Although the reverse mortgage industry worked diligently to support the development of laws regarding reverse mortgage lending to housing associations in New York State, the efforts of all parties were ultimately unsuccessful in late 2019 due to Governor Andrew’s rejected veto power. However, the industry is preparing to try again to pass a new law aimed at providing reverse mortgage-style loans to cooperative residents.
This came out from a presentation this week at the National Reverse Mortgage Lenders Association (NRMLA) Virtual Policy Conference. James Milano and Soroush Shahin of Weiner Brodsky Kider (WBK) law firm, PC based in Washington, DC, were on hand to discuss efforts related to reverse cooperative mortgages in New York
A new effort
The most recent attempt to legally approve cooperative reverse mortgages in New York comes in the form of Bill 1508, in which the official brief summary of the bill as “relat[ing] approving loans for housing units with reverse cooperative for people aged 62 and over; [while] Offer[ing] additional consumer protection. “
“This bill was introduced in January and Monday [April 26] It has been referred to the Assembly’s Cooperatives Committee, ”Soroush Shahin said in a presentation at the NRMLA Virtual Policy Conference. “This bill will approve a new type of loan that might be offered to senior citizens in New York called the Reverse Cooperative Apartment Unit Loan or Reverse Coop Op Loan.”
The new bill is, as the speakers pointed out during the event, “very similar” to the previous bill, which was passed by the New York legislature but was rejected by the governor.
“NRMLA and WBK […] invest a lot of time and effort to get that [previous] Passed the bill, ”said Shahin. “They worked with consumer groups and lobbyists to make certain changes to the bill to get it over the finish line and it almost worked.”
While new movements on the matter are encouraging, the likelihood of full governor approval and codification could be an increase due to the similarities between the new and old versions of the bill and the fact that Governor Cuomo is still in session New York State, said Shahin.
The bill also requires the New York Treasury Department (NYDFS) to enact regulations regarding the new type of loan. This could mean that even if the bill is passed, further requirements for these types of loans could be required before the legislature gives it the proverbial “thumbs up”.
First attempt history
New York Senate Bill S03686, drafted in February 2019 before passing both the Senate and State Assemblies in June, was a result of work between NRMLA officials, WBK attorneys, and consumer advocacy groups to work together -op residents the opportunity to tap into their home equity through a reverse mortgage loan with substantial consumer protection.
“As we know, the FHA does not insure loans that are backed by co-op, forward or reverse,” said James Milano at the Virtual Policy Conference. “Under New York Reverse Mortgage Act, it was not possible today to obtain cooperative coverage for reverse mortgages in New York. [NRMLA President] Steve [Irwin] and I both personally worked two years ago on a bill that would have allowed reverse mortgage coverage through cooperatives. “
Although the bill passed both houses of the New York legislature in June 2019, the bill didn’t make it to Governor Andrew Cuomo’s desk until the end of the year. The bill was received within a week of reaching his desk Vetoed, whereby Cuomo expressly referred to inadequate consumer protection in the version delivered to him.
In a statement on his veto submitted to the New York State Senate and shared by the NRMLA, Governor Cuomo said the need to support the senior citizens of New York remains “critical.” Persistent concerns about some of the details of the bill ultimately persuaded the former HUD secretary, who became governor, not to codify the measure into state law.
“Most reverse mortgages are issued through the Home Equity Conversion Mortgage program, which is insured by the Department of Housing and Urban Development’s Federal Housing Administration (HUD),” Cuomo said in his statement at the time. “HUD requirements for reverse mortgage eligibility exclude co-operatives as the loan is not backed by real estate.”
The ability to draw on home equity is still something a contingent of seniors living on cooperatives would love to do, Cuomo said. However, the consumer protection contained in the bill did not appear to be sufficient to justify signing the bill.
“While I understand that some senior citizens who own shares in a building should be given the option to draw on their equity, I am concerned that these borrowers, despite the consumer protection that protects borrowers from unscrupulous practices in this bill should do so will still be exposed to unnecessary risks that could lead to foreclosure, ”said Cuomo in his reasoning for the veto.
When the news of the veto broke, RMD reached out to Steve Irwin of NRMLA for his reaction. He said at the time that the association would work diligently to determine why the governor tended to veto.
“We’re working to find out why the governor felt the foreclosure risk was too great, despite all the consumer protection language we put in the bill,” Irwin told RMD in January 2020.
Answer from the residents of the cooperative
Following Governor Cuomo’s original veto, the New York Cooperatives and Condominium Council (CNYC) condemned the action in a statement posted on the organization’s website at the time.
“Governor Cuomo [disappointed] Hundreds of seniors who supported this important piece of legislation as they aged in New York housing cooperatives, “CNYC said in its January 2020 statement.” Many of these seniors call CNYC regularly for progress reports on the legislation enabled them to do theirs To live life in the homes and communities that are dear to them. Now many will be forced to sell their cooperatives for funds to cover their living and medical expenses in their “golden years”. “
As a news publication, RMD’s main audience is made up of contingents of reverse mortgage professionals who work in and around the company. However, RMD receives occasional telephone and email correspondence from both existing and prospective reverse mortgage customers, with a significant portion of that correspondence asking about the availability of a cooperative housing reverse mortgage loan. Anecdotally, this seems to indicate an interest in certain cooperative residents in reverse mortgage loans.
Read details on the new proposed legislation in the New York State Senate website. The bill will remain in the committee until the end of April 2021 and is not yet scheduled for a vote.