Technical Error Leaves NY Seniors Out in the Cold
NYLAG joins with other advocates for New York State seniors in supporting a bill to extend consumer protections to senior homeowners at risk of losing their homes to foreclosure of a reverse mortgage loan. The bill, A.9592/S.1992-A, corrects a technical error in a 2017 law that mistakenly excluded reverse mortgage loans holders, most of whom are senior citizens.
Reverse mortgage loans can be a useful tool for seniors because they allow homeowners aged 62 and older to tap into their home equity to supplement their income. Monthly payments are not made; the entire balance including principal and interest that accrues is due when the borrower moves or upon death. The borrower remains responsible for payment of taxes and insurance. Because these loans are typically federally insured and can be lucrative for lenders and brokers to make, deceptive practices proliferate in both the making and the servicing of reverse mortgages.
Advocates have seen a dramatic increase in the number of foreclosures brought against senior citizens with reverse mortgages in the past few years. Unfortunately, consumer protections enacted by New York State in 2009 – 2010 for homeowners with “home loans” facing default and foreclosure, excluded reverse mortgages from the definition of “home loan” (defined in Real Property Actions and Proceedings Law section 1304). Thus, senior citizens facing foreclosure on a reverse mortgage do not have the same level of consumer protections as other borrowers. The protections include a 90 pre-foreclosure filing notice which directs distressed homeowners to free foreclosure prevention services and a mandatory settlement conference intended to bring the parties together in a court-supervised meeting to see if the foreclosure can be avoided by workout or settlement.
Legislation enacted in last year’s budget intended to rectify the exclusion of reverse mortgages from the “home loan” definition contained in RPAPL section 1304. Because of a drafting error, however, the amendments to the “home loan” definition were made to the version of RPAPL 1304 which goes back into effect in 2020, but not to the version that is presently in effect until 2020. While Governor Cuomo and the Legislature’s intent in including these amendments in the budget legislation was clearly to provide these protections to senior citizens faced with the loss of their homes now—not three years in the future—the error in the codification of the amendments has caused confusion and some lenders refuse to apply these consumer protections to reverse mortgage cases.
Expanding the definition of “home loans” to cover reverse mortgage affords senior citizens facing foreclosure with the same consumer protections as all residential home loan borrowers. These basic protections have prevented thousands of foreclosures across New York State; providing these basic consumer protections to vulnerable seniors with reverse mortgages will ensure that seniors at risk of foreclosure are given the same opportunities to save their homes from foreclosures that conventional mortgage holders have been given.