Although the reverse mortgage industry worked diligently to assist in the development of legislation related to reverse mortgage loans on housing co-operatives in the state of New York, the efforts of all involved ultimately came up short due to the passed legislation being vetoed by Governor Andrew Cuomo at the end of 2019. However, the industry is preparing to try again in assisting with a new piece of legislation aimed at providing reverse mortgage-style loans to co-op residents.

This is according to a presentation made at the National Reverse Mortgage Lenders Association (NRMLA) Virtual Policy Conference which took place this week. On hand to discuss the effort surrounding co-op reverse mortgages in New York were James Milano and Soroush Shahin of law firm Weiner Brodsky Kider (WBK), PC based in Washington, D.C.

A new effort

The latest attempt to legally authorize reverse mortgages on co-ops in New York appears in the form of Assembly Bill 1508, with the official brief summary describing the bill as “relat[ing] to authorizing reverse cooperative apartment unit loans for persons 62 years of age or older; [while] provid[ing] additional consumer protections.”

“This bill was introduced in January, and on Monday [April 26] it was referred to the assembly’s committee on co-ops,” said Soroush Shahin in a presentation during the NRMLA Virtual Policy Conference. “This bill will authorize a new type of loan that could be offered to New York seniors called a ‘reverse cooperative apartment unit loan,’ or a ‘reverse co-op loan.’”

The new bill, as the presenters pointed out during the event, is “very similar” to the prior bill which was passed in the New York legislature but which was vetoed by the governor.

“NRMLA and WBK […] put in a lot of time and effort trying to get the [previous] bill passed,” Shahin said. “They worked with consumer advocacy groups and lobbyists to make certain changes to the bill in an effort to get it across the finish line, and it almost worked.”

While new movement on the topic is encouraging, the likelihood of full passage and codification by the governor could be an uphill climb owing to the similarities between the new version of the bill and the old one, and the fact that Governor Cuomo is still the sitting executive of New York state, Shahin said.

The bill will also require the New York Department of Financial Services (NYDFS) to issue regulations related to the new type of loan, which could mean that even if the bill is passed, more requirements for these types of loans could be required before the legislature gives it the proverbial “thumbs up.”

First attempt history

New York State Senate Bill S03686, which was drafted in February of 2019 before passing both the Senate and State Assembly that June, was a product of work between officials at NRMLA, attorneys at WBK as well as consumer advocacy groups in an effort to allow co-op residents the ability to tap their home’s equity through a reverse mortgage loan with substantive consumer protections.

“As we know, FHA doesn’t insure loans secured by co-op, forward or reverse,” James Milano said at the Virtual Policy Conference. “In the New York reverse mortgage law, they did not and do not today allow reverse mortgages in New York to be secured by co-op. [NRMLA President] Steve [Irwin] and I both personally worked on a bill two years ago that was passed, that would have allowed reverse mortgages to be secured by co-ops.”

Though the bill passed both houses of the New York legislature in June of 2019, the bill didn’t make it to the desk of Governor Andrew Cuomo until the end of the year. Within a week of reaching his desk, the bill was vetoed, with Cuomo specifically citing insufficient consumer protections in the version delivered to him.

In a statement on his veto submitted to the New York State Senate and shared by NRMLA, Governor Cuomo said that the need to support New York’s population of seniors remains “crucial.” However, lingering concerns about some of the specifics of the bill ultimately convinced the former HUD secretary-turned-governor not to codify the measure into state law.

“Most reverse mortgages are issued through the Home Equity Conversion Mortgage program, which is insured by the Federal Housing Administration of the Department of Housing and Urban Development (HUD),” Cuomo said in his statement at the time. “HUD requirements for reverse mortgage eligibility precludes co-ops because the loan is not secured by a real property.”

The ability to draw upon home equity is still something that a contingent of seniors who live in co-ops would like to be able to do, Cuomo said. Still, consumer protections found in the bill did not appear sufficient enough for him to justify signing the bill into law.

“While I understand that some senior citizens who own shares of a building would like to be afforded the option to draw on their equity, I am concerned that despite the consumer protections designed to protect borrowers from unscrupulous practices contained in this bill, these borrowers will still be exposed to unnecessary risk that could lead to foreclosure,” Cuomo said in his reasoning for the veto.

When news of the veto broke, RMD reached out to Steve Irwin at NRMLA for his reaction, who at the time said that the association would work diligently to determine why the governor felt inclined to veto it.

“We are working to determine why the governor felt that foreclosure risks were too great, despite all the consumer protection language we managed to get incorporated into the bill,” Irwin told RMD in January, 2020.

Co-op residents’ response

Upon the original veto by Governor Cuomo, the Council of New York Cooperatives & Condominiums (CNYC) condemned the action in a statement posted to the organization’s website at the time.

“Governor Cuomo [disappointed] hundreds of seniors who supported this important legislation as they aged in place in New York housing cooperatives,” CNYC said in its statement in January, 2020. “Many of these seniors call CNYC on a regular basis for progress reports on the legislation that would have enabled them to live out their lives in the homes and communities dear to them. Now, many will be forced to sell their cooperatives for the funds to cover their living and medical expenses in their ‘golden years.’”

As a news publication, RMD’s primary audience is the contingent of reverse mortgage professionals that work in and around the business. However, RMD does receive occasional correspondence via telephone and email from both existing and potential reverse mortgage customers, with a noticeable amount of those correspondences inquiring about the availability of a reverse mortgage loan on a co-op dwelling. Anecdotally, this appears to indicate interest in reverse mortgage loans among certain co-op residents.

Read details of the newly-proposed legislation at the New York State Senate website. As of late April 2021, the bill remains in committee and has not yet been scheduled for a floor vote.