Reverse mortgages are loans that allow homeowners aged 62 and older to use their home equity while remaining in their homes. It can be an important resource for seniors who don’t have enough income to cover their living expenses.
However, there’s been a big spike in reverse mortgage foreclosures, many triggered by “property charge” defaults that could be resolved, if the default is brought to the borrower’s attention. However, reverse mortgages had been excluded from New York’s pre-foreclosure 90-day notices and mandatory settlement conferences.
The new legislation in New York now provides for a special pre-foreclosure notice to be used just for reverse mortgages. The notice gives detailed information about the asserted reverse mortgage default and discloses basic information to reverse mortgage borrowers at risk of foreclosure, along with the other information provided to conventional mortgage borrowers. It also has a list of possible grounds for a lender’s assertion of a default specific to reverse mortgages.
The new reverse mortgage-specific notice lists the following possible claimed defaults that can trigger a reverse mortgage foreclosure:
- failure to occupy the home as a principal residence;
- failure to submit the required annual certificate of occupancy;
- death of the named borrower;
- failure to pay property taxes (with a requirement to detail property taxes advanced by the mortgage servicer);
- failure to maintain homeowner’s insurance (with a requirement to detail any insurance procured and paid for by the mortgage servicer);
- failure to pay water or sewer charges (with a requirement to detail any such charges advanced by the mortgage servicer); and
- failure to make required home repairs.
Similar to the 90-day notices for conventional mortgages, the new law also requires a lender asserting a default based on failure to pay property taxes, water, and sewer charges, or to maintain homeowner’s insurance, to specify that the homeowner can cure the alleged default by making a specified payment.
The notice gives senior homeowners additional important information, like the right to dispute the asserted default by contacting the servicer; the availability of possible grants, loans or repayment plans that may permit homeowners to cure defaults on property charges; and programs available to permit non-borrowing spouses to remain in their homes following the borrower’s death and extensions available for seniors over 80 with long-term illnesses.
Reference: New York Law Journal (May 11, 2018) “Residential Foreclosures: Reverse Mortgage Foreclosure Protections”