Bill Text: NY A02632 | 2019-2020 | General Assembly | Amended


Bill Title: Relates to authorizing reverse cooperative apartment unit loans for persons sixty-two years of age or older; provides additional consumer protections.

Spectrum: Partisan Bill (Democrat 19-0)

Status: (Introduced) 2019-06-20 - substituted by s3686b [A02632 Detail]

Download: New_York-2019-A02632-Amended.html



                STATE OF NEW YORK
        ________________________________________________________________________

                                         2632--B

                               2019-2020 Regular Sessions

                   IN ASSEMBLY

                                    January 24, 2019
                                       ___________

        Introduced   by  M.  of  A.  DINOWITZ,  WILLIAMS,  L. ROSENTHAL,  ORTIZ,
          SEAWRIGHT, ENGLEBRIGHT, HYNDMAN, BARRON, BLAKE, GLICK,  D'URSO,  DICK-
          ENS, RIVERA, GALEF, ARROYO, COOK, STERN, RICHARDSON -- Multi-Sponsored
          by  --  M. of A.   SIMON -- read once and referred to the Committee on
          Banks -- committee discharged,  bill  amended,  ordered  reprinted  as
          amended  and recommitted to said committee -- again reported from said
          committee with amendments, ordered reprinted as amended and  recommit-
          ted to said committee

        AN  ACT  to  amend  the banking law, the uniform commercial code and the
          civil practice law and  rules,  in  relation  to  reverse  cooperative
          apartment unit loans

          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:

     1    Section 1. The banking law is amended by adding a new section  6-n  to
     2  read as follows:
     3    §  6-n. Reverse cooperative apartment unit loans for persons sixty-two
     4  years of age or older. 1. For purposes of this  section,  the  following
     5  terms shall have the following meanings:
     6    (a)  Reverse  cooperative apartment unit loan. A loan which is secured
     7  by shares or membership in a cooperative apartment that is  or  intended
     8  to be the primary residence of the borrower or borrowers the proceeds of
     9  which  are  advanced to the borrower or borrowers during the term of the
    10  loan in equal installments, or in advances through a line of  credit  or
    11  otherwise,  in  a  lump sum, or through a combination thereof.  Interest
    12  and fees will accrue during the life of the loan and will  be  added  to
    13  the  principal  balance of the loan, but will not become due and payable
    14  until the   borrower(s)  dies,  permanently  vacates  the  apartment  or
    15  defaults on the terms of the loan, and will continue to accrue until the
    16  loan is paid in full.
    17    (b) Loan payout options:

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD01344-09-9

        A. 2632--B                          2

     1    (i)  Term payment option. Under the term payment option, equal monthly
     2  payments are made by the lender to the borrower  for  a  fixed  term  of
     3  months chosen by the borrower.
     4    (ii)  Tenure  payment  option.  Under the tenure payment option, equal
     5  monthly payments are made by the lender to the borrower, until the  loan
     6  is prepaid in full or becomes due and payable.
     7    (iii)  Line of credit payment option. Under the line of credit payment
     8  option, payments are made by the lender to the borrower at times and  in
     9  amounts  determined by the borrower as long as the amounts do not exceed
    10  the maximum amount of loan proceeds.
    11    (iv) Single lump sum payment option. Under the single lump sum payment
    12  option, the borrower receives an amount from the lender  that  does  not
    13  exceed  the  maximum  amount  of  loan proceeds. Set asides required for
    14  disbursements such as loan closing  costs  or  for  monthly  maintenance
    15  fees,  will  be  deducted  from  the amount of proceeds available to the
    16  borrower.
    17    (c) Authorized lender. Any bank, trust company, national banking asso-
    18  ciation, savings bank, savings and  loan  association,  federal  savings
    19  bank,  federal  savings  and  loan association, credit union, or federal
    20  credit union or any licensed mortgage banker approved for the making  of
    21  reverse mortgage loans by the superintendent or any entity exempted from
    22  licensing  pursuant  to  section five hundred ninety of this chapter and
    23  approved for the making of reverse mortgage loans by the superintendent.
    24    (d) Borrower. A tenant in severalty who is sixty-two years of  age  or
    25  older,  or  if  the cooperative apartment unit is held by tenants by the
    26  entirety or by joint tenancy, the youngest of which is  sixty-two  years
    27  age or older.
    28    (e)  Superintendent.  The superintendent of financial services of this
    29  state.
    30    (f) Department. The department of financial services of this state.
    31    (g) Third-party contact. The lender must ask the borrower if they want
    32  to designate a third-party contact, such as  a  family  member,  trusted
    33  friend,  advisor  or  other  party  whom  the  borrower would like to be
    34  contacted. It shall be the borrower's discretion to choose if the third-
    35  party contact is to be contacted if (i) the borrower  has  not  returned
    36  the  occupancy  form,  and/or (ii) the loan is in default for any reason
    37  and the lender plans to proceed on collecting on the loan, i.e.,  initi-
    38  ating  eviction  or  foreclosure  and/or  (iii)  the  borrower cannot be
    39  reached.
    40    2. A cooperative apartment unit loan pursuant to this section shall be
    41  subject to the following:
    42    (a) the borrower shall be granted lifetime possession of  the  subject
    43  premises of the cooperative apartment unit which is the security for the
    44  reverse  cooperative apartment unit loan, as long as such apartment unit
    45  remains the borrowers' primary residence and  the  borrower  is  not  in
    46  default  under the reverse cooperative apartment unit loan. The borrower
    47  or borrowers must certify annually on each anniversary of the loan, that
    48  they reside in the unit and that it is their primary residence;
    49    (b) the lender shall ask the borrower if they designate a third  party
    50  contact,  collect  such  information  from  the borrower and update such
    51  information annually on each anniversary of the loan;
    52    (c) subject to such rules or regulations  as  the  superintendent  may
    53  adopt, a reverse cooperative apartment unit loan shall be made at either
    54  a fixed or variable rate of interest;
    55    (d)  subject  to  such  rules or regulations as the superintendent may
    56  adopt, the authorized lender may require a borrower to establish  a  set

