REVERSE MORTGAGES AND CO-OPS

A new law permitting reverse cooperative apartment unit loans for persons seventy years of age or older was signed by the Governor on December 1, 2021 to be effective in 180 days therein:

"BILL NUMBER: S760

SPONSOR: BIAGGI
 
TITLE OF BILL:

An act to amend the banking law, the uniform commercial code and the
civil practice law and rules, in relation to reverse cooperative apart-
ment unit loans

 
PURPOSE:

This bill would give owners of co-op apartments who are over the age of
62 the ability to obtain reverse mortgages on their cooperative apart-
ment unit loans.

 
SUMMARY OF PROVISIONS:

Section 1 amends the banking law by adding a new section, 6-n providing
definitions for reverse cooperative apartment unit loan, loan payout
options, authorized lender, borrower, superintendent, department, and
third-party contact.

Subsection 2 of section 1 states what the cooperative apartment unit
loan would be subject to.

Subsection 3 of section 1 explains what a reverse cooperative apartment
unit loan may do.

Subsection 4 of section 1 states that the superintendent shall adopt the
rules and regulations as it considers appropriate to govern reverse
cooperative apartment unit loan if it conforms to the requirements of
the section, and explains the requirements to authorize a reverse coop-
erative apartment unit loan.

Subsection 5 of section 1 prohibits authorized lenders from any unfair
or deceptive practices when marketing or offering reverse cooperative
unit loans, including using language "public service announcement," or
"government insured," or any similar language; nor can they represent
the loan as anything other than a commercial product.

Subsection 6 of section 1 requires authorized lenders to include supple-
mental consumer protection materials deemed appropriate by the super-
intendent alongside any solicitation for reverse cooperative unit loan
products mailed to a physical address within the state.  Lenders are
also required to provide applicants or potential applicants with the
telephone number and website (HUD).

Subsection 7 of section 1 requires authorized lenders and their agents
provide monthly account statements with specified requirements in addi-
tion to notice of information requirements regarding clients home equity
line of credit.

Subsection 8 of section 1 states that upon a lender's determination that
a reverse cooperative apartment unit loan is in default and before a
lender can take up action to foreclose, they must call or visit the
borrower, the lender must provide clear information about the intent of
the call or visit and then wait 30 days after successful contact with
the borrower. Once these steps are taken, the lender may act on the
foreclosure process.
Subsection 9 of section 1 sets the priority of the lien.

Subsection 10 of section 1 states that any other mortgage, deed of
trust, encumbrance or lien filed prior to the effective date of this
section shall not be limited.

Subsection 11 of section 1 if the reverse cooperative unit loan is sold
or transferred to a person other than the original borrower, the reverse
loan shall be terminated.

Subsection 12 of section 1 sets a person's ability to bring an action.

Subsection 13 of section 1 sets conditions for a complete defense.

Section 2 adds a new paragraph 1-a to subsection (f) of section 9-611 of
the uniform commercial code which states that upon default of a reverse
cooperative apartment unit loan, a notice shall be given to the borrower
at least 45 days in advance of an agent disposing of its collateral.

Section 3 adds a new rule 3410 to civil practice law and rules pertain-
ing to face-to-face meetings for foreclosure of reverse cooperative
apartment unit loans.

Section 4 states that the superintendent of financial services shall
convene a working group comprised of industry and consumer represen-
tatives to study the availability of reverse mortgage counselors.

Section 5 sets forth the effective date.

 
JUSTIFICATION:

As of today, HUD continues to deny co-op owners from applying for
reverse cooperative apartment unit loans. With the correct regulations
and liability protection, aging populations should be permitted to
obtain such loans, instead of being forced to relocate from their homes.

With this bill, extended consumer protections will be added to the proc-
ess of acquiring a reverse cooperative apartment unit loan and will
ensure that the elderly community that so desperately wishes to stay in
their homes will be able to do so."