On December 6, 2019, A5626 was signed into law to regulate reverse mortgages. The new law takes effect on March 5, 2020. 

A reverse mortgage means "[a] loan which is secured by a first mortgage on real property improved by a one- to four-family residence or condominium that is the residence of the mortgagor(s) the proceeds of which are advanced to the mortgagor(s) during the term of the loan in equal installments, in advances through a line of credit or otherwise, in lump sums, or through a combination thereof."

The new law has the following features at new Real Property Law section 280-b:

1. Marketing & offering of reverse mortgage loans are regulated to avoid unfair or deceptive practices;
2. Consumer protection materials are required to be included in marketing such loans & the Superintendent is authorized to promulgate rules & regulations to protect consumers;
3. Loans that pay taxes, mortgage insurance, homeowners insurance, or other property obligations must provide the borrower with periodic account statements & a required warning notice;
4. When the escrowed money for payments of obligations are depleted to 10% or less, the borrower will get a telephone & mailed notice about the borrowers obligations; 
5. Restricts lenders from paying borrowers obligations on the property (taxes, mortgage insurance, homeowners insurance, etc.) as advance payments & only permits lenders to pay when there are arrears;
6. Restricts foreclosures based on primary residence restrictions; 
7. Requires both the lender & the borrower to be represented by an attorney at the closing of the loan; 
8. Borrowers who are injured from a violation by a lender have a private right of action for treble damages & reasonable attorneys' fees; & 
9. Violating this statute by a lender works a complete defense for a borrower in a foreclosure action.

Recently Governor Andrew Cuomo signed into law a comprehensive piece of legislation, which makes sweeping changes to New York’s requirement that Lenders and Borrowers negotiate in “good faith” during Mandatory Foreclosure Settlement Conferences.

Under New York foreclosure law, in a residential foreclosure action, commenced on or after February 13, 2010, involving a 1-4 family owner occupied property, it is required that a Mandatory Foreclosure Settlement Conference be held within sixty (60) days of service of the foreclosure summons and complaint. The purpose of the Mandatory Foreclosure Settlement Conference is to provide a venue for Borrowers and Lenders to settle the foreclosure action without further court action, via a loan modification, deed-in-lieu, short sale or other loss mitigation option. At this settlement conference, it is required that both parties negotiate in “good faith.”

However, the implementation of New York’s Mandatory Foreclosure Settlement Conference and its “good faith” negotiations requirement, has had its fair share of complications. To mitigate these complications, this recently enacted legislation, which takes effect on December 20, 2016, places stringent guidelines on the documentation and information that both parties must come to the conference with and requires that both parties, or representatives thereof, appear at the conference with full authority to settle the case.

Additionally, the legislation imposes more stringent penalties upon both parties should they fail to negotiate in “good faith.” Where it is found that a Lender has failed to negotiate in “good faith,” one or more of the following penalties may be imposed:

• A toll of the accumulation and collection of interest, costs and fees during any undue delay caused; 

• A civil penalty of up to twenty-five thousand dollars ($25,000.00); 

• Actual damages, fees (including attorney’s fees) and expenses incurred by the homeowner as a result of the Lender’s failure to negotiate in good faith; or 

• Any other relief that the Court deems just and proper. 

On the other hand, where it is found that a Borrower has failed to negotiate in “good faith,” the Court is required to remove the case from the conference calendar, meaning that the Lender will then be permitted to move forward towards obtaining a Judgment of Foreclosure and Sale. 

We have just opened enrollment for the Free CE on 10/15/15 in Patchogue at Briarcliff College. 

This course is instructed by Andrew Lieb, Esq. Online Registration Only. 

Foreclosure & The Economy: The Short Sale Class.

This course will shock you with the latest developments in New York's judicial foreclosure system from the perspective of a litigating attorney who spends his days in the Courts.