        A. 2632--B                          3

     1  aside  account for the purposes of paying property taxes, maintenance or
     2  cooperative fees,  insurance  premiums  of  the  property  securing  the
     3  reverse cooperative apartment unit loan, or for the payment of any other
     4  fees and expenses;
     5    (e)  a  lender who fails to make loan advances as required in the loan
     6  documents, and fails to cure an actual default after notice as specified
     7  in the loan documents, shall forfeit any right to  collect  interest  or
     8  service  charges  under the contract. The  lender's right to recovery at
     9  loan maturity shall be limited to the outstanding   balance  as  of  the
    10  date  of  lender's default, minus all interest.  However, a lender shall
    11  not be required to make loan advances under a loan if the borrower is in
    12  default under  the loan;
    13    (f) the outstanding balance may be prepaid in  full  by  the  borrower
    14  without  penalty  at  any  time during the reverse cooperative apartment
    15  unit loan term;
    16    (g) an authorized lender is prohibited from  using  or  attaching  any
    17  property  or  asset  of the borrower or heirs of the borrower except the
    18  apartment unit securing the reverse cooperative apartment unit  loan  in
    19  settlement  of  a  reverse  loan  obligation--the loan is a non-recourse
    20  loan;
    21    (h) an authorized lender shall deliver to the applicant upon  applica-
    22  tion,  a  statement  prepared  by  the  department providing the contact
    23  information for New York approved, or U.S.  Department  of  Housing  and
    24  Urban  Development  approved,  reverse  mortgage housing counselors with
    25  cooperative housing training approved by the department whom the cooper-
    26  ative apartment owner can call for independent counseling  and  informa-
    27  tion  services.  Further,  no reverse loan commitment shall be issued by
    28  the authorized lender until the applicant presents, in writing,  a  form
    29  that  certifies the terms of the reverse cooperative apartment unit loan
    30  have been explained to them by a New York or U.S. Department of  Housing
    31  and  Urban  Development approved reverse mortgage housing counselor with
    32  cooperative housing training approved by the  department.  The  form  of
    33  such statement and affidavit and cooperative housing counseling services
    34  shall be approved by the superintendent;
    35    (i)  an  authorized  lender shall deliver to an applicant such disclo-
    36  sures as may be required by the superintendent which shall describe  the
    37  relevant  portions  of the reverse loan being offered, and shall include
    38  but not be limited to the following items:
    39    (i) a schedule of payments to and from  the  borrower  and  the  total
    40  payments in dollars over the life expectancy of the youngest borrower of
    41  the reverse cooperative apartment unit loan for the borrower;
    42    (ii)  a statement prominently displayed advising applicants to consult
    43  with appropriate authorities regarding tax and  estate  planning  conse-
    44  quences of a reverse cooperative apartment unit loan;
    45    (iii)  where  applicable  a  description of prepayment and refinancing
    46  features;
    47    (iv) to the extent determinable at or prior to the  inception  of  the
    48  reverse cooperative apartment unit loan, the interest rate and, an esti-
    49  mate  of the total interest payable on the reverse cooperative apartment
    50  unit loan;
    51    (v) a statement concerning the  compliance  of  the  lender  with  the
    52  criteria  established  by  the  superintendent that an authorized lender
    53  must meet before it may make reverse cooperative  apartment  unit  loans
    54  pursuant to this section;

