N.Y. Comp. Codes R. & Regs. tit. 3 § 79.9

Current through Register Vol. 46, No. 45, November 2, 2024

Section 79.9 - Required disclosures and counseling for reverse mortgage loans

(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.

(b) Prior to executing a commitment, the lender shall provide the following notice:

IMPORTANT NOTICE REGARDING THE RIGHT TO CANCEL: The State requires a 3-day right to cancel period after the signing of a commitment for reverse mortgage loan. During this 3-day period of time, you have the right to cancel and cannot be required to close or proceed with the loan but may still be responsible for fees actually paid to third parties. The purpose of this requirement is to provide you with time to reconsider your decision. Potential borrowers may wish to seek additional information from a housing counselor or other appropriate professional during this 3-day period. The 3-day right to cancel period cannot be waived.

(c) Six months prior to the end of a term loan, the mortgagee shall notify the mortgagor or an authorized designee, in writing, if applicable:

(1) that the mortgagor will be responsible to make real estate tax and insurance payments; and

(2) that the mortgagor will have to vacate his or her home upon the expiration of the term and the exact date that such move-out is required.

(d) All notices required by this subdivision must be mailed in hard copy to each applicant or mortgagor unless each applicant or mortgagor has consented in writing to receiving notice electronically. Thereafter, any such electronic notice must comply with the following requirements:

(1) no electronic or digital signature shall be deemed acceptable unless completed in accordance with article 3 of the New York State Technology Law;

(2) receipt of all electronic notices must be confirmed through the use of a "required confirm button" without which the transaction may not proceed further;

(3) a hard-copy of any disclosures sent electronically shall be mailed, within three business days of the electronic transmission, to each applicant or mortgagor who indicates that he or she does not have the computer capacity to download and print such disclosures;

(4) a mortgagee shall either keep a copy of the digitally signed disclosures or be able to demonstrate that the transaction could not proceed further than the display of the disclosures without the applicant's use of the "required confirm button"; and

(5) in those instances, in which a hard copy is not mailed pursuant to paragraph (3) of this subdivision, the mortgagee must be able to demonstrate that information was obtained as to the applicant or mortgagor's computer capacity to download and print such disclosures.

N.Y. Comp. Codes R. & Regs. Tit. 3 § 79.9

Adopted New York State Register July 29, 2020/Volume XLII, Issue 30, eff. 7/29/2020