What's happening
This bill strengthens protections for seniors seeking reverse mortgages, requiring clearer disclosures, counseling, and a mandatory waiting period before application approval.
Why it matters
Mandates clearer, standardized disclosures. By requiring a "plain language" statement and a detailed worksheet guide (created by the Department of Financial Services), the bill ensures seniors receive easily understandable information about reverse mortgages, including risks, alternatives, and effects on heirs and government benefits.
Strengthens counseling requirements. The bill prohibits lenders from accepting applications or charging fees until applicants have attended independent counseling (or formally waived it), with a mandatory seven-day waiting period. This helps ensure that seniors have time to fully understand the implications before proceeding.
Enhances consumer protections and transparency. Lenders must collect a signed worksheet guide from borrowers and clearly label reverse mortgage documents. These steps aim to reduce confusion and prevent predatory practices by increasing transparency at every stage.
Centralizes oversight and coordination. Shifting responsibility for preparing disclosures and counseling information from local agencies to the state Department of Financial Services (with input from the Office for the Aging) could mean more consistent, up-to-date, and expertly crafted consumer protections statewide.
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Who cares
Headline styles
Tougher Reverse Mortgage Rules
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Committed to rules
- Advanced to third reading
- 2nd report cal.
- 1st report cal.639
- Referred to aging
- Committed to rules
- Advanced to third reading
- 2nd report cal.
- 1st report cal.245
- Print number 2758a
- Amend and recommit to aging
- Referred to aging
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Tougher Rules for Reverse Mortgages
In Assembly Committee · Judiciary · Sponsor Donna Lupardo
Full text
3 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
2758--A
2017-2018 Regular Sessions
IN SENATE
January 17, 2017
Introduced by Sen. SERINO -- read twice and ordered printed, and when printed to be committed to the Committee on Aging -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee
AN ACT to amend the real property law, in relation to conditions on lenders who extend reverse mortgages to persons over sixty and seventy years old
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Paragraphs (g), (h) and (i) of subdivision 2 of section 280 of the real property law, as added by chapter 613 of the laws of 1993, paragraph (i) as further amended by section 104 of part A of chapter 62 of the laws of 2011, are amended to read as follows:
(g) an authorized lender must deliver to the applicant, upon application[, if available,] a plain language statement prepared by the [local or county] department of financial services who may consult with the New York state office for the aging, where appropriate, on the advisability and availability of independent counseling and information services. In addition to the plain language notice, no reverse mortgage loan application shall be taken by a lender unless the lender provides the prospective borrower, prior to his or her meeting with a counseling agency on reverse mortgages, with a reverse mortgage worksheet guide to be prepared by the department of financial services who may consult with the New York state office for the aging where appropriate. Further, no reverse mortgage commitment shall be issued by an authorized lender until the applicant presents, in writing, a statement that the terms of the reverse mortgage loan have been explained by an attorney, a housing and urban development certified counselor or any other counseling service as indicated on the statement supplied by the [county or local office for the aging] department of financial services or a signed affidavit indicating that the applicant, although made aware of the impor-
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD07906-03-7
S. 2758--A 2
tance of counseling and its local availability through the provision of such information by the authorized lender, chooses not to utilize any of the aforementioned available services. The loan application shall not be approved until the signed reverse mortgage worksheet guide is provided to the lender. A copy of the reverse mortgage worksheet guide shall be provided to the borrower that shall have information including, but not limited to: how reverse mortgages can affect the borrower and their heirs and estate; the consequences of defaulting on a reverse mortgage; alternatives to a reverse mortgage; and the impact on the borrower's eligibility for government assistance programs. The form of such statement and affidavit shall be developed by the department of financial services, who may consult with the New York state office for the aging where appropriate; and
(h) a lender shall not accept a final and complete application for reverse mortgage loan from a prospective applicant or assess any fees upon a prospective applicant until a lapse of seven days from the date of counseling, as evidenced by the counseling certification, and without first receiving certification from the applicant or the applicant's authorized representative that the applicant has received counseling from an agency as described in paragraph (g) of this subdivision or seven days from receipt of a signed affidavit expressly waiving such counseling; and
(i) any such reverse mortgage shall expressly and conspicuously bear a legend identifying it as such; and
[(i)] (j) subject to such rules or regulations as the superintendent of financial services may adopt, a reverse mortgage loan shall be made at either a fixed or variable rate of interest.
