New York Codes, Rules and Regulations › Title 3 - BANKING › Chapter I - GENERAL REGULATIONS OF THE SUPERINTENDENT › Part 79 - Reverse Mortgage Loans › Section 79.9 - Required disclosures and counseling for reverse mortgage loans

Current through Register Vol. 46, No. 28, July 10, 2024
(a) Upon accepting
				an application or charging any fee authorized under section
				79.8(a) 
				of this Part, each loan applicant must be provided with a counseling packet,
				including the following documents, as is relevant to the type of loan being
				offered:
(1) A counseling statement - the
				following notice, or a notice to like effect, in Times New Roman, 28-point type
				face, on a separate sheet:
A reverse mortgage loan is a complex financial product that
				  provides a means of using the equity you have built up in your home, or the
				  value of your home, as a source of additional income. If you decide to obtain a
				  reverse mortgage loan, you will sign binding legal documents that will have
				  important legal and financial implications for you and your estate.
It is therefore important that you consult a housing
				  counselor, in addition to, tax, legal and financial advisers regarding
				  entitlements and tax and estate planning consequences of a reverse mortgage
				  loan.
Your lender must provide a list, approved by the Department
				  of Financial Services, of housing counselors available in your
				  community.
Senior citizen advocacy groups advice against using the
				  proceeds of a reverse mortgage loan to purchase an annuity or related financial
				  product. If you are considering obtaining lump sum proceeds for this purpose or
				  any other purpose, you should discuss the financial implications of doing so
				  with your tax, legal and financial advisors, as well as, your housing counselor
				  and family members.
IMPORTANT NOTICE REGARDING THE COOLING-OFF PERIOD: New York
				  State requires a 3-day cooling-off period after the submission of an
				  application for a reverse mortgage loan. During this 3-day period of time, you
				  cannot be required to sign a commitment or in any way proceed with the loan.
				  The purpose of this requirement is to provide you with time to consider whether
				  to secure a reverse mortgage loan. Potential borrowers are advised to seek
				  additional information from a housing counselor or other appropriate
				  professional during this 3-day period. The 3-day cooling-off period cannot be
				  waived.
Interest accrues from the time monies are advanced to or on
				  behalf of the mortgagor.
You have a right to designate a third party to be notified in
				  writing of any event that could lead to termination of the reverse mortgage
				  loan and to whom a copy of any foreclosure documents must be
				  furnished.
(2) Additional
				disclosures - an additional notice including the following information:
(i) the disclosing party's toll-free
				telephone number for questions, comments or complaints. If there is no
				toll-free telephone number, the disclosing party must disclose that it will
				accept collect calls;
(ii) the
				telephone number and internet website address provided by the Federal
				Department of Housing and Urban Development for the purposes of acquiring
				reverse mortgage loan counseling;
(iii) a notice that the mortgagor or
				applicant can submit written complaints to the New York State Department of
				Financial Services, Mortgage Banking, at the address and website set forth in
				section
				1.1  of
				Supervisory Policy G 1 of this Title;
(iv) a list of every event which would allow
				the mortgagee to terminate or accelerate the loan or could otherwise result in
				the forced sale of the mortgaged property. Such events shall be explained
				clearly and in a manner which ensures that the applicant reasonably understands
				their implications. If applicable, the list shall be accompanied by an explicit
				warning that the mortgagor may be compelled to move out of his or her home at
				the expiration of the loan term;
(v) the only asset of the mortgagor which may
				be used to satisfy the reverse mortgage loan is the real property securing the
				loan, subject to any limitation thereon as the mortgagor and mortgagee may
				agree to pursuant to section
				79.5(c) 
				of this Part;
(vi) the loan may be
				prepaid at any time without penalty, how the value of the home will be
				determined at the time of prepayment, and the method by which the then
				outstanding loan balance will be prepaid;
(vii) all fees, costs and payments to be paid
				by the mortgagor;
(viii) a
				description of any conditions or limitations on the refinancing or extension of
				any loan, and if applicable, the mortgagor' right to refinance or extend the
				loan;
(ix) if applicable, the
				availability of an annuity, whether an annuity will be required, and if there
				is an annuity, when the annuity payments will commence, who will own the
				annuity and, any affiliation between the disclosing party and the company from
				which the annuity will be purchased;
(x) whether the broker or any entity acting
				in a mortgage brokerage capacity, as a general business practice, utilizes the
				services of two or fewer lenders, and if so, the name(s) of the
				lender(s);
(xi) for term loans, a
				schedule and explanation of estimated payments to the mortgagor, whether or not
				property taxes and insurance premiums are to be deducted from such payments,
