The New York State Legislature once more passed legislation last week which would allow seniors living in cooperative apartment buildings to apply for a reverse mortgage loan, in a new effort designed to give seniors in the state another option to access their home’s equity. This is according to an announcement made by the office of Rep. Jeffrey Dinowitz, a Democrat representing New York’s 81st assembly district.

The new legislation passed in the legislature accounts for the latest effort by the New York legislature and the reverse mortgage industry to allow cooperative dwellers the ability to apply for a reverse mortgage, an effort previously spearheaded by both entities that had passed the legislature before being vetoed by New York Governor Andrew Cuomo.

The new bill, A1508, now goes to the New York State Senate for deliberation but may continue to encounter resistance from Gov. Cuomo unless prior concerns he expressed related to consumer protection are satisfied.

The new bill’s passage

The amount of cooperative dwellings in the state of New York offers sufficient justification for such-situated seniors to access their home’s equity through a reverse mortgage, according to the justification authored by Rep. Dinowitz, the Assembly Bill’s sponsor.

“In New York, about 75% of residential buildings are cooperatives,” the justification reads. “Many of those living in cooperative apartment units are elderly and are of low-to-middle income. The National Association of Housing Cooperatives (NAHC) and the Council of New York Cooperatives and Condominiums (CNYC) have spent the past sixteen years lobbying the Department of Housing and Urban Development (HUD) for the implementation of legislation for reverse cooperative apartment unit loans for aging individuals. The greatest hurdle is that co-ops are not real property.”

As long as there are sufficient consumer protections in place, HUD’s current policy that restricts cooperative dwellers from seeking reverse mortgages should no longer be enforced, the justification explains. The new bill offers sufficient consumer protections and will allow more seniors to remain in the home of their choosing, it says.

“With the correct regulations and liability protection, the older population should be permitted to obtain reverse instead of being forced to relocate from their homes,” the justification says. “With this bill, extended consumer protections will be added to the process of acquiring a reverse cooperative apartment unit loan and will ensure that the elderly community that so desperately wishes to stay in their homes will be able to do so.”

The State Assembly passed the revised bill with a vote of 148-1, while the State Senate passed its version of the bill sponsored by State Sen. Alessandra Biaggi (D) with a vote of 62-1. In the State Senate, the sole “nay” vote came from Sen. Sue Serino (R) representing New York’s 41st district. It was not immediately clear which Assembly representative voted against the bill.

Reaction from sponsor, trade association

When reached for comment, NRMLA President Steve Irwin said that the association is pleased with the bill’s passage and that it is awaiting the next action of Gov. Cuomo.

“NRMLA has been tracking the reverse mortgage co-op bills in New York, and we were pleased to see that this legislation passed last Friday, before both houses in NY adjourned for the session,” Irwin told RMD. “NRMLA has worked very closely with several of the stakeholders involved with crafting this legislation, and, while there remain some technical issues to resolve, we are pleased that co-op owners in New York may soon have another financing option available to them through the private-label reverse mortgage marketplace. We are now paying very close attention to when this may get signed by the governor.”

Sponsor Rep. Dinowitz lauded the passage of the Assembly Bill as a way for seniors to have new ways to access the equity in their homes without having to sell or move from their current residence.

“Cooperative apartments are a very common way for New Yorkers to achieve the goals of homeownership, and seniors who live in these coops deserve to have access to the same resources as traditional homeowners so that they are not forced to sell their homes in order to get access to cash,” Rep. Dinowitz said in a statement. “Our goal should be to help seniors age in place, in the homes that they have often lived in for decades, and this legislation does just that.”

Acknowledging that Gov. Cuomo vetoed the previous version which was passed in both chambers in 2019, Rep. Dinowitz nonetheless hopes that the governor will find the new version more satisfactory and codify it with his signature once it arrives at his office.

“I hope that Governor Cuomo has reconsidered his opposition to this policy and I urge him to sign it into law once it is delivered to his desk,” Rep. Dinowitz said.

History

The new version of the bill is a product of significant work by the National Reverse Mortgage Lenders Association (NRMLA) and its outside counsel with consumer advocates and other stakeholders to ensure that there are more adequate consumer protections in place for coop residents who may seek out a reverse mortgage.

“NRMLA and [Weiner Brodsky Kider] (WBK) […] put in a lot of time and effort trying to get the [previous] bill passed,” said Soroush Shahin of WBK at NRMLA’s Virtual Policy Conference in April. “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 Gov. Cuomo is still the sitting executive of New York state, Shahin said.

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,” WBK attorney 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.”

In a letter explaining his late 2019 veto, Gov. Cuomo – who served as HUD Secretary during the second term of President Bill Clinton from 1997 to 2001 – explained that he believed relevant borrowers may still be vulnerable to foreclosure under the language of the vetoed bill.

“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.