2023 New York Laws › RPP - Real Property › Article 8 - Conveyances and Mortgages › 279 - Graduated Payment Mortgage.

§  279.  Graduated payment mortgage. 1. A "graduated payment mortgage"
means a mortgage which provides: (i) monthly payments of  principal  and
interest  which  are lower during the initial years of the mortgage; and
(ii) that the graduation rate for the  monthly  payments,  the  term  of
graduation  and  the  interest rate are fixed throughout the term of the
loan; and (iii) monthly payments of  principal  and  interest  shall  be
sufficient to pay all interest and to effect full repayment of principal
within the term of the mortgage as fixed at its origination.
2. Every graduated payment mortgage shall be subject to the following:
(a)  the  average  annual  rate of increase for principal and interest
payments shall not exceed:
(i) 7.5 percent per annum for a mortgage with a graduation  period  of
five years or less;
(ii)  6.5 percent per annum for a mortgage with a graduation period of
six years;
(iii) 5.5 percent per annum for a mortgage with a graduation period of
seven years;
(iv) 4.5 percent per annum for a mortgage with a graduation period  of
eight years;
(v)  3.5  percent per annum for a mortgage with a graduation period of
nine years; and
(vi) 3 percent per annum for a mortgage with a  graduation  period  of
ten years.
(b)  periodic payments of principal and interest shall not change more
than once per annum and increases shall be  limited  to  the  first  ten
years of the term of the mortgage.
(c)  payments  of  principal  and  interest  are  required  in amounts
sufficient to pay all interest and full repayment of principal within  a
period not to exceed forty years.
3. Graduated payment mortgages may be offered only if the lender:
(a)  offers  the prospective borrower a non-graduated payment mortgage
loan at the prevailing rate being offered by that lender;
(b) provides the mortgagor with the option to  convert  the  graduated
payment  mortgage  loan  to  a  non-graduated payment mortgage loan at a
pre-determined time agreed upon between the borrower and lender  and  at
the  same  rate  of interest provided for the graduated payment mortgage
loan; and
(c) discloses in advance on a uniform disclosure statement, prescribed
by the superintendent of financial services, the relevant provisions  of
the graduated payment mortgage loan including:
(i)  a  side by side comparison of interest rates and other terms that
differ between a non-graduated payment mortgage  loan  and  a  graduated
payment mortgage loan;
(ii)  payment  schedules for both types of loans and the total payment
in dollars over the full term of each loan;
(iii) a statement prominently displayed that borrowers have the option
to elect a non-graduated payment mortgage loan; and
(iv) a description of the conversion option.
4. Failure  of  any  lender  to  comply  with  any  of  the  foregoing
provisions  shall  not  render the mortgage void or unenforceable unless
otherwise provided by law.
5. The provisions of this  section  shall  be  applicable  only  to  a
mortgage  on  real  property  improved  by a one to six family residence
given by a natural person to secure a loan or to any agreement  or  note
made  by  a  natural  person in pursuance of any loan for the purpose of
financing the purchase of or refinancing an existing ownership  interest
in  certificates of stock or other evidence of an ownership interest in,
and a proprietary lease from, a corporation or  partnership  formed  for

the  purpose  of  the  cooperative  ownership  of real estate, unsecured
except to  the  extent  of  an  assignment  or  transfer  of  the  stock
certificates or other evidence of ownership interest of the borrower and
the  proprietary  lease  within  ninety days from the making of the loan
which would otherwise conform to the provisions of this section  but  is
not otherwise entitled to be recorded as a mortgage.