General Regulations Part 79
Real Property Law 280; 280-a
February 12, 2008
Re: Reverse Mortgages
Your letter, dated November 29, 2007, to the New York State Banking Department (the "Banking Department"), has been referred to me for response.
In your letter you asked whether the requirement under Section 79.12, Part 79 of the General Regulations of Banking Board ("GRBB") of making "at least as many 280-a loans as it makes 280 loans per calendar year" applies if an authorized lender is only making Demonstration Program of Insurance of Home Equity Conversion Mortgages for Elderly Homeowners ("HUD/HECMs"). As you correctly pointed out, HUD/HECMs are carved out, under Section 79.1(b) of the GRBB, from being regulated by the Banking Department. Therefore, Section 79.12 is inapplicable and an authorized lender is not required to make as many 280-a loans as it makes 280 loans if such authorized lender is only offering HUD/HECMs.
Any authorized lender offering reverse mortgage loans pursuant to this section shall also offer reverse mortgage loans pursuant to section two hundred eighty-a of this article. Subject to this section in the event that an authorized lender makes reverse mortgage loans under this section then that lender must make an equal number of reverse mortgage loans pursuant to section two hundred eighty-a of this article. Such loans shall be made to individuals who meet the requirements promulgated in section two hundred eighty-a of this article provided that such individual seeking the loan would otherwise qualify and be approved for that loan. In the event that no or insufficient applications for reverse mortgage loans pursuant to section two hundred eighty-a of this article are made to a lender who has previously made reverse mortgage loans pursuant to this section then there shall be no requirement for that lender to make a reverse mortgage loan pursuant to section two hundred eighty-a of this article. It shall also not be a requirement that an authorized lender make any reverse mortgage loan to any individual who would not qualify for such loan and/or would not otherwise be approved for such loan.
It should be noted that the Banking Department claims no special expertise in interpreting the Real Property Law. However, to the extent RPL 280(10) is similar to Section 79.12 of the GRBB, the following should be a useful explanation.
Simply stated, an authorized lender is required to make as many reverse mortgages to borrowers 70 years and older (RPL 280-a) as it makes to borrowers 60 years and older (RPL 280). However, in the event such lender does not receive an equal number of applications from borrowers who are 70 and older as it did from borrowers who are 60 and older, then such entity would not be considered to be in violation of RPL 280(10) if it does not make an equal number of reverse mortgages to the two groups.
Further, even if an authorized lender receives an equal number of applications from the two groups, such lender is not required to make reverse mortgage loans to borrowers who are 70 and older, but do not qualify, just for the purpose of complying with RPL 280.
I trust the foregoing is responsive to your inquiry.
Very truly yours,
Harry C. Goberdhan