NY Law Requires New Pre-Foreclosure Notice for Reverse Mortgages

On April 12, 2018, the New York legislature enacted and Governor Cuomo signed, Assembly Bill 9508, a budget bill. Obscured in the budget bill was an amendment to New York law requiring reverse mortgage servicers to provide a pre-foreclosure notice at least 90 days before the mortgage loan servicer (or lender or assignee) commences legal action against the borrower or borrowers at the property address and any other addresses of record.

The New York legislature made this portion of the 2018 budget bill retroactive stating “this act shall take effect immediately and shall be deemed to have been in full force and effect on and after April 20, 2017.” While the entire act appears to be retroactive, the pre-foreclosure notice specific to reverse mortgages has an effective date of May 12, 2018. However, there is some confusion within the industry whether, between April 12, 2018, when the bill was enacted, and May 12, 2018, the effective date, some form of a pre-foreclosure notice must be provided (i.e., Must reverse mortgage servicers provide the forward mortgage pre-foreclosure notice until May 12, 2018, and then start providing the reverse mortgage pre-foreclosure notice starting on May 12?).

The reverse mortgage pre-foreclosure notice must be in at least fourteen (14) point type, except the heading which must be in at least sixteen (16) point type. The required language and format of this notice is provided in Section 1304 of the New York Real Property Actions and Proceedings Law. The 90 day period, as discussed above, will not apply if the borrower has filed for bankruptcy protection under federal law or if the borrower no longer occupies the residence as the borrower’s principal dwelling.

Reverse mortgage servicers are required to send the pre-foreclosure notice in a separate envelope from any other mailings, and by registered or certified mail, as well as by first-class mail to the last known address of the borrower, and to the residence that is subject to the mortgage. The notice must include a current list of at least five housing counseling agencies serving the county where the property is located from the most recent listing available from the New York Department of Financial Services (Department). The counseling list must include the counseling agencies’ last known addresses and telephone numbers. Moreover, if any borrower is known to have limited English proficiency, the reverse mortgage servicer will be required to provide the notice in the borrower’s native language (or a language in which the borrower is proficient), provided that the language is one of the six most common non-English languages spoken by individuals with limited English proficiency in New York. The Department will provide the disclosure on its website in the six most common non-English languages in New York.

The entire NY Assembly Bill 9508 can be found here.