A reverse mortgage bill aiming to change the way industry professionals do business in the state of New York was signed into law on Friday by Governor Andrew Cuomo, RMD has learned. This has codified the bill into New York state law, and Governor Cuomo’s office confirmed to RMD that he had signed it.
Assembly bill A5626 was first passed by the New York State Assembly in May, and takes sweeping aim at what it calls “deceptive practices,” requiring reverse mortgage lenders to provide supplemental consumer protection materials while imposing additional restrictions on lenders related to their payment of insurance premiums and property taxes.
The bill also requires that both lenders and borrowers be represented by an attorney at the time of closing, and at least one attorney must be present to conduct the closing itself. Sponsored in the New York State Assembly by Helene E. Weinstein, who represents Assembly District 41 in Brooklyn, the intent of the new law was detailed in a memo circulated to New York state lawmakers as answering the necessity of regulating a complex product that is sold to a protected class with current regulations that are described by the memo as “inadequate.”
“Reverse mortgages are complicated and expensive financial products. Many seniors do not understand how they work or what their true long-term costs are,” the memo says. “Exacerbating this problem are unscrupulous lenders who market reverse mortgages as public services or government-sponsored products. Inadequate regulation of this industry resulted in a sharp uptick in defaults in 2016, as more seniors fell into foreclosure on these products, losing not only their homes, but also their most significant financial assets.”
The bill aims to reinforce regulations governing reverse mortgages by reducing defaults and foreclosures for reverse mortgage borrowers across the state.
Prior to the initial creation of the bill that was just signed, Governor Cuomo outlined in his 2017 State of the State address to New York lawmakers that addressing the financial exploitation of seniors would be a top priority for his administration, and made a series of proposals which included the tighter regulation of reverse mortgages within New York.
“Under current law, consumer protections available to homeowners are not provided to homeowners with a reverse mortgage,” a spokesperson for the governor said in a press release at the time. “In order to safeguard seniors from the risks of reverse mortgages and provide equal protections to all homeowners, Governor Cuomo will take [action].”
The bill will become effective on the nineteenth day after it becomes law, according to its own provisions. Read the full text of the new law at the New York State Senate.