        A. 2632--B                          4

     1    (vi) a statement setting forth those events which would cause the loan
     2  to become due and payable (or cause the borrower to default) the reverse
     3  cooperative apartment unit loan;
     4    (vii)  the  loan  is subject to a three day right of rescission by the
     5  borrower; and
     6    (viii) a financial statement setting forth an estimate  of  all  costs
     7  associated with the loan;
     8    (j) an authorized lender shall deliver to each borrower at the time of
     9  closing  of a reverse cooperative unit loan two copies of the borrower's
    10  right to cancel and instructions for  how  to  cancel  the  loan  to  be
    11  prescribed by the superintendent;
    12    (k) a reverse cooperative apartment unit loan pursuant to this section
    13  shall  expressly  and conspicuously bear a legend identifying it as such
    14  in at least fourteen-point font;
    15    (l) a reverse cooperative apartment unit loan shall clearly set  forth
    16  the terms for when the loan becomes due and payable, including:
    17    (i)  regardless of loan payout option chosen by the borrower, the loan
    18  note shall state that the outstanding loan balance will not be  due  and
    19  payable  in  full until the last borrower dies, or if a borrower conveys
    20  all of his or her title in the property and no  other  borrower  retains
    21  title to the property; and
    22    (ii) the loan note shall state that the outstanding loan balance shall
    23  be due and payable in full if any of the following occur:
    24    (1)  the property ceases to be the primary residence of a borrower for
    25  reasons other than death and the property is not the  primary  residence
    26  of at least one other borrower;
    27    (2)  for a period of longer than twelve consecutive months, a borrower
    28  fails to occupy the property because of physical or mental  illness  and
    29  the  property is not the primary residence of at least one other borrow-
    30  er; or
    31    (3) an obligation of the borrower under the loan note is not met;
    32    (m) in the event that an authorized lender or holder  of  the  reverse
    33  cooperative  apartment  unit  loan determines the loan is in default and
    34  intends to initiate proceedings pursuant to the note, the  lender  shall
    35  notify the borrower's third-party contact. In the event that the borrow-
    36  er  has  not  designated a third-party contact to receive such notice of
    37  foreclosure, then the authorized lender or the holder  of  said  reverse
    38  cooperative  apartment unit loan shall notify the local or county office
    39  for the aging of its intent to commence  foreclosure  proceedings.  Such
    40  entity  shall  take  appropriate  action to protect the interests of the
    41  borrower;
    42    (n) a reverse cooperative apartment unit loan secured by a unit  in  a
    43  cooperative  housing  corporation  shall  also  be  subject to the prior
    44  approval by the cooperative's board of directors; and
    45    (o) no reverse cooperative apartment unit loan  shall  be  subject  to
    46  mandatory binding arbitration.
    47    3.  A reverse cooperative apartment unit loan pursuant to this section
    48  may:
    49    (a) provide that an authorized lender  may,  consistent  with  federal
    50  laws  and regulations, include a due-on-sale clause in its reverse coop-
    51  erative apartment unit loan agreement and at  its  option  exercise  and
    52  enforce such clause in accordance with its terms; and
    53    (b)  provide  that  the  borrower's  closing  costs, including but not
    54  limited to loan or commitment fees if any, insurance premiums,  repairs,
    55  legal fees, the costs of third party counseling, the costs of paying off
    56  any existing mortgages or liens, and other appropriate costs be included

