Establishes the reverse mortgage fairness act of 2009

2 Co-sponsors

• Ruben Diaz
• Diane J. Savino

Title of bill

An act to amend the banking law and the real property tax law, in relation to establishing the reverse mortgage fairness act and making certain technical corrections thereto

Purpose

To ensure that proceeds received from reverse mortgages are not considered as income for the purpose of senior citizens' partial property tax exemption, pursuant to section 467 of the Real Property Tax Law.

Summary

This bill would amend the Banking Law and Real Property Tax Law to prohibit proceeds received from reverse mortgages from being considered as income for the purpose of senior citizens' partial property tax exemption authorized by section 467 of the Real Property Tax Law. This bill would also provide, however, that monies used to repay a reverse mortgage may not be deducted from income, and further that any interest or dividends realized from the investment of reverse mortgage proceeds shall be considered income.

Justification

Reverse mortgages are essentially loans, created primarily to benefit elderly persons whose principal assets are their homes. When taking out a reverse mortgage, people borrow against the equity built up in their homes and are therefore able to use an asset that otherwise would be dormant.

According to a recent Opinion of Counsel from the Office of Real Property Services, "the proceeds of a reverse mortgage are a loan, and should not be considered as income for purposes of section 467 of the Real Property Tax Law" (9 Op. Counsel SBRPS No. 72). The opinion also stated that "if loan proceeds, in this case from a reverse mortgage, are invested, however, interest or dividends realized from such investment would constitute income" (9 Op. Counsel SBRPS No. 72; 1 Op. Counsel SBEA Nos. 2, 48).

This legislation would codify in Banking Law and Real Property Tax Law the aforementioned legal action opinions.

Legislative history

2007 - 2008 Sabini

Fiscal implications

To be determined.

Effective date

This act shall take effect on the ninetieth day after it shall have become a law; provided that the superintendent of banks is authorized to promulgate any and all rules and regulations and take any measures necessary to implement this act on or before such effective date.