N.Y. Comp. Codes R. & Regs. tit. 3 § 83.7

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

Section 83.7 - Disclosures

(a) Disclosures required prior to transactions.

Prior to entering into a shared appreciation agreement a holder must provide the mortgagor with a notice with a heading in bold, 14-point type stating that "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 must include the following disclosures:

(1) A statement that the holder will be entitled to receive a share of the appreciation in value of the residential property that occurs between the time of the loan modification and the time the property is sold or transferred.

(2) The limitation on the holder's share of appreciation in accordance with section 83.6 of this Part.

(3) The methodology the holder is required to use in calculating the appreciation in the value of the residential property.

(4) At least three illustrations of how the appreciation will be shared at the time the mortgagor sells or transfers the property, or pays off the modified mortgage loan at maturity. Such examples to include:

(i) no appreciation in the value of the residential property;

(ii) appreciation of 20 percent; and

(iii) appreciation of 50 percent.

(5) A statement or notice to like effect: YOU SHOULD SEEK INDEPENDENT COUNSELING FROM A LAWYER, A HUD-CERTIFIED MORTGAGE COUNSELOR OR A TAX ADVISOR REGARDING:

(i) THE TRADE-OFF BETWEEN A CURRENT REDUCTION IN THE SIZE OF THE MORTGAGE AND THE PROMISE TO GIVE UP PART OF THE FUTURE INCREASE (APPRECIATION) IN THE VALUE OF YOUR HOME; and

(b) [(ii)] THE TAX CONSEQUENCES OF THE PRINCIPAL FORGIVENESS AND SHARED APPRECIATION AGREEMENT.

(6) A list of the names and contact information of at least five government approved housing counseling agencies in the county where the residential property is located; provided, however, that if there are fewer than five such counselors in that county, the list may include counselors in one or more neighboring counties.

(7) A statement on the potential effect of the shared appreciation agreement on any future refinancing of the modified mortgage loan and the potential effect of any prepayment or refinancing of the modified mortgage loan on the shared appreciation agreement.

(8) A notice to like effect that the mortgagor should consult with other lien holders of the subject residential property as to whether their liens contain clauses that could accelerate such lien holders' loans as a result of the mortgagor's execution of the shared appreciation agreement.

(9) A statement that the holder shall not secure a modified mortgage loan by any real or personal property, other than the residential property securing the modified mortgage loan, nor shall it seek a deficiency judgment in order to satisfy such modified mortgage loan.

(b) At or prior to accepting an application for a shared appreciation agreement, a holder must disclose in writing or via electronic media to each mortgagor, in one or more documents, and in plain language, the terms of the transaction sought by the mortgagor. disclosure statement(s) provided to a mortgagor shall include at a minimum the following information:

(1) amounts, if any, the mortgagor must pay to the holder prior to or simultaneously with the execution of the shared appreciation agreement or modified mortgage loan documents;

(2) the events that would terminate or accelerate the mortgagor's obligations under the shared appreciation agreement and an explicit warning regarding the consequences of defaulting on the modified mortgage loan or breaching the shared appreciation agreement;

(3) a full explanation of how the unpaid principal balance on the pre-modified mortgage loan will be calculated, including a detailed breakdown and listing of all capitalized third-party fees and advances paid for taxes and insurance;

(4) the amount of the monthly payment, including if applicable, escrow amounts for property taxes and hazard insurance, the mortgagor will be required to pay on the modified mortgage loan, amortization period on which payments are calculated and an explanation of the holder's amortization schedule for the modified mortgage loan, including how the holder determines both the amount of each payment and the proportion of each payment which will be credited to interest. If the monthly payment is expected to change at any time during the term of the loan, holder must also provide an illustrative example of the effects that the increase may have on such payments;

(5) a statement that the shared appreciation agreement requires the maintenance of an escrow account and an explanation of the purpose for requiring escrow payments and how such payments are calculated;

(6) the prevailing and initial interest rate and, if applicable, a statement of the intervals at which the holder may change the interest rate on the loan, including identification of the indexes/indices to be used and how the index values may be obtained by the mortgagor;

(7) a statement that the loan may be prepaid prior to final maturity without penalty. the holder must also specify the mortgagor's repayment obligation under the shared appreciation agreement at prepayment of the loan;

(8) the holder's toll-free number and the name of a person to whom a mortgagor may address questions, comments or complaints;

(9) a notice that the mortgagor can submit written complaints to the New York State Department of Financial Services online at (www.dfs.ny.gov/consumer); and

(10) where applicable, that the mortgagor is eligible to enter into a modification or refinance transaction(s) in accordance with section 83.3(a)(3) of this Part, which may also result in lower monthly payments than those currently paid, without having to share in the appreciation of the value of the residential property. such disclosure must also include the amount of such lower monthly payments as well as all other material terms.

(c) With regard to the electronic transmission of notices, a hard-copy of such notice shall be mailed to the mortgagor who indicates that he or she does not have the computer capacity to down-load and print such notice. in those instances in which a hard copy of the notice is not mailed to the mortgagor, the holder must be able to demonstrate that information was obtained as to the mortgagor's computer capacity to down-load and print such notice.

N.Y. Comp. Codes R. & Regs. Tit. 3 § 83.7