New York Pushes for Stronger Reverse Mortgage Foreclosure Protections

Following a series of damning articles spotlighting New York reverse mortgage borrowers in foreclosure, lawmakers this week introduced new legislation that seeks to create additional consumer protections for these afflicted seniors.

On Monday, New York Assemblywoman Helene Weinstein (D-Brooklyn) and Senator Jeff Klein (D-Bronx/Westchester) announced the introduction of legislation (A10745/S8177). The bill will provide reverse mortgage homeowners with the consumer protections given to other homeowners currently not included in many of the protections of New York State’s residential foreclosure prevention laws.

This includes requiring lenders to provide notices to reverse mortgage borrowers 90 days in advance of filing a foreclosure action against the homeowner, including a notice containing contact information to free non-profit resources to help negotiate a resolution early in efforts to avert the filing of a foreclosure action.

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Under the legislation, homeowners would also be entitled to in-person mandatory residential foreclosure settlement conferences with the foreclosing entities under court oversight.

“These changes must be made so courts can protect seniors from losing homes they worked their whole life to attain,” said Assemblywoman Weinstein in a prepared statement.

Weinstein, who is also chair of the New York State Assembly Judiciary Committee, attributes the need for additional foreclosure protection to recent articles that have appeared in the New York Post over the last month.

The articles, which also caught the attention of the New York State Department of Financial Services, described an “uptick” in foreclosure cases involving reverse mortgage borrowers in the state, as well as “numerous” complaints about reverse mortgages serviced and originated by several of the industry’s largest players.

In a release issued Monday, Weinstein and Klein noted that reverse mortgage lenders “seem to be engaging in deceptive or exploitative practices” when offering reverse mortgages to New York seniors.

“In light of the recent increase in foreclosure filings against New York’s senior homeowners with reverse mortgages, and an uptick in the outrageous deceptive practices of the lending industry, affording these often vulnerable homeowners with the full protections of our residential foreclosure prevention laws is timely, and the right thing to do,” Weinstein said.

Sen. Klein acknowledged that reverse mortgages have been a useful financial tool for many seniors, however, he said the “unscrupulous actors have left some on a road to financial ruin.”

“We must take action to protect our seniors from predatory practices, and to extend the protections of our foreclosure prevention laws to include this type of mortgage,” said Sen. Klein.

While the lawmakers don’t expect the legislature to resume session before year’s end, Weinstein told the New York Post that she plans to push the law and “plug the hole” next year.

In response to the legislation introduced Monday, the National Reverse Mortgage Lenders Association (NRMLA) told RMD that it recognizes the importance of providing homeowners with the time and opportunity to discuss loss mitigation options with their lender.

“NRMLA has been supportive of HUD’s efforts to refine its loss mitigation policies that allow for curing of de minimus amounts, repayment plans and at-risk extensions,” NRMLA said in a statement provided to RMD.

Written by Jason Oliva

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  • I feel the move with the new legislation in NY is a good thing. I also understand the concerns of al of us with those lenders that are being deceptive in their dealings with our seniors!

    However, since April of 2015, which introduced the Financial Assessment (FA) ruling into the qualification process of reverse mortgages, foreclosures should be at a minimum in comparison.

    Keep in mind, I am not talking about those loans on the books prior to April, 2015. One main reason for foreclosures with a reverse mortgage has been due to the failure of seniors paying their property taxes, home owners insurance, home owners association dues (If applicable) and any other property charges.

    The FA ruling will eliminate a great deal of foreclosures in the future. My question is for our NY legislators would be, are we to late and to little for todays originations? Don’t get me wrong, I still feel the passage of this proposed bill is very good. Foreclosures will still occur in the future for many other reasons, as well as for some not paying their property charges!

    Yes, this bill will also help those going into foreclosure that possibly should not have been put into a reverse mortgage in the first place, prior to April of 2015.

    Unfortunately, this bill will not help those that were deceived by unscrupulous lenders and loan originators of the past!

    John A. Smaldone
    http://www.hanover-financial.com

    • John,

      Jason tells us: “Following a series of damning articles spotlighting New York reverse mortgage borrowers in foreclosure….” Jason does not state what type(s) of reverse mortgages these were. Let us assume they are HECMs.

      Over the last five years the biggest percentage of foreclosures on HECMs has been due to defaults over not paying the balance due when required. Other than this year and last do you have any idea what percentage of HECM homeowners were ever foreclosed upon due to defaults for nonpayment of property taxes or insurance? The percentage is most likely ridiculously low.

      HUD has only recently agreed to a substantial number of foreclosures due to defaults for nonpayment of taxes and insurance.

      Where in the HECM mortgage documents is there a covenant regarding payment of HOA dues and assessments? If there is none, then as to the HECM, there can be no default or foreclosure filed against the borrower by the HECM lender. HECMs are simply contracts. Normally HOAs file defaults and take the property into foreclosure if their dues and assessments go unpaid.

      While HUD has released information on defaults due to nonpayment of real estate taxes and insurance by HECM borrowers, the data on the status of these defaults is opaque. So, John, any info you can provide in that way would be appreciated.

      Thanks, The_Cynic

      • Cynic, you state “Over the last five years the biggest percentage of foreclosures on HECMs has been due to defaults over not paying the balance due when required. Other than this year and last do you have any idea what percentage of HECM homeowners were ever foreclosed upon due to defaults for nonpayment of property taxes or insurance? The percentage is most likely ridiculously low.”
        I am curious to where I can find this information as I have been questioning the actual foreclosure numbers for years in terms of what percentage is actually because of non payment of taxes and insurance vs non payment when balance is due (usually when the last borrower dies). If these numbers exist, why do we have FA again?
        Thank You,
        EricSD

      • EricSD,

        As to the general cause over the last five years, the estimate comes from an anecdote through a well thought of servicer. His answer was logical since HUD was trying every way it could to reduce the number of defaults for nonpayment of property charges through installment workouts.

        As to exact numbers, I hear someone in the industry is trying to run that down but for now your best source is most likely Steven Irwin at NRMLA. If you come across HUD generated or estimated data, please let me know.

        The_Cynic

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