2018 Changes to Reverse Mortgage Foreclosure Process

On April 12, 2018, Governor Andrew M. Cuomo signed legislation regarding the application of the pre-foreclosure notice requirement of New York’s Real Property Actions & Proceedings Law Section 1304 and the foreclosure settlement conference requirement of New York’s Civil Practice Laws & Rules to reverse mortgages.  These amendments, build upon the foreclosure reforms of 2008 and 2009, ensuring foreclosure protections previously only applicable to forward mortgages are provided to reverse mortgage borrowers. 

Effective May 12, 2018, all lenders, assignees or loan servicers must, at least 90 days before commencing a foreclosure action involving a reverse mortgage, provide the reverse mortgage borrower (or their surviving family members) with a pre-foreclosure notice in the form specified by the amendments.  The new form is tailored to the unique features of a reverse mortgage, and explains the rights and obligations of a borrower (or their surviving family) both prior to and during the foreclosure process.  As with the pre-foreclosure notices required for a forward mortgage, these new notices must be filed with the Department’s Foreclosure Database within 3 business days of the notice being sent. 

The pre-foreclosure notice for a reverse mortgage, in English and translations of the notice in the six most common non-English languages spoken in the state of New York are available.

The amendments to New York Civil Practice Laws & Rules Section 3408 state that reverse mortgage borrowers (or their surviving family members) are entitled to a mandatory settlement conference to afford them a forum to discuss loss mitigation options and potentially allow for retention of the subject property.  The mandatory settlement conference is required when the default underlying the foreclosure is triggered by anything other than the death of the last surviving borrower (such as a tax or insurance delinquency) unless the last surviving borrower’s spouse is a resident of the property subject to the foreclosure or the last surviving borrower’s successor in interest, who,  by bequest or through intestacy, owns, or has a claim to the ownership of the property subject to foreclosure, and is a resident of such property at the time of the death of the last surviving borrower.