The New York State Assembly is currently debating a bill that, if passed, would make key changes to the way reverse mortgage business is conducted within the state. This includes raising the minimum borrower age from 60 to 62.
If the bill is successful, it could undercut a critical product feature found in private-label reverse mortgages.
If passed, State Assembly Bill A5877 would make several changes to the reverse mortgage laws within the state, the most notable being an increase to the minimum borrower age. The bill also specifies application of its provisions for cooperatives, defines the role of a non-borrowing spouse, allows for partial or full prepayments, and simplifies language that describes “mortgagors” or “applicants” rather than “borrowers.”
The bill would also restrict fees from being charged for reverse mortgage processing until a counseling certificate is delivered to the borrower.
“The processing of a reverse mortgage shall include the ordering of an appraisal, a title search and a credit report or an FHA case number, when applicable,” one of the bill’s new provisions states. “A reverse mortgage loan cannot be processed, nor shall a borrower incur any processing expense until the borrower completes the required counseling. The processing of a reverse mortgage loan may only proceed once the counseling is complete, as evidenced by the signed and dated counseling certificate.”
In addition, the bill would add a section to existing law that states a borrower “shall not be required by an authorized lender or broker to purchase an insurance or annuity product,” except for insurance normally required in a reverse mortgage transaction.
The bill would also repeal section 280-A of the state’s real property law, which requires lenders to make as many reverse mortgages to borrowers 70 years and older as it makes to those who are 60 years and older.
In a member update late last month, National Reverse Mortgage Lenders Association (NRMLA) said that it had reached out to the bill’s primary sponsor, David Weprin (D), who represents parts of Queens.
NRMLA said while there are some measures of the bill it supports, the minimum borrower age should instead be lowered to 55 for borrowers who are seeking private-label reverse mortgage outside the FHA-sponsored Home Equity Conversion Mortgage (HECM).
One recent substantial change to New York’s reverse mortgage laws was the allowance of proprietary loans on cooperative living spaces for borrowers aged 70 or older. That bill was originally passed under the tenure of Former Gov. Andrew Cuomo, and sat for months on the governor’s desk until his successor Gov. Kathy Hochul, signed it into law.
Last May, the New York Department of Financial Services (NYDFS) issued a letter to any entity in the state that intends to originate reverse mortgage loans on cooperative apartments, specifying that only proprietary product options, and not FHA-sponsored HECMs, are eligible on co-ops.
Bill A5877 is currently in the hands of the Assembly’s Committee on Banks and has not yet been scheduled to go to the floor.
