“Under current law, consumer protections available to homeowners are not provided to homeowners with a reverse mortgage,” a spokesperson for the governor said in a press release. “In order to safeguard seniors from the risks of reverse mortgages and to provide equal protections for all homeowners, Governor Cuomo will take action.”
On December 6, 2019, Governor Cuomo signed Assembly Bill A5626/NYS Senate Bill S4407, enacted as 2019 NY Laws Chap. 581, into law. This bill amends the Real Property Law by adding Section 280-b.
Under the new law, the protections afforded to homeowners will be available to senior citizens with reverse mortgages as well. Seniors will now enjoy the same protections as other homeowners.
The amended bill regulates the origination, marketing and managing of reverse mortgage products issued under the HUD federal home equity conversion mortgage program. These mortgage products are intended to help senior citizens. The bill will prohibit deceptive advertising practices as well as the marketing of such mortgages. The bill also requires that independent counseling must be provided for those who apply for reverse mortgage loans.
This bill was designed to reduce the number of reverse mortgage loan foreclosures and defaults. A new section of the bill adds additional layers of protection for consumers who are considering reverse mortgages and for homeowners who already have reverse mortgages.
One of the new requirements is that the borrower and the lender must both be represented by counsel during the property closing. Failure to comply with this requirement or with any other requirements of Section 280-b constitutes a “complete defense to a foreclosure action.”
Further, lenders must provide notice of duty to the mortgagor to cover select property-related expenses if equity in the property is low. Foreclosure on mortgaged property because of the failure of the mortgagor to be in residence on the property is prohibited until an inspection of the property can be completed.
This law will take effect on March 5, 2020. Until the TIRSA Reverse Mortgage Endorsement is changed to accommodate Section 280-B, this exception must appear in all title reports prepared to insure reverse mortgage transactions that close on or after March 5, 2020. It must also remain in all loan policies insuring reverse mortgages.
The policy does not insure against loss or damage resulting from a violation of any of the provisions of the New York Reverse Mortgage Statute Section 280-b.
If you have any questions regarding this matter, have questions about New York Title Insurance or need a New York attorney or New York Title Company, please reach out to us today. We are happy to offer you our guidance!