Banking Interpretations


New York State Banking Department

To: Oronzo Nardulli, Principal Bank Examiner
From: Harry C. Goberdhan - Assistant Counsel
Date: September 17, 2008
Subject: Reverse Mortgages - [---]

May an exempt entity legally choose not to offer Section 280-a reverse mortgage loans to its customer base even though it is offering and making Section 280 reverse mortgage loans?
Note that this response does not address whether [---] is qualified as an exempt entity to make mortgage loans as that question has not been raised. This memorandum is written on the assumption that [---] is duly authorized to make reverse mortgages. 

According to Section 79.12 of the General Regulations of Banking Board:

(a) Commencing January 1, 1995, a lender shall make at least as many 280-a loans as it makes 280 loans per calendar year. However, a lender need not do so to the extent that it determines that there are no or insufficient applications for 280-a loans, the individuals who apply for 280-a loans do not qualify for such loans, or mortgage insurance for the principal and any accrued but unpaid interest for 280-a loans is not available for the type of reverse mortgage loan made by the lender through the private market or any agency of the State of New York. Such determination shall be subject to review by the superintendent at his or her discretion.

(b) A lender shall: 

(1) advertise its 280-a loan programs to the same extent as it advertises its 280 loan programs in all the counties in which the lender makes 280 loans; and

(2) ensure that all advertising materials, including brochures, for any reverse mortgage loans designed specifically for New York residents mention both the lender's 280-a and 280 loans and prominently display or state the lender's name; and

(3) make its promotional materials on its 280-a loans available to the local and county offices for the aging and the New York State Office for the Aging, to the extent reasonably requested by them, in all counties in which the lender makes 280 loans; and

(4) require its loan officers to inform applicants for 280 loans of the lender's 280-a loan programs.

(c) All lenders shall maintain copies of all advertising and promotional materials for all reverse mortgage loans for a period of three years commencing from the first date that the material was used to solicit reverse mortgage loans.

(d) All lenders must maintain an application log for all applications. In addition, the lender must maintain rejected mortgage application files for a minimum of three years.

(e) Any lender may, at its option, offer only one reverse mortgage loan program provided such program meets the requirements of a 280-a loan.

As can be seen from a simple reading of the regulation, a determination as to whether an entity's operations complies with Section 79.12 is very fact intensive, and can best be made by an examiner, on a case by case basis.

Notwithstanding, considering the facts presented in this case [---] has contacted two mortgage insurance companies, both of whom indicated that they do not insure any type of reverse mortgage transactions - [---] cannot successfully argue that they will be in compliance. if they only offer Section 280 mortgage loans.  From the facts presented, it does not appear as though [---] made an effort adequate enough to support a conclusion that there is no "mortgage insurance for the principal and any accrued but unpaid interest for 280-a loans"; therefore, absent additional or different facts they must make as many 280­a loans as they make 280 loans.

Noted: MEG