HousingWireHousingWire
A bill that would seek to bolster the disclosures that reverse mortgage lenders make to potential clients in an effort to broaden their understanding of the product inside New York state is getting pushback from industry advocates. They argue that adding to and duplicating the currently required federal and state disclosures about the product run the risk of overwhelming consumers.
On Feb. 26, the National Reverse Mortgage Lenders Association (NRMLA) sent a formal comment letter to the sponsoring lawmaker, Sen. Leroy Comrie (D-Queens), who introduced the bill on Jan. 21.
The bill seeks to establish a state-level “information summary” for the Federal Housing Administration (FHA)-backed Home Equity Conversion Mortgage (HECM) program. The summary would “provide notice of mortgagor’s right and responsibilities under reverse mortgage loans issued under the [HECM] program of the federal Department of Housing and Urban Development (HUD).”
It would also require every “authorized lender” in the state to provide copies of these summaries within five days before the closing of a HECM loan. The summary would be an “essential component” of the reverse mortgage origination process in the state, NRMLA argues, and the absence of such a summary would effectively render a loan “null and void.”
But the existing disclosures required under federal and state laws already serve to overwhelm reverse mortgage clients, the letter stated, and state-level code already requires “numerous” reverse mortgage disclosures to borrowers in New York.
Instead, the proposed bill duplicates existing disclosure requirements under New York’s Code of Rules and Regulations — with the exception of the addition of a new document that NRMLA said has more potential for confusion than it does for enhanced consumer protection.
In an interview with HousingWire’s Reverse Mortgage Daily (RMD) earlier this month, conducted prior to the issuance of the letter, NRMLA President Steve Irwin indicated that the association identified problems with the bill.
“This bill is not unlike legislation that was introduced, but did not pass in 2023, and we had contacted sponsors of that legislation at that time. Again, it’s very concerning,” Irwin said. “I want to stress that our opposition to this legislation regarding the disclosure is not in opposition to consumer protections.”
While every client entering into a reverse mortgage should be fully aware of their obligations and the functions of the product, the duplicative nature of the bill and the potential to make a loan null and void is a step too far, Irwin said.
“When you propose a state law that could make the transaction null and void because of a disclosure, then that’s a problem,” he said. “And the amount of paperwork involved in these transactions is already massive, which moves from originator through several parties and ultimately to a custodian. And in the unfortunate event that something’s misplaced, you can’t make all the terms and conditions of a loan null and void for the absence of a disclosure.”
RMD attempted several times to contact Comrie’s office for comment. After initially having received a reply, additional attempts to secure perspectives from the senator were not returned.
According to New York Senate records, lawmakers have attempted to introduce this bill on multiple occasions. In 2017, the original version was sponsored by former Sen. David Carlucci (D-Clarkstown), who went on to reintroduce the bill twice in the 2019-2020 legislative session.
Comrie has subsequently worked to reintroduce the bill into three more recent legislative sessions, including the current one. In each prior instance, the bill has never progressed beyond being referred to a Senate committee for additional debate. Following its most recent reintroduction, it has been referred to the Senate’s special committee on aging.
New York state has passed at least two consequential reverse mortgage laws in recent years. This includes a 2019 law that took aim at what supporters called “deceptive practices.” It requires reverse mortgage lenders to provide supplemental consumer protection materials while imposing additional restrictions on lenders related to payments of insurance premiums and property taxes.
In 2021, Gov. Kathy Hochul signed a bill with a previous version that had been vetoed by the previous governor, Andrew Cuomo. It allows New York residents who are at least 70 years old to take out a reverse mortgage on a cooperative living space. The law is limited to proprietary loans only, however, since the FHA does not permit HECM loans on co-ops.
