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New York Bill Aims to Add Lender Requirement Prior to HECM Foreclosure

Legislation Update
July 22, 2020

Source: The New York State Senate (full bill text)

Sponsor Memo

BILL NUMBER: S4408

SPONSOR: GOUNARDES

TITLE OF BILL: An act to amend the real property law, in relation to the regulation of default and foreclosure of reverse mortgages issued under the federal home equity conversion mortgage for seniors program

PURPOSE:

This bill will regulate certain activities of lenders when defaults take place on reverse mortgages issued in New York State under HUD’s home equity conversion mortgage for seniors program.

SUMMARY OF PROVISIONS:

Section 1: Lenders must now notify the Department of Financial Services when engaging in foreclosure proceedings against a borrower, and must also provide proof to the department that HUD has granted prior approval to accelerate the loan, proof of the default and notice to the borrower, and any other information required by the department. The Department of Financial Services must then provide notice of the foreclosure directly

Lenders will also be required to engage in loss mitigation, as specified by the Department of Financial Services, before foreclosing.

This section also prevents lenders from making advance payments on mortgage insurance or tax liabilities. Lenders will only be entitled to pay those moneys which are currently in arrears.

The new requirements will be conditions precedent to bringing a foreclosure action against an HUD reverse mortgage. The provisions will be enforceable by providing treble damages and attorney’s fees to prevailing plaintiffs. Section 2: The act will take effect one hundred and twenty days after it becomes law, but the Department of Financial Services is authorized to immediately take any actions necessary to ensure the law’s implementation.

CURRENT LAW:

Under current law, lenders are not required to notify DFS, and DFS is not required to inform seniors of services available to help them in the event of a default. Lenders are also currently allowed to make advance payments on obligations associated with these reverse mortgages.

JUSTIFICATION:

Reverse mortgages are complicated and expensive financial products. Many seniors do not understand how they work or what their true long- term costs are. Exacerbating this problem are unscrupulous lenders who market reverse mortgages as public services or government- sponsored products. Inadequate regulation of this industry resulted in a sharp uptick in defaults in 2016, as more seniors fell into foreclosure on these products, losing not only their homes, but also their most signif- icant financial assets.

Foreclosures in the reverse mortgage industry have taken place against seniors for making payments mere cents short of their tax, homeowners insurance, or mortgage insurance bills. Lenders eager to tap the equity in these homes are sometimes aggressive to foreclose and see a return on their investment. Seniors can be better protected by providing for stricter regulation of the foreclosure process.

Currently, lenders are not required to notify the Department of Finan- cial Services in the event of a default, and DFS does not regularly provide information to seniors in reverse mortgage default scenarios that can help seniors to keep their homes. This bill will change that by requiring a notification to DFS, and by requiring DFS to help seniors get in touch with a legal services organization to help them manage the process.

Lenders sometimes also make large advance payments on obligations tied to reverse mortgages in the event of a default. Then, to resolve the default, lenders will demand that the advance payments be paid back, resulting in massive financial liabilities to seniors that they may not have the cash on hand to satisfy in order to become current on their mortgage payments and cure a default. This new section would allow lenders to make payments only on obligations that are currently in arrears.

LEGISLATIVE HISTORY:

2017-18: S.4452 – Referred to Judiciary

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

To be determined.

EFFECTIVE DATE: 120th day after it shall have become a law.

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CEO

Alan Jaffa

Alan Jaffa is the Chief Executive Officer for Safeguard Properties, steering the company as the mortgage field services industry leader. He also serves on the board of advisors for SCG Partners, a middle-market private equity fund focused on diversifying and expanding Safeguard Properties’ business model into complimentary markets.

Alan joined Safeguard in 1995, learning the business from the ground up. He was promoted to Chief Operating Officer in 2002, and was named CEO in May 2010. His hands-on experience has given him unique insights as a leader to innovate, improve and strengthen Safeguard’s processes to assure that the company adheres to the highest standards of quality and customer service.

Under Alan’s leadership, Safeguard has grown significantly with strategies that have included new and expanded services, technology investments that deliver higher quality and greater efficiency to clients, and strategic acquisitions. He takes a team approach to process improvement, involving staff at all levels of the organization to address issues, brainstorm solutions, and identify new and better ways to serve clients.

In 2008, Alan was recognized by Crain’s Cleveland Business in its annual “40-Under-40” profile of young leaders. He also was named a NEO Ernst & Young Entrepreneur Of The Year® Award finalist in 2013.

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Esq., General Counsel and EVP

Linda Erkkila

Linda Erkkila is the General Counsel and Executive Vice President for Safeguard Properties, with oversight of legal, human resources, training, and compliance. Linda’s broad scope of oversight covers regulatory issues that impact Safeguard’s operations, risk mitigation, strategic planning, human resources and training initiatives, compliance, insurance, litigation and claims management, and counsel related to mergers, acquisition and joint ventures.

Linda assures that Safeguard’s strategic initiatives align with its resources, leverage opportunities across the company, and contemplate compliance mandates. She has practiced law for 25 years and her experience, both as outside and in-house counsel, covers a wide range of corporate matters, including regulatory disclosure, corporate governance compliance, risk assessment, compensation and benefits, litigation management, and mergers and acquisitions.

Linda earned her JD at Cleveland-Marshall College of Law. She holds a degree in economics from Miami University and an MBA. Linda was previously named as both a “Woman of Influence” by HousingWire and as a “Leading Lady” by MReport.

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COO

Michael Greenbaum

Michael Greenbaum is the Chief Operating Officer of Safeguard Properties, where he has played a pivotal role since joining the company in July 2010. Initially brought on as Vice President of REO, Mike’s exceptional leadership and strategic vision quickly propelled him to Vice President of Operations in 2013, and ultimately to COO in 2015. Over his 14-year tenure at Safeguard, Mike has been instrumental in driving change and fostering innovation within the Property Preservation sector, consistently delivering excellence and becoming a trusted partner to clients and investors.

A distinguished graduate of the United States Military Academy at West Point, Mike earned a degree in Quantitative Economics. Following his graduation, he served in the U.S. Army’s Ordnance Branch, where he specialized in supply chain management. Before his tenure at Safeguard, Mike honed his expertise by managing global supply chains for 13 years, leveraging his military and civilian experience to lead with precision and efficacy.

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CFO

Joe Iafigliola

Joe Iafigliola is the Chief Financial Officer for Safeguard Properties. Joe is responsible for the Control, Quality Assurance, Business Development, Marketing, Accounting, and Information Security departments. At the core of his responsibilities is the drive to ensure that Safeguard’s focus remains rooted in Customer Service = Resolution. Through his executive leadership role, he actively supports SGPNOW.com, an on-demand service geared towards real estate and property management professionals as well as individual home owners in need of inspection and property preservation services. Joe is also an integral force behind Compliance Connections, a branch of Safeguard Properties that allows code enforcement professionals to report violations at properties that can then be addressed by the Safeguard vendor network. Compliance Connections also researches and shares vacant property ordinance information with Safeguard clients.

Joe has an MBA from The Weatherhead School of Management at Case Western Reserve University, is a Certified Management Accountant (CMA), and holds a bachelor’s degree from The Ohio State University’s Honors Accounting program.

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Business Development

Carrie Tackett

Business Development Safeguard Properties