Important changes governing pre-foreclosure notices and settlement conferences for reverse mortgages were signed into law on April 20, 2017, requiring 90-day pre-foreclosure notices in all reverse mortgage foreclosures and requiring settlement conferences in many reverse mortgage cases. The amendments affecting reverse mortgage foreclosures, making changes to New York Real Property Law (RPAPL) 1304 and Civil Practice Law and Rules (CPLR) 3408 appear in Part FF, 2017 Sess. Laws of N.Y., Ch. 58 (S. 2008C) (McKinneys). These changes supplemented the 2016 amendments to New York's residential foreclosure settlement conference law, detailed in a previous article. Jacob Inwald, “Residential Foreclosures: Legislative Changes to Settlement Conference Law,” N.Y.L.J., July 29, 2016. Significant changes to New York's pre-foreclosure notice law also went into effect at the end of 2016. (The legislation, signed into law on June 23, 2016, as part of an omnibus bill, Part Q of which contained the provisions applicable to residential foreclosures, became effective 180 days after enactment, i.e., on Dec. 20, 2016 pursuant to Chapter 73 of the Laws of New York.)

Reverse mortgages are loans that allow homeowners aged 62 and older to tap into their home equity while remaining in their homes, and can be an important resource for seniors who may have insufficient income to cover their living expenses. Instead of making a payment each month to cover principal and interest, the interest accrues against the borrower's home equity, and the loan (which most typically is insured by the Federal Housing Administration, known as a Home Equity Conversion Mortgage, or HECM) is not due and payable until the borrower's death. But borrowers are responsible for payment of taxes and insurance, known as property charges, and a failure to pay such charges can trigger a reverse mortgage “default” that can result in a foreclosure.

These most vulnerable homeowners are increasingly finding themselves in foreclosure as mortgage servicers move aggressively to foreclose without providing an opportunity for the borrower to resolve property charge defaults, or invoke other technical defaults that can trigger foreclosure, causing a substantial uptick in reverse mortgage foreclosures in recent years. The exclusion of reverse mortgages from New York's foreclosure consumer protections became an unacceptable anomaly, as New York's most vulnerable homeowners—the seniors to whom reverse mortgages are marketed—were deprived of statutory pre-foreclosure notices and mandatory settlement conferences at which foreclosure-avoiding solutions can be negotiated. The availability of improved notices and settlement conferences at which defaults can be resolved is a positive development for New York's senior homeowners.