Require Reverse Mortgage Counseling

Section 1. Section 280 of the real property law, as added by chapter 613 of the laws of 1993, paragraph (f) of subdivision 1 as amended by chapter 155 of the laws of 2012, subdivision 5 as amended by chapter 33 of the laws of 1996, and paragraph (d) of subdivision 1, paragraphs (a), (b), and (i), and the opening paragraph and subparagraph (v) of paragraph (e) of subdivision 2, paragraph (b) of subdivision 3, and subdivisions 4, 8, and 9 as further amended by section 104 of part A of chapter 62 of the laws of 2011, is amended to read as follows:

§ 280. Reverse mortgage loans for persons [sixty] sixty-two years of age or older. 1. For purposes of this section the following terms shall have the following meanings:

(a) Reverse mortgage loans. A loan which is secured by a first mortgage on real property improved by a one- to four-family residence, cooperative apartment, life estate, trust, leasehold or condominium that is the residence of the [mortgagor(s)] borrower or borrowers the proceeds of which are advanced to the [mortgagor(s)] borrower or borrowers during the term of the loan using any one or more method of payments in equal monthly installments using tenure or term payments, in advances through a line of credit or otherwise, in lump sums, or through a combination thereof using a modified tenure or modified term payments. A reverse mortgage loan may be FHA insured (HECM) pursuant to subdivision four of this section or a non FHA insured loan (proprietary).

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD07521-01-9

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(b) [Term reverse mortgage loan. Any reverse mortgage loan that has a fixed term to maturity.

(c) Tenure reverse mortgage loan. Any reverse mortgage loan that does not have a fixed term to maturity, but rather] Reverse mortgage maturity. A reverse mortgage matures solely upon contingent events, such as events including but not limited to death [or] of the surviving borrower, the real property securing the loan no longer being the [mortgagors'] borrowers' principal residence or the subject property being sold.

[(d)] (c) Authorized lender. Any bank, trust company, national banking association, savings bank, savings and loan association, federal savings bank, federal savings and loan association, credit union, or federal credit union or any licensed mortgage banker approved for the making of reverse mortgage loans by the superintendent of financial services or any entity exempted from licensing pursuant to section five hundred ninety of the banking law and approved for the making of reverse mortgage loans by the superintendent of financial services.

[(e) Mortgagor.] (d) Borrower. A tenant in severalty who is [sixty] sixty-two years of age or older, or if the real property is held by tenants by the entirety or by joint tenancy, the youngest of which is [sixty] sixty-two years of age or older and signs the loan application. However, a party with a remainder interest who has not signed the application but signs the mortgage, signs the mortgage as an accommodation and not as a borrower as defined in this section.

[(f)] (e) Superintendent of financial services. The superintendent established pursuant to section two hundred two of the financial services law.

(f) Mortgagor. Mortgagor is one who signs the mortgage as a borrower or as a non-borrower when one holds a remainder interest, or signs as a trustee.

(g) Home equity conversion mortgage (HECM). The FHA reverse mortgage loan under the department of housing and urban development.

(h) Tenure payment. Equal monthly payments are made by the lender to the borrower or borrowers as long as property remains the principal residence unless the loan becomes due pursuant to paragraph (c) of this subdivision.

(i) Term payment. Equal monthly payments are made by the lender to the borrower or borrowers for a fixed term of months chosen by the borrower, unless the loan becomes due pursuant to paragraph (c) of this subdivision.

(j) Line of credit. Payments are made by the lender to the borrower at times and in amounts determined by the borrower or borrowers, as long as the property remains principal residence, unless the loan becomes due pursuant to paragraph (c) of this subdivision.

(k) Modified tenure. A tenure plan combined with a line of credit feature.

(l) Modified term. A term plan combined with a line of credit feature.

(m) Full draw. All available funds are taken in a one-time single payment.

(n) Partial draw. A portion of the available funds are taken in a single payment.

(o) Principal residence. The dwelling where the borrower maintains a permanent place of abode and typically spends a majority of calendar year. The property shall be considered to be the principal residence of any borrower who is temporarily or permanently in a health care institu-

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tion as long as the property is the principal residence of at least one other borrower who is not in a health care institution.

(p) Proprietary reverse mortgage. A non FHA insured loan.

(q) Counselor. Shall be an individual who has met all testing and education requirements of the department of housing and urban development and is included in the HUD approved roster, as long as said roster shall be maintained.

