New York Law Requires New Pre-Foreclosure Notice for Reverse Mortgages

By Jim Milano, Weiner Brodsky Kider PC

On April 12, 2018, the New York legislature enacted and Governor Cuomo signed, Assembly Bill 9508, a budget bill. Obscured in the budget bill was an amendment to New York law requiring reverse mortgage servicers to provide a pre-foreclosure notice at least 90 days before the mortgage loan servicer (or lender or assignee) commences legal action against the borrower or borrowers at the property address and any other addresses of record.

According to locally licensed New York foreclosure counsel, it was the intent of the New York legislature to include reverse mortgages within the definition of “home loan” (i.e., triggering the requirement for the pre-foreclosure notice) in last year’s (2017) budget bill. However, due to an oversight, the 2017 budget bill did not include this change. In an effort to fix the oversight, the New York legislature made this portion of the 2018 budget bill retroactive stating “this act shall take effect immediately and shall be deemed to have been in full force and effect on and after April 20, 2017.” While the entire act appears to be retroactive, the pre-foreclosure notice specific to reverse mortgages has an effective date of May 12, 2018. However, there is some confusion within the industry whether, between April 12, 2018, when the bill was enacted, and May 12, 2018, the effective date, some form of a pre-foreclosure notice must be provided (i.e., Must reverse mortgage servicers provide the forward mortgage pre-foreclosure notice until May 12, 2018, and then start providing the reverse mortgage pre-foreclosure notice starting on May 12?). Because of this confusion, locally licensed New York foreclosure counsel with which we conferred suggested that reverse mortgage servicers can and should begin sending the reverse mortgage specific pre-foreclosure notice right away. 

The reverse mortgage pre-foreclosure notice must be in at least fourteen (14) point type, except the heading which must be in at least sixteen (16) point type. The required language and format of this notice is provided in Section 1304 of the New York Real Property Actions and Proceedings Law, and is pasted below. The 90 day period, as discussed above, will not apply if the borrower has filed for bankruptcy protection under federal law or if the borrower no longer occupies the residence as the borrower’s principal dwelling.

Reverse mortgage servicers are required to send the pre-foreclosure notice in a separate envelope from any other mailings, and by registered or certified mail, as well as by first-class mail to the last known address of the borrower, and to the residence that is subject to the mortgage. The notice must include a current list of at least five housing counseling agencies serving the county where the property is located from the most recent listing available from the New York Department of Financial Services (“Department”). The counseling list must include the counseling agencies’ last known addresses and telephone numbers. Moreover, if any borrower is known to have limited English proficiency, the reverse mortgage servicer will be required to provide the notice in the borrower’s native language (or a language in which the borrower is proficient), provided that the language is one of the six most common non-English languages spoken by individuals with limited English proficiency in New York (i.e., Haitian-Creole, Italian, Korean, Spanish, Russian, and Chinese [Traditional]). The Department will provide the disclosure on its website in the six most common non-English languages in New York.

As mentioned above, it was the intent of the New York legislature to include reverse mortgages within the definition of home loan last year (i.e., in 2017) which would trigger a multitude of foreclosure requirements (e.g., mandatory settlement conferences). According to locally licensed New York foreclosure counsel, as a consequence of this intent, New York foreclosure courts have been requiring settlement conferences for reverse mortgage servicers since April 20, 2017 where there is a living borrower, or a Non-Borrowing Spouse or heirs with an interest in the property.  Thus, the requirement for a settlement conference should not be new for reverse mortgage servicers in New York.  However, the 90 days pre-foreclosure notice is new, and because of the retroactivity provisions of Assembly Bill 9508, confusion has arisen regarding its use in the time period between its use between April 12, 2018 and May 12, 2018. Reverse mortgage servicers should consult with competent locally licensed New York foreclosure counsel on this matter.

The entire NY Assembly Bill 9508 can be found here, and locally licensed New York foreclosure counsel’s alert on this matter is attached.

