Provides that a lender may receive not more than 20% of the future appreciation of property secured by a reverse mortgage granted to a person 60 years old or older

1 Co-sponsor

• Martin J. Golden

Title of bill

An act to amend the real property law, in relation to reverse mortgage loans for persons sixty years of age or older

Purpose

This bill will limit shared appreciation in revenue mortgage.

Summary of provisions

This bill amends subdivision 2 of section 280 of the real property law to limit the shared appreciation any authorized lender may receive no more than 20 per cent of the appreciation during the term of the mortgage.

Justification

In 1994, the Real Property Law was amended to formalize the reverse mortgage law in The State of New York. (Reverse mortgage allows senior citizens to take equity out of their homes which they are living there through equal installments, a line of credit or a lump sum.)

Those mortgages are now being satisfied either by the mortgagor paying off the mortgage, selling the property themselves or through their estate. The Legislature has received depressing information: For example in 1996, an individual mortgagor received a lump sum payment of $114,000. In 2003, when the mortgagor decided to sell, the authorized lender issued a payout letter of $451,000. This included $113,000 in compounded interest and $223,000 of shared appreciation at the rate of 50%.

This bill would attempt to remedy this gouging by the authorized lender by reducing the shared appreciation from 50% to 20%. This would be a much more equitable distribution of the shared appreciation.

Legislative history

2007/2008 - S.642/A.6720 - Passed Senate Non-Controversial/Assembly Judiciary 2005-06 - S.4097 - Passed Senate

Fiscal implications

None.

Effective date

One hundred eightieth day after it shall have become a law.