What's happening
This bill requires lenders to provide clearer information and counseling to seniors applying for reverse mortgages, and institutes a waiting period before applications can be finalized.
Why it matters
Expands required counseling and information. The bill ensures seniors receive not just a plain-language statement but also a comprehensive worksheet guide before applying, covering risks, effects on heirs and estates, alternatives to reverse mortgages, and how loans may impact eligibility for government assistance. This aims to reduce confusion and prevent seniors from entering into reverse mortgages without fully understanding the consequences.
Establishes a mandatory waiting period. By instituting a seven-day “cooling off” period after counseling—during which lenders cannot accept a final application or fees—the bill gives seniors time to reflect and consult trusted advisors, reducing the risk of rushed or pressured decisions.
Strengthens oversight and standardized information. The Department of Financial Services (DFS), in consultation with the Office for the Aging, will now standardize the forms and counseling requirements statewide. This centralization aims to close loopholes and ensure all seniors, not just those in certain counties, get consistent, high-quality information and support.
Increases lender accountability. Lenders are prohibited from finalizing a reverse mortgage without proof that the borrower received counseling or formally chose to waive it, and must ensure borrowers have completed and signed the new worksheet guide. This makes it harder for lenders to skip important consumer protection steps, reducing the likelihood of predatory practices.
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Who cares
Headline styles
Protect Seniors in Reverse Mortgages
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred 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.
Protect Seniors from Reverse Scams
In Assembly Committee · Judiciary · Sponsor Harry B. Bronson
Full text
3 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
1246
2019-2020 Regular Sessions
IN SENATE
January 11, 2019
Introduced by Sen. SERINO -- read twice and ordered printed, and when printed to be committed to the Committee on Aging
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 importance of counseling and its local availability through the provision of such information by the authorized lender, chooses not to utilize any of
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06745-01-9
S. 1246 2
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 the borrower and their heirs and estate, the consequences of defaulting on a reverse mortgage, alternatives to a reverse mortgage, and impacts
S. 1246 3
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 Depart- ment of Financial Services, who may consult with the Office for the Aging, on the advisability and availability of counseling and informa- tion 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 appli- cant until at least seven days from the date of counseling or receipt of a signed affidavit waiving such counseling.
Read the full memo (609 words)
Section 2: Amends paragraphs (j), (k), (l) 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 obli- gations 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
2017-18: S.2758A Advanced to Third Reading
Fiscal implications
None.
Effective date
This act shall take effect on the one hundred twentieth day after it shall have become law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.