Download a Reverse Mortgage Memorandum with Client Guidance and Best Practices written by New York legal counsel, RAS Boriskin.

 

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YOU COULD LOSE YOUR HOME TO FORECLOSURE.

PLEASE READ THE FOLLOWING NOTICE CAREFULLY.

 

Date

Borrower’s Address

Loan Number:

Property Address:

 

Dear Borrower(s):

 

As of ____________________, we as your lender or servicer claim that your reverse mortgage loan is _____________ days in default. Under New York State Law, we are required to send you this notice to inform you that you may be at risk of losing your home.

We, the lender or servicer of your loan, are claiming that your reverse mortgage loan is in default because you have not complied with the following conditions of your loan:

         

          _______      You are not occupying your home as your principal residence.

 

  _______      You did not submit the required annual certificate of occupancy.

 

          _______      The named borrower on the reverse mortgage has died.

 

          _______      You did not pay property taxes.


{Servicer name} paid your property taxes for the following time periods: _______________________________________________ {quarter/year}.

 

          _______      You did not maintain homeowner’s insurance.

{Servicer name} purchased homeowner’s insurance for you on the following date(s) and for the following cost(s): ________________.

 

          _______      You did not pay water/sewer charges.

{Servicer name} paid water/sewer charges for you on the following date(s) and for the following cost(s): ____________________.

 

          _______      You did not make required repairs to your home.

 

If the claim is based on your failure to pay property or water and sewer charges or homeowner’s insurance, you can cure this default by making the payment of $____________ for the advancements we made towards these payments on your behalf.

You have the right to dispute the claims listed above by contacting us, by calling ____________________ or sending a letter to _____________________. This may include proof of payments made for property taxes or water and sewer charges or a current declaration page from your insurance company, or any other proof to dispute the servicer’s claim.

If you are in default for failure to pay property charges (property taxes, homeowner’s insurance and/or water/sewer charges) you may qualify for a grant, loan, or re-payment plan to cure the default balance owed.

If you are in default due to death of your spouse, you may be considered an eligible “Non-Borrowing Spouse” under a HUD program which allows you to remain in your home for the rest of your life.

If you are over the age of 80 and have a long term illness, you may also qualify for the “At-Risk Extension,” which allows you to remain in your home for one additional year and requires an annual re-certification.

Attached to this notice is a list of government-approved housing counseling agencies and legal services in your area which provide free counseling. You can also call the NYS Office of the Attorney General’s Homeowner Protection Program (HOPP) toll free consumer hotline to be connected to free counseling services in your area at 1-855-HOME-456 (1-855-466-3456), or visit their website at http://www.aghomehelp.com.  You may also call your local Department of Aging for a referral or call 311 if you live in New York City.

Qualified free help is available; watch out for companies or people who charge a fee for these services.

You may also contact us directly at ___________________________ and ask to discuss all possible options to allow you to cure your default and prevent the foreclosure of your home. While we cannot ensure that a resolution is possible, we encourage you to take immediate steps to try to achieve a resolution. The longer you wait, the fewer options you may have.

If you have not taken any actions to resolve this matter within 90 days from the date this notice was mailed, we may commence legal action against you (or sooner if you cease to live in the dwelling as your primary residence).

If you need further information, please call the New York State Department of Financial Services’ toll-free helpline at 877-226-5697 or visit the Department’s website at http://www.dfs.ny.gov.

IMPORTANT: You have the right to remain in your home until you receive a court order telling you to leave the property. If a foreclosure action is filed against you in court, you still have the right to remain in the home until a court orders you to leave. You legally remain the owner of and are responsible for the property until the property is sold by you or by order of the court at the conclusion of any foreclosure proceedings. This notice is not an eviction notice, and a foreclosure action has not yet been commenced against you.

(Editor’s note: Jim Milano is an attorney with Weiner Brodsky Kider, PC, based in Washington, DC and he serves as co-general counsel to the National Reverse Mortgage Lenders Association.)