BLOG

Latest New York State HECM Requirements – Effective 3/5/2020

January 23, 2020 BY MQMR Blogger

Question:

I read something recently about changes to New York regulations related to reverse mortgages issued under FHA’s HECM program.  What are the changes?

 

Answer:

On December 6, 2019, Assembly Bill 5626 was signed into law by the governor and is set to take effect on March 5, 2020 (the “Act”). The Act places additional requirements on lenders and/or servicers who offer and/or service reverse mortgages under FHA’s HECM program in New York. 

 

Most importantly, in order to make a HECM in New York, in addition to a mortgage lenders license, you’ll need a separate approval.  There is no “grandfather” provision in the Act for current HECM lenders.  The Act also prohibits a lender from engaging in any unfair or deceptive practices in connection with the marketing or offering of a HECM loan.  Specifically, a lender shall not: (a) use the words “public service announcement” in any mailing, advertisement or writing; (b) use the words “government insured” or other similar language representing that HECM loans are insured, supported, and sponsored by any governmental entity in any mailing, advertisement or writing; or (c) represent that any such HECM is anything other than a commercial product.

 

In addition, the Act:

  • Requires HECM lenders to provide supplemental consumer protection material (the content and form of which shall be specified by the Superintendent of Financial Services) with any HECM solicitation mailed to a physical address within New York.
  • Requires HECM lenders to provide each applicant or potential applicant the telephone number and website address provided by HUD for the purpose of acquiring HECM counseling.
  • Requires both the HECM lender and the borrower to be represented by an attorney at closing, and each party must have at least one attorney present to conduct the closing.
  • Requires HECM lenders to provide a notice of duty of the borrower to pay certain property related expenses when equity in the property is low or depleted.
  • Outlines various other servicing and foreclosure related requirements.

 

Noteworthy, compliance with the Act is a condition precedent to foreclosing on a HECM and the failure to comply is a “complete” defense to a foreclosure action.

 

There are many other requirements in the Act not discussed above.  A complete version of the Act can be found here.