Included in the budget legislation signed by New York’s governor, is a new requirement that protects senior homeowners by establishing a pre-foreclosure notice process and a fix to notifications and settlement conferences that were created by legislation in 2017.
For seniors who don’t have enough income to cover their expenses, reverse mortgages can be an important way to tap into home equity. A recent article in New York Law Journal, “Residential Foreclosures: Reverse Mortgage Foreclosure Protections,” provides a look at changes to the law that address the growing problem of reverse mortgage foreclosures.
There’s been a spike in reverse mortgage foreclosures, many triggered by “property charge” defaults that could be resolved, if the default is brought to the borrower’s attention. However, reverse mortgages had been excluded from New York’s pre-foreclosure 90-day notices and mandatory settlement conferences.
The new legislation in New York now provides for a special pre-foreclosure notice to be used just for reverse mortgages. The notice gives detailed information about the asserted reverse mortgage default and discloses basic information to reverse mortgage borrowers at risk of foreclosure, along with the other information provided to conventional mortgage borrowers. It also has a list of possible grounds for a lender’s assertion of a default specific to reverse mortgages.
The new reverse mortgage-specific notice lists the following possible claimed defaults that can trigger a reverse mortgage foreclosure:
- failure to occupy the home as a principal residence;
- failure to submit required annual certificate of occupancy;
- death of the named borrower;
- failure to pay property taxes (with a requirement to detail property taxes advanced by the mortgage servicer);
- failure to maintain homeowner’s insurance (with a requirement to detail any insurance procured and paid for by the mortgage servicer);
- failure to pay water or sewer charges (with a requirement to detail any such charges advanced by the mortgage servicer); and
- failure to make required home repairs.
Similar to the 90-day notices for conventional mortgages, the new law also requires a lender asserting a default based on failure to pay property taxes, water and sewer charges, or to maintain homeowner’s insurance, to specify that the homeowner can cure the alleged default by making a specified payment.
With the new laws in place, notification will help the senior homeowners better protect themselves. The reverse mortgage notice will provide additional information about grants, repayment plans or loans that can be used by senior homeowners to address unpaid property charges and the right to dispute the default by contacting the servicer. Information to help non-borrowing spouses who wish to stay in their homes after the borrower has died and extensions available to seniors over age 80 suffering from long-term illnesses will also be provided.
The new law gives senior homeowners with reverse mortgages in New York, many of the same consumer protections that were previously in place only for traditional mortgage holders.
Reference: New York Law Journal (May 11, 2018) “Residential Foreclosures: Reverse Mortgage Foreclosure Protections”