New York Codes, Rules and Regulations
Title 3 - BANKING
Legal Interpretations
LI 8 Miscellaneous-Banking Board Regulations, Superintendent's Regulations, Supervisory Policies and Procedures
Section 8.2 - Propriety of "transfer" charge by mortgagee upon change of mortgagor

The department was informed that a mortgage investing institution had granted a conventional home mortgage loan in 1969 which by its terms did not allow the mortgagee to accelerate the mortgage indebtedness or declare it in default upon sale or transfer of the residence mortgaged. The mortgage debt bore the maximum rate permitted by law when made. A sale did occur, and the mortgagee attempted to impose a "transfer fee" on the assuming mortgagor. The department was asked whether in its opinion the charge was proper under Part 4 of the general regulations of the Banking Board, which was applicable because the loan postdated June 30, 1968.

The department responded that on the facts presented it did not see a legal justification for the charge. Since the loan already bore the maximum legal rate in effect at the time it was made, imposing the additional charge would be a usurious practice unless the charge fell within one of the categories set forth in section 4.3 of Part 4. Since the purchaser of the home assumed the existing mortgage, the department recognized that certain of these categories might be operative, such as legal services and disbursements (section 4.3[b][5]) , and possible fees and taxes for filing or recording whatever transfer, satisfaction or other documents might be necessary (section 4.3[c] and [e]) . However, the mortgagee should be prepared to itemize and justify these expenses and may not charge an undifferentiated aggregate "transfer fee". The department was of the view that the foregoing principles would be equally applicable if the purchaser had taken the property subject to the mortgage instead of assuming it. It was felt likely, however, that even fewer of the categories in section 4.3 would be operative in a "subject to" situation.

DATED: May 1, 1973