A new bill passed by the state of New York could impact reverse mortgage originators and servicers, as it will prohibit lenders from engaging in “unfair or deceptive” practices when offering reverse mortgage loans.
According to Reverse Mortgage Daily, the bill will soon be sent to Governor Andrew Cuomo for signature.
The report states that once the law becomes enforceable, the impact it could have on the reverse mortgage industry would be “significant,” according to Allison J. Schoenthal, partner with Hogan Lovells.
“Originators and servicers of Home Equity Conversion Mortgages (HECMs) who do business in New York should take action now to prepare to comply with the new bill’s requirements,” said Schoenthal. “Ensuring compliance may require a thorough review of commercial advertisements and mailings, adapting communications with mortgagors to incorporate required notices, and modifying procedures employed to verify a mortgagor’s continued residence in a mortgaged property.”
The bill includes prohibition in unfair and deceptive practices, new requirements for consumer notices, and the imposition of restrictions related to occupancy verification and related foreclosures. Also prohibited is the use of phrases “public service announcement” and “government issued” in promotional materials.
“The HECM bill also requires that every authorized lender or its agent provide ‘supplemental consumer protection materials’ with any solicitation for a reverse mortgage that is mailed to a physical address within New York,” Schoenthal said. “The content of the ‘supplemental consumer protection materials’ will be specified by the Superintendent of the New York Department of Financial Services.”
Lenders in New York will also be required to provide each applicant for a reverse mortgage with the contact information provided by the Department of Housing and Urban Development (HUD), so they can seek counseling for a HECM loan.
“When a mortgagor defaults on mortgage insurance premiums, homeowners’ insurance premiums, or real property tax, the lender may only pay those premiums and/or taxes which are in arrears,” Schoenthal said. “The bill further requires that both authorized lenders and mortgagors be represented by an attorney or attorneys at the time of closing and shall have at least one attorney present to conduct the closing.”