        A. 2632--B                          5

     1  in  the  principal  of  the  reverse cooperative apartment unit loan and
     2  disbursed out of the loan proceeds at closing.
     3    4.  The  superintendent shall adopt such rules or regulations as he or
     4  she considers appropriate to govern a reverse cooperative apartment unit
     5  loan made pursuant to this section.  No  reverse  cooperative  apartment
     6  unit  loan  shall be made unless it conforms to the requirements of this
     7  section and such rules and regulations as the superintendent may adopt.
     8    5. No authorized lender or any other party  or  entity  shall  in  any
     9  manner,  in  the  marketing or offering of reverse cooperative apartment
    10  unit loans, engage in any unfair or deceptive  practices  in  connection
    11  with  the  marketing  or  offering of reverse cooperative apartment unit
    12  loans, and, additionally, shall not:
    13    (a) use the words "public service  announcement"  in  any  commercial,
    14  mailing, advertisement or writing relating thereto;
    15    (b)  use  the  words  "government  insured"  or other similar language
    16  representing that reverse cooperative apartment unit loans are  insured,
    17  supported  and  sponsored  by any governmental entity in any commercial,
    18  mailing, advertisement or writing relating thereto; or
    19    (c) represent that any such loan is other than a commercial product.
    20    6. (a) Every authorized lender and assignee must obtain a surety  bond
    21  in  the amount of one hundred thousand dollars for the benefit of claims
    22  against the lender/assignee for failure to perform their obligations  to
    23  the borrower. The superintendent will hold the surety bond. In addition,
    24  a  lender  or  assignee  shall maintain an irrevocable standby letter of
    25  credit from a financial institution approved by  the  superintendent  in
    26  favor  of  the  lender  or  assignee  in an amount necessary to fund all
    27  reverse mortgage loan requirements  anticipated  over  the  next  twelve
    28  months  for  loans  then  on the lender's books and those expected to be
    29  made over the next twelve months or three million dollars, whichever  is
    30  greater.  The initial term of the letter of credit shall be at least two
    31  years. A lender or assignee also shall maintain a minimum capital of ten
    32  million dollars. A lender may rely upon its parent company to  meet  the
    33  minimum  capital  requirements.  The requirements for a letter of credit
    34  shall not apply to loans that are  fully  funded  at  consummation.  The
    35  minimum  capital  requirements  shall  not apply to lenders or assignees
    36  that sell loans in the secondary market to a financially  viable  finan-
    37  cial  institution,  and the superintendent shall define the requirements
    38  of what constitutes a "financially viable financial institution prior to
    39  any secondary market sale".
    40    (b) Every authorized lender or  its  agent  shall  provide,  with  any
    41  solicitation for reverse cooperative apartment unit loan products mailed
    42  to a physical address within the state, supplemental consumer protection
    43  materials the content and form of which shall be specified by the super-
    44  intendent or his or her designee.
    45    (c)  Every authorized lender shall provide each applicant or potential
    46  applicant for a reverse cooperative apartment unit loan with  the  tele-
    47  phone number and internet website address provided by the department for
    48  the  purposes of acquiring reverse cooperative apartment unit loan coun-
    49  seling.
    50    (d) The superintendent is authorized  to  promulgate  such  rules  and
    51  regulations  as  he  or  she  shall  deem  necessary  to  implement  the
    52  provisions of this subdivision.
    53    7. For reverse cooperative apartment unit loans, authorized lender and
    54  their agents shall:
    55    (a) provide a monthly account statement, and for all  borrowers  whose
    56  maintenance fees, special assessments mortgage insurance payments, home-

