2023 New York Laws › BNK - Banking › Article 1 - Short Title; Definitions; Miscellaneous Provisions. › 6-F - Alternative Mortgage Instruments Made by Banks, Trust Companies, Savings Banks, Savings and Loan Associations and Credit Unions.

§ 6-f.   Alternative   mortgage   instruments  made  by  banks,  trust
companies, savings banks,  savings  and  loan  associations  and  credit
unions.  1.   Notwithstanding any inconsistent provision of this chapter
or any other law of this state, the superintendent of financial services
is authorized to adopt such rules or regulations as shall permit  banks,
trust  companies,  foreign  banking  corporations licensed to maintain a
branch or  agency  in  this  state,  savings  banks,  savings  and  loan
associations,  credit  unions  and  persons and entities engaging in the
business described in section five hundred ninety  of  this  chapter  to
make  residential  mortgage  loans  and cooperative apartment unit loans
which provide for (a) periodic readjustments of  the  rate  of  interest
charged  for  the  loan  or successive terms of the loan or (b) terms of
loan which are shorter than the term of the mortgage or (c) repayment of
the principal amount of the loan by regular payments which are not equal
in amount throughout the term of the mortgage or (d) the lender  thereof
to receive a share in the future appreciation of the property serving as
security for the loan under the circumstances set forth in the following
sentence  or  (e) any combination of paragraphs (a), (b), (c) and (d) of
this subdivision, subject to the provisions of subdivision two  of  this
section.  Where  the  lender or holder of a residential mortgage loan or
cooperative apartment unit loan enters into a written agreement with the
borrower under which the  lender  or  holder  conditionally  reduces  an
amount  of  principal of such loan in order to assist a borrower at risk
of foreclosure to avoid such foreclosure, the lender or holder may enter
into a written agreement (a "shared appreciation  agreement")  with  the
borrower  under  which  the  lender  shall  be  entitled to share in the
appreciation of the market value of the  real  property  or  cooperative
shares  and  proprietary  lease securing such loan between the effective
date of such reduction in principal  amount  until  the  date  when  the
property  is  sold,  provided  that the amount the lender is entitled to
receive under such shared appreciation agreement shall be the lesser  of
(i)  the  amount  of  such reduction in principal, plus interest on such
amount from the date of such reduction to the date  of  payment  at  the
same  rate  of  interest as applies to the remaining principal amount of
the residential mortgage loan, and (ii) fifty percent of the  amount  of
such  appreciation.  Such  amounts  shall  be payable when the mortgagor
sells  the  residential  real  property  or   cooperative   shares   and
proprietary  lease  that  secure  the  loan.  Such  shared  appreciation
agreement shall expressly and conspicuously bear a legend at the top  of
the  agreement  in  at least fourteen-point type which shall include the
following: "In this agreement, you are giving away some  of  any  future
increase  in value of your home. Please read carefully." For purposes of
this subdivision, the appreciation of the property shall be measured  as
the  difference,  if  positive, between the gross sales proceeds (net of
any reasonable real estate commission) of the sale of the  property  and
the  value  of  the  property  at  the time of the closing of the shared
appreciation mortgage, as determined by an appraisal by  an  independent
New  York  state  licensed  real  estate  appraiser.  Recovery  of  such
reduction in the principal amount shall not be deemed to be interest for
any purpose of the laws of this state.
Any shared appreciation agreement shall be accompanied  by  a  notice,
which shall be on a separate page from the shared appreciation agreement
and  shall  contain  the following heading in bold, fourteen-point type:
"Important disclosures about the contract in which  you  agree  to  give
away  a  part  of any future increase in value of your home. Please read
carefully." The notice shall include the following disclosures:
(1) a statement that the lender will  be  entitled  to  share  in  any
appreciation  of  the market value of the mortgaged property that occurs

between the time of the loan modification and the time the  property  is
sold,  up  to  the  amount  of  principal forborne plus interest on such
amount at the applicable rate of interest on  the  mortgage  but  in  no
event  more  than  fifty percent of the amount of such appreciation, and
providing at least three examples of how such  shared  appreciation  may
affect  the  borrower  at  the  time  the  borrower  sells the mortgaged
property, such examples to include (A) no appreciation in the  value  of
the  mortgaged  property,  (B)  appreciation  of  twenty percent and (C)
appreciation of fifty percent;
(2) a statement advising the borrower to seek  independent  counseling
from  a  lawyer,  a  HUD-certified  mortgage  counselor or a tax advisor
regarding (A) the trade-off between a current reduction in the  size  of
the  mortgage,  versus  the  promise  to  give  up  part  of  the future
appreciation of the home, and (B) the tax consequences of the  principal
forgiveness  and  shared appreciation agreement, and providing a list of
the  names  and  contact  information  of  five  HUD-certified  mortgage
counselors  in the county where the mortgaged property is located or, if
there are fewer than five such counselors in that county, the  list  may
include counselors in one or more neighboring counties;
(3)  a  statement  on  the potential effect of the shared appreciation
agreement on any future refinancing of the mortgage  and  the  potential
effect  of  any  prepayment  or  refinancing  of  the  mortgage  on  the
appreciation sharing agreement; and
(4) such other disclosures as the superintendent of financial services
may require.
2. Any rules or regulations which are adopted by the superintendent of
financial services pursuant to subdivision one of this section:
(a) shall provide for disclosures and notices  to  the  borrower  with
respect  to  the  terms and conditions of the loan and the mortgage, and
the superintendent of financial services may  require  the  adoption  of
uniform disclosure and notice forms for this purpose;
(b) shall provide for the conditions governing renewals of the term of
the loan;
(c)  shall  not  permit any uninsured loan secured by residential real
property to be made  in  an  amount  exceeding  ninety  percent  of  the
appraised value of the property; and
(d) shall not allow, with respect to any specific alternative mortgage
instrument  which permits a periodic readjustment of the rate charged on
the loan, for a greater change in rate than that permitted under federal
law or regulations to federally-chartered banking organizations  located
in  this  state  for  loans  made  pursuant to an equivalent alternative
mortgage instrument.