Reverse Mortgage Lenders Suspend New York Business Amid New Regulations
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Reverse mortgage lenders who are licensed to generate reverse mortgages in New York state have largely suspended their application processes for new loans in the state, RMD has learned, which has been confirmed by several. lenders. This is in response to sweeping new regulations that recently came into effect there, according to several industry professionals and lenders who operate in the state.
Lenders have indicated that the suspension of business activity is a temporary disruption as opposed to a longer-lasting reaction to the implementation of the new regulations, according to lenders’ statements.
Lenders take a ‘break’ in New York
Britany Luth, vice president of best practices at Finance of America Reverse (FAR), has confirmed that operations in New York are “on hold” but that this is temporary pending the application of the new regulations.
“As with any new regulation impacting the reverse mortgage industry and FAR and its clients, there is an expected and often necessary transition period and possible disruption of services as application becomes practical. of these new measures is understood, applied and implemented, ”Luth said. told RMD in an email. “FAR is working hard and is enforcing the new regulations introduced in New York and expects any related disruptions to be addressed in the short term.”
American Advisors Group (AAG) also confirmed to RMD that it is assessing the current regulatory climate, leading to a suspension of business activities in the state.
“We have suspended activity in New York as the industry works to understand and implement recently adopted regulations,” an AAG spokesperson told RMD.
Representatives of other reverse mortgage lenders declined to comment on the matter, with some directing RMD instead to advice from the National Reverse Mortgage Lenders Association (NRMLA).
“At NRMLA, we are aware of the issues with this business disruption and have convened a working group to document and draft a comment letter to the New York Department of Financial Services regarding the business disruption it caused. NRMLA President Steve Irwin said in an interview with RMD. “We are also coordinating with our outside legal counsel and industry leaders to develop our position, while also working to clarify some of the outstanding issues. This work is ongoing.
Players in the New York area reverse mortgage industry have expressed concern to RMD that loan applications have been unable to be processed in recent days.
“I have an outstanding loan, we got it all back, but we can’t submit it,” a reverse mortgage originator in the state told RMD on condition of anonymity.
Several lenders have recently been granted permission to create reverse mortgages in New York State in recent months. Reverse mortgage financing (RMF) and Longbridge Financial secured approval to create home equity conversion mortgages (HECMs) last October, while FAR secured approval to create its exclusive “HomeSafe” loan there last July.
The new regulations
The new regulations, entered into effect March 5, the result of New York State Assembly Bill A5626, which first passed in May, and largely targets what it calls “deceptive practices.” It requires reverse mortgage lenders to provide additional consumer protection documents while placing additional restrictions on lenders when it comes to paying insurance premiums and property taxes. New York Governor Andrew Cuomo sign the bill in December.
The law also requires that lenders and borrowers be represented by a lawyer at the time of closing, and at least one lawyer must be present alongside the lender and the borrower to carry out the closing itself. The bill can be divided into four main categories: regulatory approval; marketing and origination practices and disclosures; service practices and disclosures; and penalties for infringement.
“This bill creates a new section in the real estate law that basically defines a reverse mortgage, and it says that if you are doing an HECM in New York, you will need a separate approval from the Department of Financial Services. New York, “said Jim Milano, partner at law firm Weiner Brodsky Kider at a presentation in November.
Issuing a HECM loan now requires additional approval, according to Milano.
“If you do an HECM in New York [prior to the new law], you [would] You need a banker’s or mortgage broker‘s license, which is the term mortgage license that lenders need just about anywhere if you are creating setbacks. In New York, when the governor signs the bill, in addition to this license, you will need a separate approval to create HECMs.
Marketing arrangements
On the marketing side, the law also contains a general ban on what it calls “deceptive practices”, including in marketing communications. Three specific elements are mentioned in the rules: Reverse mortgage advertising cannot use the terms “public service announcement” and “government insured” or similar language.
Shortly after the bill was passed, the NRMLA expressed worry for some of its provisions according to Steve Irwin.
“While the NRMLA continues to support consumer protections relating to reverse mortgages, we are concerned about some of the provisions contained in this bill,” Irwin said in a July email to RMD. “The NRMLA and its external counsel brought our concerns to the bill’s sponsors in the New York Legislature before it was passed. “
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