) if applicable, the
availability of an annuity, whether an annuity will be required, and if there
is an annuity, when the annuity payments will commence, who will own the
annuity and, any affiliation between the disclosing party and the company from
which the annuity will be purchased;
(x) whether the broker or any entity acting
in a mortgage brokerage capacity, as a general business practice, utilizes the
services of two or fewer lenders, and if so, the name(s) of the
lender(s);
(xi) for term loans, a
schedule and explanation of estimated payments to the mortgagor, whether or not
property taxes and insurance premiums are to be deducted from such payments,
and the total payment in dollars over the term of the loan. In addition, the
disclosure shall state the repayment date and other events which cause the loan
to become due and payable;
(xii)
for tenure loans, a schedule of estimated payments to the mortgagor shall be
furnished. The lender or broker shall label such schedules as
"estimates;"
(xiii) a statement
indicating whether a set aside account is required to pay property charges and,
if so, an approximation of the amount to be set aside;
(xiv) a statement indicating whether and what
type(s) of mortgage and/or property insurance will be required and the cost of
any premiums, broken down monthly and over the life of the loan;
(xv) if applicable, that the loan provides
for the mortgagee to receive a percentage of the future appreciated value of
the property, i.e., "shared appreciation," what that
percentage is, and the method of calculating such amount. In addition, the
lender shall provide both a narrative explanation and an example of the
application of its methodology. This example must use as its projected real
estate appreciation or depreciation rate for home prices, the average of the
yearly changes in the Consumer Price Index for Shelter for New
York-Newark-Jersey City area for the eight years preceding the year in which
the loan is made;
(xvi) the
interest rate(s) to be charged on the outstanding principal and whether the
rate(s) are fixed, variable or both. For a term loan with a fixed rate of
interest, the lender or broker shall also disclose the total interest payable
on the loan principal, assuming maturity of the loan at expiration of the term.
For a term loan with a variable rate of interest, the lender shall disclose
also the estimated total interest payable on the loan principal using the
yearly average of the base index and margin chosen by the lender for the
eight-year period preceding the loan closing and assuming the maturity of the
loan at expiration of the term. A shared appreciation mortgage constitutes a
variable interest rate mortgage and is subject to the same disclosure
requirements state and federal law imposes on all variable interest rate
mortgages. For tenure reverse mortgage loans, the same disclosures shall be
made, except that maturity shall be assumed at the actuarial life expectancy of
the mortgagor, or, if there is more than one mortgagor, the younger of the
mortgagors; and
(xvii) that the
loan provides for the lender to receive any form of equity participation the
maximum total percentage obligation of the mortgagor to the lender arising from
the reverse mortgage loan, what is included in this maximum and what is
excluded from it. In addition, the lender shall provide both a narrative
explanation and an example demonstrating equity participation.
(3) Counseling checklist - a
checklist of issues to be discussed with a housing counselor, printed on a
separate sheet of paper in Times New Roman 28-point font and including the
following:
(i) how unexpected medical or other
events that cause the applicant to move out of the home earlier than
anticipated, either permanently or for more than one year, will impact the
projected total annual loan cost of the mortgage;
(ii) the extent to which the applicant's
financial needs could be better met by options other than a reverse mortgage
loan;
(iii) whether the applicant
intends to use the proceeds of the reverse mortgage loan to purchase an annuity
or other insurance products and the consequences of doing so;
(iv) the effect of repayment of the loan on
non-borrowing residents of the home after all mortgagors have died or
permanently left the home;
(v) the
applicant's ability to finance routine or catastrophic home repairs, especially
if maintenance is a factor that may determine when the mortgage becomes payable
or will allow the mortgagee to accelerate or terminate the reverse mortgage
loan;
(vi) a statement that the
reverse mortgage loan has tax and estate planning consequences and may affect
levels of, or eligibility for, government benefits, grants or pensions, and
that applicants are advised to explore those matters with appropriate
professionals; and
(vii) the
ability of the applicant to finance alternative living accommodations, such as
assisted living or long-term care nursing home registry, after the applicant's
equity is depleted.
(4)
Counseling acknowledgment- a blank acknowledgment, printed on a separate sheet
of paper, allowing for an applicant to choose from the following options:
(i) the terms of the reverse mortgage loan
have been explained, in-person, by an attorney, a housing counselor or any
other in-person counseling services indicated on the counseling statement;
and
(ii) either:
(a) for R PL 280 -b loans. The applicant,
although made aware of the importance of in-person counseling and its local
availability through the provision of such information by the lender, chooses
to engage in the required counseling via telephone; or
(b) for R PL 280 and R PL 280 -a loans. The
applicant, although made aware of the importance of counseling and its local
availability through the provision of such information by the lender, chooses
not to take advantage of in-person counseling services.