2023 New York Laws › BNK - Banking › Article 1 - Short Title; Definitions; Miscellaneous Provisions. › 6-O*2 - Reverse Cooperative Apartment Unit Loans for Persons Sixty-Two Years of Age or Older.

* §   6-o.  Reverse  cooperative  apartment  unit  loans  for  persons
sixty-two years of age or older. 1. For purposes of  this  section,  the
following terms shall have the following meanings:
(a)  Reverse  cooperative apartment unit loan. A loan which is secured
by shares or membership in a cooperative apartment that is  or  intended
to be the primary residence of the borrower or borrowers the proceeds of
which  are  advanced to the borrower or borrowers during the term of the
loan in equal installments, or in advances through a line of  credit  or
otherwise, in a lump sum, or through a combination thereof. Interest and
fees  will  accrue  during the life of the loan and will be added to the
principal balance of the loan, but will not become due and payable until
the borrower(s) dies, permanently vacates the apartment or  defaults  on
the  terms  of  the  loan, and will continue to accrue until the loan is
paid in full.
(b) Loan payout options:
(i) Term payment option. Under the term payment option, equal  monthly
payments  are  made  by  the  lender to the borrower for a fixed term of
months chosen by the borrower.
(ii) Tenure payment option. Under the  tenure  payment  option,  equal
monthly  payments are made by the lender to the borrower, until the loan
is prepaid in full or becomes due and payable.
(iii) Line of credit payment option. Under the line of credit  payment
option,  payments are made by the lender to the borrower at times and in
amounts determined by the borrower as long as the amounts do not  exceed
the maximum amount of loan proceeds.
(iv) Single lump sum payment option. Under the single lump sum payment
option,  the  borrower  receives an amount from the lender that does not
exceed the maximum amount of loan  proceeds.  Set  asides  required  for
disbursements  such  as  loan  closing  costs or for monthly maintenance
fees, will be deducted from the amount  of  proceeds  available  to  the
borrower.
(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 or any entity exempted from
licensing pursuant to section five hundred ninety of  this  chapter  and
approved for the making of reverse mortgage loans by the superintendent.
(d)  Borrower.  A tenant in severalty who is sixty-two years of age or
older, or if the cooperative apartment unit is held by  tenants  by  the
entirety  or  by joint tenancy, the youngest of which is sixty-two years
age or older.
(e) Superintendent. The superintendent of financial services  of  this
state.
(f) Department. The department of financial services of this state.
(g) Third-party contact. The lender must ask the borrower if they want
to  designate  a  third-party  contact, such as a family member, trusted
friend, advisor or other party  whom  the  borrower  would  like  to  be
contacted.  It  shall  be  the  borrower's  discretion  to choose if the
third-party contact is to be contacted  if  (i)  the  borrower  has  not
returned  the occupancy form, and/or (ii) the loan is in default for any
reason and the lender plans to proceed on collecting on the loan,  i.e.,
initiating  eviction  or foreclosure and/or (iii) the borrower cannot be
reached.
2. A cooperative apartment unit loan pursuant to this section shall be
subject to the following:
(a) the borrower shall be granted lifetime possession of  the  subject
premises  of  the  cooperative  apartment  unit  for which the shares or

membership are the security for the reverse cooperative  apartment  unit
loan,  as  long  as  such  apartment unit remains the borrowers' primary
residence  and  the  borrower  is  not  in  default  under  the  reverse
cooperative  apartment unit loan. The borrower or borrowers must certify
annually on each anniversary of the loan, that they reside in  the  unit
and that it is their primary residence;
(b)  annually the lender shall advise the borrower or borrowers of the
name and contact information, if any, on file for a third-party  contact
designated  pursuant to paragraph (g) of subdivision one of this section
and ask if the borrower or  borrowers  want  to  update  or  change  the
information for the third-party contract;
(c)  subject  to  such  rules or regulations as the superintendent may
adopt, a reverse cooperative apartment unit loan shall be made at either
a fixed or variable rate of interest;
(d) subject to such rules or regulations  as  the  superintendent  may
adopt,  the  authorized lender may require a borrower to establish a set
aside account for the purposes of paying property taxes, maintenance  or
cooperative  fees, insurance premiums of the cooperative apartment unit,
or for the payment of any other fees and expenses;
(e) a lender who fails to make loan advances as required in  the  loan
documents, and fails to cure an actual default after notice as specified
in  the  loan  documents, shall forfeit any right to collect interest or
service charges under the contract. The lender's right  to  recovery  at
loan maturity shall be limited to the outstanding balance as of the date
of  lender's default, minus all interest. However, a lender shall not be
required to make loan advances under  a  loan  if  the  borrower  is  in
default under the loan;
(f)  the  outstanding  balance  may be prepaid in full by the borrower
without penalty at any time during  the  reverse  cooperative  apartment
unit loan term;
(g)  an  authorized  lender  is prohibited from using or attaching any
property or asset of the borrower or heirs of the  borrower  except  the
shares or membership representing an ownership interest in the apartment
unit  securing the reverse cooperative apartment unit loan in settlement
of a reverse loan obligation--the loan is a non-recourse loan;
(h)  an  authorized  lender  shall  deliver  to  the  applicant   upon
application, a statement that complies with the requirements established
by  the  department  providing  the  contact  information  for  New York
approved, or U.S. Department of Housing and Urban Development  approved,
reverse  mortgage  housing  counselors with cooperative housing training
whom the cooperative apartment owner can call for independent counseling
and information services. Further, no reverse loan commitment  shall  be
issued  by  the  authorized  lender  until  the  applicant  presents, in
writing, a form that certifies the  terms  of  the  reverse  cooperative
apartment  unit  loan  have been explained to them by a New York or U.S.