        A. 2632--B                          6

     1  owners  insurance payments, or payments stemming from any other property
     2  obligation or obligations are administered by the authorized lender, and
     3  where these payments are derived from the  proceeds  of  the  loan,  the
     4  authorized  lender shall provide on the borrower's account statement the
     5  current balance remaining in the borrower's line of credit  or  lifetime
     6  expectancy  set  aside,  the  projected annual property charges for that
     7  year, and a notice which reads in at least fourteen point type:
     8    "YOUR MAINTENANCE FEES AND SPECIAL  ASSESSMENTS  ARE  CURRENTLY  BEING
     9  PAID  BY  THE  PROCEEDS OF THIS LOAN. THE FUNDS THAT HAVE BEEN SET ASIDE
    10  ARE EXPECTED TO BE EXHAUSTED AFTER  THE  MAINTENANCE  FEES  AND  SPECIAL
    11  ASSESSMENT  PAYMENTS  OF  (SPECIFY  EXPECTED  MONTH  AND  YEAR).  IF THE
    12  PROCEEDS OF THIS LOAN  CANNOT  PAY  THE  MAINTENANCE  FEES  AND  SPECIAL
    13  ASSESSMENTS,  YOU  MUST PAY THESE OBLIGATIONS OR YOUR COOP SHARES MAY BE
    14  LOST TO FORECLOSURE. PLEASE  NOTE  THAT  MAINTENANCE  FEES  AND  SPECIAL
    15  ASSESSMENTS  CAN  VARY  SO YOU SHOULD CONTINUE TO REVIEW THIS NOTICE FOR
    16  CHANGES."
    17    (b) by telephone and first class mail, inform and provide notice to  a
    18  borrower  when  his or her home equity line of credit or life expectancy
    19  set aside is depleted to twenty percent  or  less  of  its  value.  Such
    20  notice  shall  inform the borrower of his or her obligations relating to
    21  such real property including, but not limited  to,  mortgage  insurance,
    22  homeowners  insurance  and  real  property taxes previously paid by such
    23  line of credit or life expectancy set aside, and that  such  obligations
    24  must  continue  to  be  paid when the home equity line of credit or life
    25  expectancy set aside is depleted. Such notice shall use plain  language,
    26  written in a clear and coherent manner using words with common and every
    27  day  meanings,  appropriately  divided  and  captioned  by  its  various
    28  sections. If the lender or its agent is unable to contact  the  borrower
    29  by  telephone, notice must be sent to the third-party contact if author-
    30  ized by the borrower.
    31    (c) Each authorized lender shall, by telephone and first  class  mail,
    32  inform and provide notice to a borrower when his or her home equity line
    33  of  credit  or  life expectancy set aside is depleted. Such notice shall
    34  inform the borrower of his or her obligations relating  to  the  cooper-
    35  ative  apartment unit including, but not limited to, mortgage insurance,
    36  homeowners insurance and real property taxes, and that the  home  equity
    37  line  of  credit  or  life expectancy set aside will no longer pay these
    38  obligations. Such notice shall use plain language, written  in  a  clear
    39  and  coherent  manner  using  words  with common and every day meanings,
    40  appropriately divided and captioned by its various sections.
    41    8. In the event that an authorized lender determines a reverse cooper-
    42  ative apartment unit loan to be in default on the basis that the cooper-
    43  ative apartment is no longer the primary residence of or occupied by the
    44  borrower, if during the verification of the borrower's primary residence
    45  and/or occupancy no responses  are  received  in  response  to  mailings
    46  relating thereto, such lender shall cause a telephone call to be made to
    47  the  borrower,  or  if  the borrower is unreachable by telephone, to the
    48  third-party contact if designated, and an in person visit to be made  to
    49  the  borrower  at  the  cooperative  apartment  to  be made prior to the
    50  commencement of any proceeding to enforce the lender's rights under  the
    51  note.  During  such  visit,  the  authorized  lender  or its agent shall
    52  provide clear information as to who they are, that the visit pertains to
    53  the reverse cooperative apartment unit loan, the  reason  for  the  home
    54  visit,  and  the  telephone  number to call for further information. The
    55  authorized lender must wait at least thirty days following  such  visit,
    56  in  addition  to any additional time or notice requirements specified by

