The New York Department of Financial Services (NYDFS) recently published the final reverse mortgage regulations (Final Regulations) that implement the reverse mortgage requirements of Assembly Bill 5626. Final Regulations became effective on July 29, 2020. WBK previously covered NYDFS reverse mortgage regulations that were adopted on an emergency basis (Emergency Regulations) here.
The Final Regulations apply to FHA-insured Home Equity Conversion Mortgage Loans (HECM) made under section 280-b of the New York Real Estate Law (NYRPL) and proprietary reverse mortgage loans. performed pursuant to sections 280 and 280-a of the NYRPL.
The Final Regulation differs from the Emergency Regulation, in part, by:
- Provide a compliance transition period provision that, notwithstanding any other applicable federal or state laws or regulations for 120 days, including and after March 5, 2020, mortgagees originating or servicing RPL loans 280-b will not incur a violation if they comply with Part 79 of Title 3 of the New York Codes, Rules and Regulations (NYCRR) that was in effect before March 5, 2020;
- Eliminating the specification of service fees, and in the published Comment, the NYDFS indicates that the rate limits under the NYDFS mortgage servicing regulations under Part 419 of Title 3 of the NYCRR will also apply to reverse mortgages;
- Review the property charges section account requirements to establish that such reserved accounts may include all or some of the items defined as property charges under Part 79 of Title 3 of the NYCRR;
- Eliminate the requirement for a letter of credit for lenders who make private reverse mortgage loans that are fully funded at closing;
- Grant eligible non-borrowing surviving spouses the right to remain in the property for their entire life after the borrower’s death;
- In the case of repairs, delete the term “structural integrity” and replace it with the concept of “reasonably similar condition, condition and repair”, but provided that it is relevant only to the extent that such condition, condition or repair threatens materially to damage the property or its market value (note that the Final Regulations also add a new requirement that mortgagees must have written policies and procedures to allow for appeal of any determination made pursuant to the Final Regulations);
- Revise the “counseling affidavit” requirement to a “counseling recognition” requirement and establish that a HUD HECM Counseling Certificate, or a reasonable equivalent for non-HECM loans, is sufficient to meet this requirement;
- Define expiration events in a manner more consistent with federal HECM regulations; and
- Provided that the mortgagee can advance the funds necessary to pay the property insurance premiums or property taxes in the following circumstances:
- The borrower’s payment of such property charges is already more than 30 days past due;
- The reverse mortgage loan has already been demanded and payable; or
- A reserved account has been established and the tax jurisdiction offers a discount for disbursements on an annual lump sum basis or imposes an additional charge or fee for installment disbursements and the mortgagee has chosen to take advantage of the discount for the borrower or avoid the additional payment. Charge or fee for installments.