Department of Housing and Urban Development  approved  reverse  mortgage
housing counselor with cooperative housing training;
(i)   an   authorized  lender  shall  deliver  to  an  applicant  such
disclosures as  may  be  required  by  the  superintendent  which  shall
describe  the  relevant  portions of the reverse loan being offered, and
shall include but not be limited to the following items:
(i) a schedule of payments to and from  the  borrower  and  the  total
payments in dollars over the life expectancy of the youngest borrower of
the reverse cooperative apartment unit loan for the borrower;
(ii)  a statement prominently displayed advising applicants to consult
with  appropriate  authorities  regarding  tax   and   estate   planning
consequences of a reverse cooperative apartment unit loan;
(iii)  where  applicable  a  description of prepayment and refinancing
features;
(iv)  to  the  extent determinable at or prior to the inception of the
reverse cooperative apartment unit  loan,  the  interest  rate  and,  an
estimate  of  the  total  interest  payable  on  the reverse cooperative
apartment unit loan;
(v) a statement concerning the  compliance  of  the  lender  with  the
criteria  established  by  the  superintendent that an authorized lender
must meet before it may make reverse cooperative  apartment  unit  loans
pursuant to this section;
(vi) a statement setting forth those events which would cause the loan
to become due and payable (or cause the borrower to default) the reverse
cooperative apartment unit loan;
(vii)  the  loan  is subject to a three day right of rescission by the
borrower; and
(viii) a financial statement setting forth an estimate  of  all  costs
associated with the loan;
(j) an authorized lender shall deliver to each borrower at the time of
closing  of a reverse cooperative unit loan two copies of the borrower's
right to cancel and  instructions  for  how  to  cancel  the  loan  that
complies with the requirements to be prescribed by the superintendent;
(k) a reverse cooperative apartment unit loan pursuant to this section
shall  expressly  and conspicuously bear a legend identifying it as such
in at least fourteen-point font;
(l) a reverse cooperative apartment unit loan shall clearly set  forth
the terms for when the loan becomes due and payable, including:
(i)  regardless of loan payout option chosen by the borrower, the loan
note shall state that the outstanding loan balance will not be  due  and
payable  in  full until the last borrower dies, or if a borrower conveys
all of his or her title in the property and no  other  borrower  retains
title to the property; and
(ii) the loan note shall state that the outstanding loan balance shall
be due and payable in full if any of the following occur:
(1)  the cooperative apartment unit ceases to be the primary residence
of a borrower for reasons other than death and the cooperative apartment
unit is not the primary residence of at least one other borrower;
(2) for a period of longer than twelve consecutive months, a  borrower
fails  to  occupy  the cooperative apartment unit because of physical or
mental illness and the cooperative apartment unit  is  not  the  primary
residence of at least one other borrower; or
(3) an obligation of the borrower under the loan note is not met;
(m)  within  thirty business days of learning of the occurrence of any
event listed in paragraph (l) of this subdivision, the  mortgagee  shall
notify  the mortgagor and their authorized designee, in writing, of such
occurrence, along with information on the right to cure.  The  mortgagee
shall  then  allow  the  mortgagor  forty-five  calendar days to cure. A
mortgagee may only terminate a reverse mortgage loan  if  the  mortgagor
fails  to cure any termination event within such forty-five calendar day
period. In the event that the borrower has not designated a  third-party
contact  to  receive  such  notice  of  foreclosure, then the authorized
lender or the holder of said reverse  cooperative  apartment  unit  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 borrower;
(n)  a  reverse cooperative apartment unit loan secured by shares or a
membership representing an ownership interest in a unit in a cooperative
housing corporation shall also be subject to the prior approval  by  the
cooperative's board of directors; and
(o)  no  reverse  cooperative  apartment unit loan shall be subject to
mandatory binding arbitration.