        A. 2632--B                          7

     1  any other provision of law, before initiating a  foreclosure  action  on
     2  the  basis that the cooperative apartment is no longer the primary resi-
     3  dence of the borrower. If the borrower contacts  the  authorized  lender
     4  and provides proof of residence or occupancy after such visit but before
     5  the  commencement  of  a proceeding to enforce the lender's rights under
     6  the note, the authorized lender shall be  barred  from  initiating  such
     7  action.    Furthermore, no authorized lender shall charge a borrower any
     8  fee for any such visit and inspection. This prohibition on  the  imposi-
     9  tion  of  fees  shall  include  any and all inspections conducted by the
    10  authorized lender to verify the status of the reverse cooperative apart-
    11  ment unit loan, or any suspected or actual default condition.
    12    9. Notwithstanding any inconsistent provision of law, the priority  of
    13  the  lien  of  a  reverse cooperative apartment unit loan, including the
    14  lien for  all  principal,  interest,  fees,  costs,  and  other  charges
    15  assessed in connection with the reverse loan, shall date from the filing
    16  of  a  UCC-1 notice for the loan irrespective of the date of any advance
    17  of reverse loan proceeds or the date by which an authorized lender shall
    18  be entitled to accrued but unpaid interest, fees, costs or other  charg-
    19  es.
    20    10.  Nothing  in  this  section shall be construed to limit, impair or
    21  otherwise affect the priority, under applicable law, of any other  mort-
    22  gage,  deed  of  trust, encumbrance or lien which was filed prior to the
    23  effective date of this section.
    24    11. The sale or transfer of the interest in the cooperative  apartment
    25  unit  securing  the  reverse cooperative apartment unit loan to a person
    26  other than an original borrower or borrowers shall result in the  termi-
    27  nation of the reverse loan.
    28    12. Any person who has been injured by reason of any violation of this
    29  section  or any violation of the rules and regulations of the department
    30  relating to the reverse cooperative  apartment  unit  loan  program  may
    31  bring  an  action  in  his  or her own name to recover treble his or her
    32  actual damages, plus the prevailing  plaintiff's  reasonable  attorneys'
    33  fees.
    34    13. Compliance with the provisions of this section shall be conditions
    35  precedent  to  commencing  an action to foreclose upon a reverse cooper-
    36  ative apartment unit loan which is subject to  the  provisions  of  this
    37  section, and the failure to comply therewith shall be a complete defense
    38  to such action.
    39    § 2. Subsection (f) of section 9-611 of the uniform commercial code is
    40  amended by adding a new paragraph 1-a to read as follows:
    41    (1-a)  Notwithstanding  any  other  provision of law, with regard to a
    42  reverse cooperative apartment unit loan, at least forty-five days before
    43  a secured party, as defined under Section  9-102(a)(73),  or  its  agent
    44  takes any steps to dispose of its collateral, as provided for in Section
    45  9-610, the secured party or its agent shall give notice to the borrower,
    46  and  separate notice to the borrower's designated third-party if one has
    47  been designated in at least fourteen-point type except for  the  heading
    48  which  shall be in at least sixteen-point type. The notice shall include
    49  the following:
    50       YOU COULD LOSE YOUR COOPERATIVE APARTMENT UNIT TO FORECLOSURE.
    51                 PLEASE READ THE FOLLOWING NOTICE CAREFULLY.
    52  Date
    53  Borrower's address
    54  Loan Number:
    55  Property Address:
    56  Dear Borrower(s) {or heirs of Debtor?}:

        A. 2632--B                          8

     1  As of ___________, your reverse cooperative apartment unit  loan  is  in
     2  default.  Under  New  York  State  Law, we are required to send you this
     3  notice to inform you that you may be at risk of losing your home.
     4  Your  reverse  loan is in default because you have not complied with the
     5  following conditions of your loan:
     6  _____ You are not occupying your  cooperative  apartment  unit  as  your
     7  primary residence
     8  _____ You did not submit the required annual certificate of occupancy
     9  _____ The named borrower on the reverse loan has died
    10  _____ You did not pay maintenance on your unit to the cooperative corpo-
    11  ration,  and  {servicer}  paid your maintenance for you on the following
    12  date(s)  in  the  following   amount(s):________________________________
    13  ____________________________________
    14  _____ You did not make required repairs to your unit
    15  If  the claim is based on your failure to pay maintenance to the cooper-
    16  ative corporation, you can cure this default by making  the  payment  of
    17  $____________  for  the  advances we made towards these payments on your
    18  behalf.
    19  You have the right to dispute the claims listed above by contacting  us,
    20  by  calling  ___________ or sending a letter to __________________. This
    21  may include proof of payments made for water  and  sewer  charges  or  a
    22  current declaration page from your insurance company, or any other proof
    23  to dispute the servicer's claim.
    24  OPTIONS  MAY  BE  AVAILABLE  FOR YOU TO CURE YOUR DEFAULT. SOME OF THESE
    25  OPTIONS ARE LISTED BELOW.  YOU  MAY  CONTACT  {SERVICER}  AT  {TOLL-FREE
    26  NUMBER} TO DISCUSS YOUR OPTIONS.
    27  If  you  are  in default for failure to pay maintenance, you may qualify
    28  for a re-payment plan to cure the default balance owed.
    29  Attached to this notice is a list of New  York  approved  housing  coun-
    30  seling agencies and legal services in your area which provide free coun-
    31  seling.   A   statewide   listing   by   county  is  also  available  at
    32  http://www.dfs.ny.gov/consumer/mortg  nys  np  counseling  agencies.htm.
    33  You  may also call your local Department of Aging for a referral or call
    34  311 if you live in New York City.
    35  Qualified free help is available; watch out for companies or people  who
    36  charge a fee for these services.
    37  You  may  also  contact  {SERVICER}  directly  at  __________ and ask to
    38  discuss all possible options to allow  you  to  cure  your  default  and
    39  prevent  the  foreclosure  of  your  home. While we cannot ensure that a
    40  resolution is possible, we encourage you to take immediate steps to  try
    41  to achieve a resolution.  The longer you wait, the fewer options you may
    42  have.
    43  If  you  have not taken any actions to resolve this matter within ninety
    44  days from the date this notice was mailed, we will  have  the  right  to
    45  take your cooperative shares from you.
    46  If  you need further information, please call the New York State Depart-
    47  ment of Financial Services' toll-free helpline at 877-226-5697 or  visit
    48  the Department's website at http://www.dfs.ny.gov.
    49  IMPORTANT: You have the right to remain in your unit until you receive a
    50  court  order  telling you to leave the property. If a foreclosure action
    51  is filed against you in court, you still have the right to remain in the
    52  unit until a court orders you to leave. You legally remain the owner  of
    53  your  cooperative  shares  and  are  responsible  for the unit until the
    54  shares are transferred to a new owner through  a  sale.  However,  there
    55  will  be  no court proceeding before the shares are transferred to a new