§ 2. Paragraphs (j), (k), (l) and (m) of subdivision 2 of section 280-a of the real property law, as added by chapter 613 of the laws of 1993, paragraph (l) as further amended by section 104 of part A of chapter 62 of the laws of 2011, are amended to read as follows:
(j) an authorized lender must deliver to the applicant upon application[, if available,] a plain language statement prepared by the [local or county] department of financial services, who may consult with the New York state office for the aging, where appropriate, on the advisability and availability of independent counseling and information services. In addition to the plain language notice, no reverse mortgage loan application shall be taken by a lender unless the lender provides the prospective borrower, prior to his or her meeting with a counseling agency on reverse mortgages, with a reverse mortgage worksheet guide to be prepared by the department of financial services, who may consult with the New York state office for the aging where appropriate. Further, no reverse mortgage commitment shall be issued by the authorized lender until the applicant presents, in writing, a statement that the terms of the reverse mortgage loan have been explained to them by an attorney, a housing and urban development certified counselor or any other counseling service as indicated on the statement supplied by the [county or local office for the aging] department of financial services or a signed affidavit indicating that the applicant, although made aware of the importance of counseling and its local availability through the provision of such information by the authorized lender, chooses not to utilize any of the aforementioned available services. The loan application shall not be approved until the signed reverse mortgage worksheet guide is provided to the lender. A copy of the reverse mortgage worksheet guide shall be provided to the borrower that shall have information including, but not limited to: how reverse mortgages can affect
S. 2758--A 3
the borrower and their heirs and estate, the consequences of defaulting on a reverse mortgage, alternatives to a reverse mortgage, and impacts on the borrower's eligibility for governmental assistance programs. The form of such statement and affidavit shall be developed by the department of financial services, who may consult with the New York state office for the aging where appropriate; and
(k) a lender shall not accept a final and complete application for a reverse mortgage loan from a prospective applicant or assess any fees upon a prospective applicant until a lapse of seven days from the date of counseling, as evidenced by the counseling certification, and without first receiving certification from the applicant or the applicant's authorized representative that the applicant has received counseling from an agency as described in paragraph (j) of this subdivision or seven days from receipt of a signed affidavit expressly waiving such counseling; and
(l) a reverse mortgage pursuant to this section shall expressly and conspicuously bear a legend identifying it as such; and
[(l)] (m) subject to such rules or regulations as the superintendent of financial services may adopt, a reverse mortgage loan shall be made at either a fixed or variable rate of interest; and
[(m)] (n) in the event that an authorized lender or holder of the reverse mortgage loan intends to initiate foreclosure proceedings the mortgagor shall have the right to designate a third party who shall be notified. In the event that the mortgagor has not designated a third party to receive such notice of foreclosure, then the authorized lender or the holder of said reverse mortgage loan shall notify the local or county office for the aging of its intent to commence foreclosure proceedings. Such entity shall take appropriate action to protect the interests of the mortgagor.
§ 3. This act shall take effect on the one hundred twentieth day after it shall have become a law.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the real property law, in relation to conditions on lenders who extend reverse mortgages to persons over sixty and seventy years old
Purpose
To enhance protections for persons over sixty and seventy years old who are considering entering into contracts for reverse mortgages.
Summary of provisions
Section 1: Amends paragraphs (g), (h) and (i) of subdivision 2 of section 280 of the Real Property Law to require statements be prepared in plain language for persons sixty years of age or older by the Department of Financial Services, who may consult with the Office for the Aging, on the advisability and availability of counseling and information services for persons considering entering into a reverse mortgage contract. Also requires lenders provide prospective borrowers with a reverse mortgage guide prepared by the Department of Financial Services before such a loan application can be approved. Additionally, prohibits lenders from accepting completed applications for reverse mortgage loans from a prospective applicant or assessing fees upon a prospective applicant until at least seven days from the date of counseling or receipt of a signed affidavit waiving such counseling.
Read the full memo (606 words)
Section 2: Amends paragraphs (j), (k), (I) and (m) of subdivision 2 of section 280-a of the Real Property Law to add the same provisions as section 1 of this legislation for persons seventy years of age or older.
Section 3: Establishes the effective date.
Justification
Reverse mortgages can be an attractive option for older adults living on a fixed income to help cover the costs of basic living expenses, health care or even reducing additional debt. However, the risks associated with reverse mortgages are not always clear, including continuing obligations and legal responsibilities that the mortgagor assumes. As such, defaults on reverse mortgages hit a high of 10% in 2013. Although the Department of Housing and Urban Development has enacted policy changes to address the high default rates, there is still more to be done to protect seniors.
In 2016, the Department of Financial Services opened an investigation into the operations of several agencies that provide reverse mortgage contracts after a dramatic increase in foreclosure cases involving reverse mortgages in New York and allegations that vulnerable seniors were being targeted. Because of the long-term impacts that a reverse mortgage can have on a senior's financial security, it is imperative that the State ensures that there are appropriate safeguards during the contracting process. This legislation will help to ensure seniors are aware of the risks associated with reverse mortgages by providing for a seven day cooling off period prior to the final contract. During this time, the senior will be given a worksheet intended to facilitate consideration of the current state of the mortgagor's finances, provide for an appropriate time to review the contract, as well as consider the impacts of the reverse mortgage long-term. To that end, the senior will be required to obtain financial counseling during this period unless they specifically opt-out of such counseling through a signed affidavit. At every stage in life, financial decisions can determine your standard of living as well as your independence and security. For our seniors, these decisions are arguably even more important because they are often on a fixed income and the loss of housing can be devastating. As a result, the transparency of the reverse mortgage contract process should be proportionate to the impact that it will have on the mortgagor.
Legislative history
New bill.
Fiscal implications
None.
Effective date
This act shall take effect on the one hundred twentieth day after it shall have become law.
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