3.  A reverse cooperative apartment unit loan pursuant to this section
may:
(a) provide that an authorized lender  may,  consistent  with  federal
laws  and  regulations,  include  a  due-on-sale  clause  in its reverse
cooperative apartment unit loan agreement and at its option exercise and
enforce such clause in accordance with its terms; and
(b) provide that the  borrower's  closing  costs,  including  but  not
limited  to loan or commitment fees if any, insurance premiums, repairs,
legal fees, the costs of third party counseling, the costs of paying off
any existing mortgages or liens, and other appropriate costs be included
in the principal of the reverse  cooperative  apartment  unit  loan  and
disbursed out of the loan proceeds at closing.
4.  The  superintendent shall adopt such rules or regulations as he or
she considers appropriate to govern a reverse cooperative apartment unit
loan made pursuant to this section.  No  reverse  cooperative  apartment
unit  loan  shall be made unless it conforms to the requirements of this
section and such rules and regulations as the superintendent may adopt.
5. No authorized lender or any other party  or  entity  shall  in  any
manner,  in  the  marketing or offering of reverse cooperative apartment
unit loans, engage in any unfair or deceptive  practices  in  connection
with  the  marketing  or  offering of reverse cooperative apartment unit
loans, and, additionally, shall not:
(a) use the words "public service  announcement"  in  any  commercial,
mailing, advertisement or writing relating thereto;
(b)  use  the  words  "government  insured"  or other similar language
representing that reverse cooperative apartment unit loans are  insured,
supported  and  sponsored  by any governmental entity in any commercial,
mailing, advertisement or writing relating thereto; or
(c) represent that any such loan is other than a commercial product.
6. (a) Every authorized lender and assignee must obtain a surety  bond
in  the amount of one hundred thousand dollars for the benefit of claims
against the lender/assignee for failure to perform their obligations  to
the borrower. The superintendent will hold the surety bond. In addition,
a  lender  or  assignee  shall maintain an irrevocable standby letter of
credit from a financial institution approved by  the  superintendent  in
favor  of  the  lender  or  assignee  in an amount necessary to fund all
reverse mortgage loan requirements  anticipated  over  the  next  twelve
months  for  loans  then  on the lender's books and those expected to be
made over the next twelve months or three million dollars, whichever  is
greater.  The initial term of the letter of credit shall be at least two
years. A lender or assignee also shall maintain a minimum capital of ten
million dollars. A lender may rely upon its parent company to  meet  the
minimum capital requirements.
(b)  Every  authorized  lender  or  its  agent shall provide, with any
solicitation for reverse cooperative apartment unit loan products mailed
to a physical address within the state, supplemental consumer protection
materials the content and form  of  which  shall  be  specified  by  the
superintendent or his or her designee.
(c)  Every authorized lender shall provide each applicant or potential
applicant for  a  reverse  cooperative  apartment  unit  loan  with  the
telephone number and internet website address provided by the department
for  the  purposes  of acquiring reverse cooperative apartment unit loan
counseling.
(d) The superintendent is authorized  to  promulgate  such  rules  and
regulations  as  he  or  she  shall  deem  necessary  to  implement  the
provisions of this subdivision.
7. For reverse cooperative apartment unit loans, authorized lender and
their agents shall:
(a)  provide  a monthly account statement, and for all borrowers whose
maintenance  fees,  special  assessments  mortgage  insurance  payments,
homeowners  insurance  payments,  or  payments  stemming  from any other
property obligation or obligations are administered  by  the  authorized
lender,  and  where  these payments are derived from the proceeds of the
loan, the authorized lender shall  provide  on  the  borrower's  account
statement the current balance remaining in the borrower's line of credit
or  lifetime expectancy set aside, the projected annual property charges
for that year, and a notice which reads in at least fourteen point type:
"YOUR MAINTENANCE FEES AND SPECIAL  ASSESSMENTS  ARE  CURRENTLY  BEING
PAID  BY  THE  PROCEEDS OF THIS LOAN. THE FUNDS THAT HAVE BEEN SET ASIDE
ARE EXPECTED TO BE EXHAUSTED AFTER  THE  MAINTENANCE  FEES  AND  SPECIAL
ASSESSMENT  PAYMENTS  OF  (SPECIFY  EXPECTED  MONTH  AND  YEAR).  IF THE
PROCEEDS OF THIS LOAN  CANNOT  PAY  THE  MAINTENANCE  FEES  AND  SPECIAL
ASSESSMENTS,  YOU  MUST PAY THESE OBLIGATIONS OR YOUR COOP SHARES MAY BE
LOST TO FORECLOSURE. PLEASE  NOTE  THAT  MAINTENANCE  FEES  AND  SPECIAL
ASSESSMENTS  CAN  VARY  SO YOU SHOULD CONTINUE TO REVIEW THIS NOTICE FOR
CHANGES."