        A. 2632--B                          9

     1  owner. After the shares are transferred, the new owner may begin a court
     2  proceeding to evict you from the unit.
     3  This notice is not an eviction notice.
     4    §  3. The civil practice law and rules is amended by adding a new rule
     5  3410 to read as follows:
     6    Rule 3410. Face-to-face meeting for foreclosure of reverse cooperative
     7  apartment unit loans. (a) For purposes of this rule, default shall  only
     8  include  a borrower's breach of an obligation under the reverse mortgage
     9  cooperative loan agreement, and shall not include death of the  borrower
    10  or the borrower's permanent vacating of the cooperative unit.
    11    (b)  In  any  action  recovery  involving a borrower's default under a
    12  reverse cooperative apartment unit loan, as defined in paragraph (a)  of
    13  subdivision  one  of  section six-n of the banking law, the lender shall
    14  file a petition with the supreme court of the county in which the  coop-
    15  erative apartment is located stating that the loan is in default and the
    16  reason  for  the  default.  The  petition must be served on the borrower
    17  pursuant to section three hundred eight of this chapter. Within ten days
    18  of the date of service of the notice to  the  borrower,  the  petitioner
    19  must  file  a  specialized  request  for  judicial intervention with the
    20  clerk. Within sixty days of receipt of the notice or on  such  adjourned
    21  date as has been agreed to by the parties, the court shall hold a manda-
    22  tory  settlement  conference  for  the  purpose  of  holding  settlement
    23  discussions pertaining to the relative rights  and  obligations  of  the
    24  parties under the loan documents, including, but not limited to:
    25    1.  determining  whether  the  parties  can reach a mutually agreeable
    26  resolution to help the borrower avoid  losing  his  or  her  cooperative
    27  apartment  unit,  and evaluating the potential for a resolution or other
    28  workout options may be agreed; or
    29    2. whatever other purposes the court deems appropriate.
    30    (c) At any meeting held pursuant to this  rule,  the  lender  and  the
    31  borrower  shall  appear in person or by counsel, and each party's repre-
    32  sentative at the meeting shall be fully authorized  to  dispose  of  the
    33  matter.  If  the  borrower is appearing without counsel, the court shall
    34  inform the borrower of the nature of the action and his  or  her  rights
    35  and  responsibilities.  Where  appropriate,  the  court  may  permit the
    36  borrower or a representative of the borrower or the defendant to  attend
    37  the settlement conference telephonically or by video-conference.
    38    (d) Upon the filing of the notice of default with the court, the court
    39  shall  send  either a copy of the notice or the borrower's name, address
    40  and telephone number (if available) to a housing  counseling  agency  or
    41  agencies  on  a  list  designated  by  the department for the geographic
    42  region in which the borrower resides. Such information shall be used  by
    43  the designated housing counseling agency or agencies exclusively for the
    44  purpose  of making the borrower aware of housing counseling and foreclo-
    45  sure prevention services and options available to them.
    46    (e) The court shall promptly send a notice to parties advising them of
    47  the time and place of the meeting, the purpose of the  meeting  and  the
    48  requirements  of  this rule. The notice shall be in a form prescribed by
    49  the court, and shall advise the parties of the documents that they shall
    50  bring to the meeting.
    51    (f) Both the lender and the borrower shall negotiate in good faith  to
    52  reach  a  mutually  agreeable resolution, including but not limited to a
    53  re-payment agreement, or any other loss mitigation, if possible. Compli-
    54  ance with the obligation to negotiate in good  faith  pursuant  to  this
    55  rule  shall  be measured by the totality of the circumstances, including
    56  but not limited to the following factors:

        A. 2632--B                         10

     1    1. compliance with the requirements of this rule and applicable  regu-
     2  lations pertaining to the face-to-face meeting process;
     3    2. compliance with applicable lending and servicing laws, rules, regu-
     4  lations,  investor directives, and loss mitigation standards or options;
     5  and
     6    3. conduct consistent with  efforts  to  reach  a  mutually  agreeable
     7  resolution,  including  but not limited to, avoiding unreasonable delay,
     8  appearing at the meeting with authority to fully dispose of the  matter,
     9  avoiding  moving forward to take possession while loss mitigation appli-
    10  cations and attempts are pending, and providing accurate information  to
    11  the department and all parties.
    12    Neither  of the parties' failure to make the offer or accept the offer
    13  made by the other party is sufficient to establish a failure to  negoti-
    14  ate in good faith.
    15    (g) Upon a finding by the court that the plaintiff failed to negotiate
    16  in good faith pursuant to subdivision (f) of this rule, the court shall,
    17  at  a  minimum, toll the accumulation and collection of interest, costs,
    18  and fees during any undue delay  caused  by  the  plaintiff,  and  where
    19  appropriate, the court may also impose one or more of the following:
    20    1.  compel  production  of any documents requested by the court or the
    21  court's designee during the settlement conference;
    22    2. impose a civil penalty payable to the state that is  sufficient  to
    23  deter  repetition  of the conduct and in an amount not to exceed twenty-
    24  five thousand dollars;
    25    3. the court may award actual damages, fees, including  attorney  fees
    26  and  expenses  to  the  defendant  as a result of plaintiff's failure to
    27  negotiate in good faith; or
    28    4. award any other relief that the court deems just and proper.
    29    (h) A party to a default action may not charge, impose,  or  otherwise
    30  require  payment  from  the  other party for any cost, including but not
    31  limited to attorneys' fees, for appearance at or  participation  in  the
    32  settlement conference process.
    33    (i) This rule shall not apply if:
    34    1.  the  borrower dies and there is no surviving borrower, unless: (i)
    35  the last surviving borrower's spouse, if any, is a resident of the prop-
    36  erty subject to foreclosure;  or  (ii)  the  last  surviving  borrower's
    37  successor  in interest who by bequest or through intestacy, owns, or has
    38  a claim to the ownership of the property subject to foreclosure, and who
    39  was a resident of such property at  the  time  of  death  of  such  last
    40  surviving  borrower;  or  the borrower does not reside in the unit after
    41  such non-occupancy by the borrower as verified by  the  lender  and  the
    42  lender  has  taken  action as   required by subdivision eight of section
    43  six-n of the banking law; or
    44    2. a repayment plan or other workout consistent  with  the  borrower's
    45  circumstances is entered into to bring the borrower's account current or
    46  otherwise cure the default thus making a meeting unnecessary.
    47    §  4. The superintendent of financial services shall convene a working
    48  group comprised of industry and consumer representatives  to  study  the
    49  availability  of  reverse  mortgage  counselors  within the state of New
    50  York, and assess their experience and availability to provide counseling
    51  in connection with non-government  insured  reverse  mortgages,  and  to
    52  address any other matters the superintendent deems necessary pursuant to
    53  this  act.    The  superintendent  shall report on its findings and make
    54  recommendations based upon such findings.
    55    § 5. This act shall take effect on the one hundred eightieth day after
    56  it shall have become a law.  Effective immediately, the addition, amend-

        A. 2632--B                         11

     1  ment and/or repeal of any rule or regulation necessary for the implemen-
     2  tation of this act on its effective date are authorized to be  made  and
     3  completed on or before such effective date.
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