				and the total payment in dollars over the term of the loan. In addition, the
				disclosure shall state the repayment date and other events which cause the loan
				to become due and payable;
(xii)
				for tenure loans, a schedule of estimated payments to the mortgagor shall be
				furnished. The lender or broker shall label such schedules as
				"estimates;"
(xiii) a statement
				indicating whether a set aside account is required to pay property charges and,
				if so, an approximation of the amount to be set aside;
(xiv) a statement indicating whether and what
				type(s) of mortgage and/or property insurance will be required and the cost of
				any premiums, broken down monthly and over the life of the loan;
(xv) if applicable, that the loan provides
				for the mortgagee to receive a percentage of the future appreciated value of
				the property,
i.e.,
"shared appreciation," what that
				percentage is, and the method of calculating such amount. In addition, the
				lender shall provide both a narrative explanation and an example of the
				application of its methodology. This example must use as its projected real
				estate appreciation or depreciation rate for home prices, the average of the
				yearly changes in the Consumer Price Index for Shelter for New
				York-Newark-Jersey City area for the eight years preceding the year in which
				the loan is made;
(xvi) the
				interest rate(s) to be charged on the outstanding principal and whether the
				rate(s) are fixed, variable or both. For a term loan with a fixed rate of
				interest, the lender or broker shall also disclose the total interest payable
				on the loan principal, assuming maturity of the loan at expiration of the term.
				For a term loan with a variable rate of interest, the lender shall disclose
				also the estimated total interest payable on the loan principal using the
				yearly average of the base index and margin chosen by the lender for the
				eight-year period preceding the loan closing and assuming the maturity of the
				loan at expiration of the term. A shared appreciation mortgage constitutes a
				variable interest rate mortgage and is subject to the same disclosure
				requirements state and federal law imposes on all variable interest rate
				mortgages. For tenure reverse mortgage loans, the same disclosures shall be
				made, except that maturity shall be assumed at the actuarial life expectancy of
				the mortgagor, or, if there is more than one mortgagor, the younger of the
				mortgagors; and
(xvii) that the
				loan provides for the lender to receive any form of equity participation the
				maximum total percentage obligation of the mortgagor to the lender arising from
				the reverse mortgage loan, what is included in this maximum and what is
				excluded from it. In addition, the lender shall provide both a narrative
				explanation and an example demonstrating equity participation.
(3) Counseling checklist - a
				checklist of issues to be discussed with a housing counselor, printed on a
				separate sheet of paper in Times New Roman 28-point font and including the
				following:
(i) how unexpected medical or other
				events that cause the applicant to move out of the home earlier than
				anticipated, either permanently or for more than one year, will impact the
				projected total annual loan cost of the mortgage;
(ii) the extent to which the applicant's
				financial needs could be better met by options other than a reverse mortgage
				loan;
(iii) whether the applicant
				intends to use the proceeds of the reverse mortgage loan to purchase an annuity
				or other insurance products and the consequences of doing so;
(iv) the effect of repayment of the loan on
				non-borrowing residents of the home after all mortgagors have died or
				permanently left the home;
(v) the
				applicant's ability to finance routine or catastrophic home repairs, especially
				if maintenance is a factor that may determine when the mortgage becomes payable
				or will allow the mortgagee to accelerate or terminate the reverse mortgage
				loan;
(vi) a statement that the
				reverse mortgage loan has tax and estate planning consequences and may affect
				levels of, or eligibility for, government benefits, grants or pensions, and
				that applicants are advised to explore those matters with appropriate
				professionals; and
(vii) the
				ability of the applicant to finance alternative living accommodations, such as
				assisted living or long-term care nursing home registry, after the applicant's
				equity is depleted.
(4)
				Counseling acknowledgment- a blank acknowledgment, printed on a separate sheet
				of paper, allowing for an applicant to choose from the following options:
(i) the terms of the reverse mortgage loan
				have been explained, in-person, by an attorney, a housing counselor or any
				other in-person counseling services indicated on the counseling statement;
				and
(ii) either:
(a) for R PL 280 -b loans. The applicant,
				although made aware of the importance of in-person counseling and its local
				availability through the provision of such information by the lender, chooses
				to engage in the required counseling via telephone; or
(b) for R PL 280 and R PL 280 -a loans. The
				applicant, although made aware of the importance of counseling and its local
				availability through the provision of such information by the lender, chooses
				not to take advantage of in-person counseling services.