(b) by telephone and first class mail, inform and provide notice to  a
borrower  when  his or her home equity line of credit or life expectancy
set aside is depleted to twenty percent. Such notice  shall  inform  the
borrower of his or her obligations relating to the cooperative apartment
unit  including,  but  not  limited  to,  mortgage insurance, homeowners
insurance and real property taxes previously paid by such line of credit
or life expectancy set aside, and that such obligations must continue to
be paid when the home equity line of credit or life expectancy set aside
is depleted. Such notice shall use plain language, written  in  a  clear
and  coherent  manner  using  words  with common and every day meanings,
appropriately divided and captioned by  its  various  sections.  If  the
lender  or  its  agent  is  unable to contact the borrower by telephone,
notice must be sent to the third-party  contact  if  authorized  by  the
borrower.
(c)  Each  authorized lender shall, by telephone and first class mail,
inform and provide notice to a borrower when his or her home equity line
of credit or life expectancy set aside is depleted.  Such  notice  shall
inform   the  borrower  of  his  or  her  obligations  relating  to  the
cooperative apartment unit  including,  but  not  limited  to,  mortgage
insurance,  homeowners  insurance  and real property taxes, and that the
home equity line of credit or life expectancy set aside will  no  longer
pay  these obligations. Such notice shall use plain language, written in
a clear and coherent manner  using  words  with  common  and  every  day
meanings, appropriately divided and captioned by its various sections.
8.  In  the  event  that  an  authorized  lender  determines a reverse
cooperative apartment unit loan to be in default on the basis  that  the
cooperative  apartment is no longer the primary residence of or occupied
by the borrower, if during the verification of  the  borrower's  primary
residence  and/or  occupancy  no  responses  are received in response to
mailings relating thereto, such lender shall cause a telephone  call  to
be made to the borrower, or if the borrower is unreachable by telephone,
to  the  third-party contact if designated, and an in person visit to be
made to the borrower at the cooperative apartment to be  made  prior  to
the  commencement of any proceeding to enforce the lender's rights under
the note. During such visit, the authorized lender or  its  agent  shall
provide clear information as to who they are, that the visit pertains to
the  reverse  cooperative  apartment  unit loan, the reason for the home
visit, and the telephone number to call  for  further  information.  The

authorized  lender  must wait at least thirty days following such visit,
in addition to any additional time or notice requirements  specified  by
any  other  provision  of law, before initiating a foreclosure action on
the  basis  that  the  cooperative  apartment  is  no longer the primary
residence of the borrower.  If  the  borrower  contacts  the  authorized
lender and provides proof of residence or occupancy after such visit but
before  the  commencement of a proceeding to enforce the lender's rights
under the note, the authorized lender shall be  barred  from  initiating
such  action.  Furthermore, no authorized lender shall charge a borrower
any fee for any such visit  and  inspection.  This  prohibition  on  the
imposition  of  fees  shall include any and all inspections conducted by
the authorized lender to verify the status of  the  reverse  cooperative
apartment unit loan, or any suspected or actual default condition.
9.  Notwithstanding any inconsistent provision of law, the priority of
the lien of a reverse cooperative apartment  unit  loan,  including  the
lien  for  all  principal,  interest,  fees,  costs,  and  other charges
assessed in connection with the reverse loan, shall date from the filing
of a UCC-1 notice for the loan irrespective of the date of  any  advance
of reverse loan proceeds or the date by which an authorized lender shall
be  entitled  to  accrued  but  unpaid  interest,  fees,  costs or other
charges.
10. Nothing in this section shall be construed  to  limit,  impair  or
otherwise  affect  the  priority,  under  applicable  law,  of any other
mortgage, deed of trust, encumbrance or lien which was  filed  prior  to
the effective date of this section.
11.  The sale or transfer of the interest in the cooperative apartment
unit to a person other than an  original  borrower  or  borrowers  shall
result in the termination of the reverse loan.
12. Any person who has been injured by reason of any violation of this
section  or any violation of the rules and regulations of the department
relating to the reverse cooperative  apartment  unit  loan  program  may
bring  an  action  in  his  or her own name to recover treble his or her
actual damages, plus the prevailing  plaintiff's  reasonable  attorneys'
fees.
13. Compliance with the provisions of this section shall be conditions
precedent   to   commencing  an  action  to  foreclose  upon  a  reverse
cooperative apartment unit loan which is subject to  the  provisions  of
this  section,  and  the failure to comply therewith shall be a complete
defense to such action.
* NB There are 2 § 6-o's