This year’s budget included an important substantive protection for homeowners with reverse mortgages. (Part FF) Since 2010, New York State has mandated settlement conferences to be scheduled in all foreclosure cases involving residential “home loans.” (CPLR 3408) A “home loan” was defined as a loan secured by a mortgage or deed of trust, including lines of credit but specifically excluding reverse mortgages, used primarily for personal, family or household purposes and in an amount conforming with federal standards. (RPAPL sec. 1304(b)) This year’s budget removed the exclusion of reverse mortgages from the definition of “home loan,” bringing reverse mortgage foreclosures into the mandatory settlement conference process.
Settlement conferences confer no additional rights to the parties. They have proven, however, to be a critical step in the judicial process, bringing the parties together to explore alternatives to foreclosure. It was once believed, and perhaps was once the case, that foreclosures in reverse mortgage cases were fairly straightforward, typically caused by death of the borrowers. There has been an uptick in reverse mortgage foreclosures, however, and foreclosures are often caused by the questionable actions of lenders and servicers. Such practices include mandating deeds be transferred into the older borrower’s name only, failing to clearly explain the need for homeowners to make tax and insurance payments on their own, and sometimes paying tax bills early or paying them even if the senior is paying through a payment plan in order to trigger a foreclosure.
Foreclosures caused by tax or insurance arrears can often be remedied, especially with the return of the Statewide Mortgage Assistance Program (MAP), which provides zero percent interest rate loans up to $40,000 to cure past due tax or mortgage arrears. Mortgage servicers, though, are not always great with working with homeowners, especially regarding reverse mortgages. Homeowners also do not always understand the foreclosure processes and their rights, problems compounded sometimes for senior homeowners. The conferences have become a key way to link homeowners to non-profit direct services provided through the New York State Office of the Attorney General’s Homeowner Protection Program (HOPP). Scheduling a mandatory settlement conference in reverse mortgage foreclosure cases makes great sense to ensure seniors are not losing homes unnecessarily.
Where a default of a reverse mortgage is caused by the death of a borrower, the budget language provides that a settlement conference be held for “the last surviving borrower’s spouse” or an heir as long as they were a resident of the property at the time of the borrower’s death. This is also meaningful because a spouse is allowed to assume the mortgage and remain in the property, and heirs are allowed to purchase properties at ninety percent of value, though servicers do not always adequately communicate these protections or work effectively with survivors. The Superintendent of the New York State Department of Financial Services is authorized to prescribe regulations regarding the budget language pertaining to survivors.