Most mortgage notes have a provision for the sale of the loan. The loans are sold to investors which in turn provides the liquidity necessary for funding additional mortgages.

There are certain provisions in New York law and regulations that limit the ability of a lender to impose a prepayment penalty on loans with an interest rate that exceeds six percent per annum and which are secured primarily by a one-to-six family owner-occupied residence or certificates of stock or other evidence of ownership in a corporation or other entity formed for the purpose of cooperative ownership of real estate. Specifically, a lender may not impose a prepayment penalty on such loans on or after one year from the date the loan was made and, in the case of loans that are not fixed-rate, the interest rate must remain fixed for a period of at least five years for a prepayment penalty to be legally permissible. In all cases, the mortgage note must expressly provide for a prepayment penalty.

Reverse mortgages allow certain senior citizens to access some of the equity in their homes. A portion of the equity can be paid to the owner in either a lump sum or as a stream of payments used to supplement other income such as Social Security. No repayment is made until the borrower no longer resides in the residence.

Real Property Law Section 254C provides that as a borrower you are entitled to receive a copy of the appraisal you paid for. The bank retains the original in their records.

It is an option given to borrowers to cancel a loan contract secured by real estate within three days of closing. The institution or its designee must be notified in writing of your intention to cancel.

Lenders can refuse to accept payments on a mortgage if payments on the loan are more than thirty days late. The institution will usually request a single payment to bring the loan current or set up a formal plan to cure the default.

A certificate of mortgage discharge must be provided by the mortgagor or its designee within thirty days of payoff. NYS Real Property Law 275.

Under guidelines established in 1997 by the Department of Housing and Urban Development, lenders and servicers can require monthly escrow contributions equal to one twelfth of the total property tax, insurance premiums and other charges agreed upon. In addition, the institution may escrow an additional one sixth of the total as a cushion against unexpected increases in the charges

Simple interest computation is a method widely used in the mortgage industry for calculating interest charges. Interest is calculated on the actual principal used by the borrower without compounding. Payments are applied to interest first and then to principal.

Bankers and mortgage lenders are required to provide documents to applicants within three days. They are required to give the potential borrower a good faith estimate of settlement charges, a disclosure showing whether the lender is planning to service the mortgage or transfer it to another entity, and an information booklet explaining various real estate settlement services

A document called a HUD-1 shows the actual charges imposed on borrowers and sellers in connection with the mortgage. A borrower is allowed to review the HUD-1 one day before the actual closing. The final HUD-1 is to be delivered as soon as practicable after closing.

The rates you see advertised are for individuals with spotless credit Histories and loans with specific characteristics. This rate is also usually for loans closing that day. Therefore, not all mortgages qualify for this rate.

As a general rule, for loans up to $250,000, the maximum allowable interest rate is 16%. In general, permissible rates increase for loans greater than that amount, as set forth in Title 5 of the New York State General Obligations Law. Other exceptions, permitting rates in excess of 16% per annum, apply to loans made by regulated lenders.

Escheatment is the process of turning over unclaimed or abandoned property to a state authority, such as if a person dies without a will or a bank account is inactive for 3 years. Property may consist of, but is not limited to Savings and Checking Accounts, Uncashed Checks, Deposits, Wages, etc.

Information about property escheated to the State of New York may be obtained from the Office of the State Comptroller or by calling (800) 221-9311, or by writing the Office of the State Comptroller at 110 State Street, Albany, New York 12236.

On a biennial basis, New York State bank examiners conduct an evaluation, pursuant to the Community Reinvestment Act (CRA), of an institution’s performance in helping to meet the credit needs of communities, including those of low or moderate income within its assessment area. An institution’s assessment area reflects those areas in which it operates branches, accepts deposits and/or does a significant amount of lending. Based on the evaluation, a rating of 1-4 is assigned.

1. indicates an Outstanding record of helping to meet community credit needs.
2. indicates a Satisfactory record of helping to meet community credit needs.
3. indicates that the bank Needs to Improve its record of helping to meet community credit needs.
4. indicates Substantial Non-compliance in helping to meet the credit needs of its community.

These ratings, along with a Performance Evaluation provide the bank and the public an understanding of how well the bank is performing under CRA.

The best way to research the CRA activities of a bank is to contact the bank and request a copy of the Performance Evaluation. It is mandatory that banks make their Performance Evaluations available to the public at each branch office and the institution’s headquarters. Performance Evaluations can also be requested from the bank’s supervisory agency. The Performance Evaluation is designed to show the bank’s CRA rating. Most banks have at least one staff member who serves the role of CRA Officer (sometimes referred to as a Compliance Officer). Call the bank for more information.

The Department of Financial Services regulates only New York State-chartered financial institutions. Some banks choose to operate under a state charter, and some elect to operate under a federal charter.

Federal regulators include the Office of the Comptroller of the Currency (OCC), which regulates all nationally chartered financial institutions. For example, banks that have N.A. (National Association) in their title are nationally chartered financial institutions. The Federal Reserve Bank (FRB) regulates those state-chartered institutions that are members of the Federal Reserve System. The Federal Deposit Insurance Corporation (FDIC) regulates non-FRB member state-chartered banks and state-chartered thrift institutions, and the Office of Thrift Supervision (OTS) regulates federally chartered Thrift institutions, as well as all Savings and Loan Associations.

All state-chartered banks in New York are regulated simultaneously by the Department and one of the above agencies, and the Department maintains a close working relationship with each of them. When possible, the Department examines institutions simultaneously, to maximize efficiency and minimize the financial and resource burdens on the institution.

In a CRA Performance Evaluation examiners evaluate the institution’s community development activity. All institutions, with the exception of certain small banks, are required to engage in some community development activity; although not required to do so, if a small bank elects to engage in community development activities, it may receive favorable consideration for those activities.

Community development is defined as:

1. Affordable housing (including multifamily rental housing) for low- or moderate-income individuals;
2. Community services targeted to low- or moderate-income individuals;
3. Activities that promote economic development by financing businesses or farms that meet the size eligibility standards of the Small Business Administration's Development Company or Small Business Investment Company programs or have gross annual revenues of $1 million or less;
4. Activities that revitalize or stabilize low- or moderate-income geographies.; or
5. Activities that prevent defaults and/or foreclosures in certain loans.

An institution receives favorable consideration for those activities that have a primary purpose of community development. Although primary purpose is not defined in the regulation, it is presumed to mean that a majority of the activities engaged in by the beneficiary of the bank’s support, meet the regulatory definition of community development. Community development support may take the form of community development loans, qualified investments (including grants), or community development services

If an organization’s activities meet the community development definition set forth above, a bank can receive favorable consideration for supporting the organization, in a CRA Performance Evaluation.

It’s not surprising that we receive many phone calls from groups or individuals who have heard about CRA and think that it is a program through which they can apply for funding. However, the Department of Financial Services does not make grants; it regulates state-chartered financial institutions.

The Department may, however, offer a different type of assistance to community groups and banks alike. Through its authority to administer and enforce CRA, the Department plays an active role in facilitating partnerships between banks and communities. Staff are available to work with groups to address specific problems in the community that affect access to capital and community members are encouraged to inform the Department about local issues that may be relevant to a bank’s CRA performance or which may benefit from the Department’s involvement. Staff are also available to provide information and assistance to banks seeking additional lending and investment opportunities.