(r) Counseling protocol. Each counselor shall follow HUD's detailed counseling protocol, as updated and amended from time to time. The counseling protocol for all reverse mortgage loans, shall include among other things a discussion of: client needs and circumstances; features of a reverse mortgage loan; borrower responsibility under a reverse mortgage loan; costs to obtain a reverse mortgage; financial and tax implications; alternatives to a reverse mortgage loan; elder abuse issues and warnings about potential reverse mortgage insurance fraud schemes. As long as required by HUD, the certificate can be withheld if the borrower is unable to answer five out of ten questions about reverse mortgage basics, after an explanation of the concept has been stated by the counselor. The counseling protocol can be delivered face to face or over the phone, at the sole option of the borrower.

(s) Counseling certificate. The counselor shall issue a counseling certificate upon the completion of the session by either hand delivery or through the postal service. Among other things, the certificate shall contain the original signature of the counselor; counselor's ID number, and the length of time of the session.

2. A reverse mortgage loan pursuant to this section shall be subject to the following:

(a) [the loan to value ratio shall be determined by the superintendent of financial services; and

(b) subject to] such rules or regulations as the superintendent of financial services shall adopt, any authorized lender or any successor or assign of such authorized lender which suspends, ceases or makes late payments to a [mortgagor] borrower under a reverse mortgage loan shall be subject to forfeiture (as liquidated damages to such [mortgagor] borrower and not as a penalty) of twice the interest which would otherwise have been earned during the period in which payments were suspended, ceased or made late, provided that said authorized lender or any successor or assign of such authorized lender shall have the right to make payments pursuant to said loan agreement within fifteen days of each payment date, without penalty; and

[(c)] (b) the outstanding balance may be prepaid [in full] by the [mortgagor] borrower without penalty at any time [during the term and/or tenure of the loan]; provided, however, if said outstanding balance is paid in full, the loan will be deemed satisfied and no longer be in effect; and

[(d)] (c) an authorized lender is prohibited from using or attaching any property or asset of the [mortgagor] borrower except the real property, including a cooperative apartment, securing the reverse mortgage loan in settlement of a reverse mortgage obligation; and

[(e)] (d) the authorized lender must deliver to [an applicant] a borrower such disclosures as may be required by the superintendent of financial services which shall describe the relevant portions of the reverse mortgage being offered, and shall include but not be limited to the following items:

(i) [except for a tenure reverse mortgage loan, a schedule of payments to and from the mortgagor and the total payments in dollars over the

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term of the reverse mortgage loan for both the mortgagor and mortgagee depending on the type of reverse mortgage loan being offered;

(ii)] a statement prominently displayed advising [applicants] borrowers to consult with appropriate authorities regarding tax and estate planning consequences of a reverse mortgage;

[(iii)] (ii) where applicable a description of prepayment and refinancing features;

[(iv)] (iii) the interest rate and, except for a tenure reverse mortgage loan, the total interest payable on the loan;

[(v)] (iv) a statement concerning the compliance of the lender with the criteria established by the superintendent of financial services that an authorized lender must meet before it may make reverse mortgage loans pursuant to this section; and

[(vi)] (v) a statement setting forth those events which would terminate the reverse mortgage loan; and

[(f)] (e) in the event that an authorized lender or holder of the reverse mortgage loan intends to initiate foreclosure proceedings the [mortgagor] borrower 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] borrower; and

[(g)] (f) for all reverse mortgage loans an authorized lender must deliver to the [applicant] borrower, upon application, if available, a statement prepared by the local or county office for the aging on the [advisability and] availability of independent counseling [and information services]. Further, no reverse mortgage [commitment shall be issued by an authorized lender] processing of this loan shall begin 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 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 form of such statement and affidavit shall be developed by the New York state office for the aging] borrower provides to an authorized lender or broker the original counseling certificate allowed under the Federal Housing Administration (FHA) or other programs approved by the superintendent of financial services in consultation with the state office for the aging; and

[(h)] (g) any such reverse mortgage shall expressly and conspicuously bear a legend identifying it as such; and

[(i)] (h) 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.

(i) The processing of a reverse mortgage shall include the ordering of an appraisal, a title search and a credit report or an FHA case number, when applicable. A reverse mortgage loan cannot be processed, nor shall a borrower incur any processing expense until the borrower completes the required counseling. The processing of a reverse mortgage loan may only proceed once the counseling is complete, as evidenced by the signed and dated counseling certificate.

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3. A reverse mortgage loan pursuant to this section may:

(a) provide that the [mortgagor's] borrower's closing costs, including but not limited to loan or commitment fees, if any, insurance premiums, house repairs, legal fees, [the cost of annuities,] the costs of thirdparty counseling, the costs of existing mortgages or liens, and other appropriate costs be included in the principal of the reverse mortgage loan and disbursed out of the loan proceeds at closing;