N.Y. Comp. Codes R. & Regs. tit. 3 § 83.5

Current through Register Vol. 46, No. 51, December 18, 2024

Section 83.5 - Sharing of appreciation

(a) Shared appreciation agreements may provide that the mortgagor shall share, in accordance with section 83.6 of this Part, in any appreciation in the value of the residential property with the holder in the event of a sale or transfer of the residential property or any interest therein, whether by deed, contract for deed or otherwise; including the following cases:

(1) sale or transfer for value that exceeds the outstanding principal balance of the modified mortgage loan;

(ii) taking of the residential property by eminent domain where payment is made for the full value of the property; or

(iii) casualty loss where the proceeds of the claim are used to repay the principal of the modified mortgage loan.

(b) The following cases do not necessitate a sharing, nor do they extinguish a holder's claim to a share of the appreciation in value upon a subsequent sale or transfer:

(1) the creation of a lien or other encumbrance subordinate to the holder's security instrument, which does not relate to a transfer of rights of occupancy in the residential property;

(2) the creation of a purchase money security interest for household appliances;

(3) a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;

(4) the granting of a leasehold interest; provided, however, the leasehold interest is not for a period longer than the period permitted to pay off the modified mortgage loan, and the lease does not provide the lessee with an option to purchase;

(5) a transfer to a relative resulting from the death of a mortgagor;

(6) a transfer where the spouse or children of the mortgagor become an owner of the residential property;

(7) a transfer resulting from a decree of dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse or former spouse of the mortgagor becomes an owner of the residential property;

(8) a transfer into an inter vivos trust in which the mortgagor is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the residential property; or

(9) any other transfer or disposition permissible by Federal regulation as not triggering a due-on-sale clause.

(c) The following cases do not prevent a holder from sharing in any appreciation; rather, each entitles the holder to collect the aggregate principal balance, including the principal reduction and interest thereon, calculated at the modified note rate from the date of the shared appreciation agreement to the date of consummation of the transaction:

(1) a refinancing or other satisfaction in full of the modified mortgage loan, which is not in connection with a sale or transfer of the residential property or any interest therein; or

(2) a sale or transfer of the residential property or any interest therein, which occurs within one year of the execution of the modified mortgage loan.

N.Y. Comp. Codes R. & Regs. Tit. 3 § 83.5