Texas Constitutional and New York Legislative Update

Texas Constitutional and New York Legislative Update

The Texas legislature recently amended subsection (k), Section 50, of Article XVI of the Texas Constitution with regard to reverse mortgages.  The Constitutional amendment will appear on the November 5, 2013 ballot.  The New York legislature recently enacted laws governing foreclosure effective August 30, 2013.

 

TEXAS SENATE JOINT RESOLUTION 18

 

 

A “reverse mortgage” now includes an extension of credit:

  • Under which advances are provided to a borrower for the purchase of homestead property that the borrower will occupy as a principal residence.
  • That requires no payment of principal or interest until, if the extension of credit is used for the purchase of homestead property, the borrower fails to timely occupy the homestead property as the borrower’s principal residence within a specified period after the date the extension of credit is made that is stipulated in the written agreement creating the lien on the property.
  • That is not made unless the prospective borrower and the spouse of the prospective borrower attest (previously owner of the homestead attests) in writing that the prospective borrower and the prospective borrower’s spouse (previously owner) received counseling regarding the advisability and availability of reverse mortgages and other financial alternatives that was completed not earlier than the 180th day nor later than the 5th day before the date the extension of credit is closed.
  • That is not closed before the 12th day after the date the lender provides to the prospective borrower the following written notice on a separate instrument, which the lender or originator and the borrower must sign for the notice to take effect:

 

 

IMPORTANT NOTICE TO BORROWERS

RELATED TO YOUR REVERSE MORTGAGE

 

UNDER THE TEXAS TAX CODE, CERTAIN ELDERLY PERSONS MAY DEFER THE COLLECTION OF PROPERTY TAXES ON THEIR RESIDENCE HOMESTEAD.  BY RECEIVING THIS REVERSE MORTGAGE YOU MAY BE REQUIRED TO FORGO ANY PREVIOUSLY APPROVED DEFERRAL OF PROPERTY TAX COLLECTION AND YOU MAY BE REQUIRED TO PAY PROPERTY TAXES ON AN ANNUAL BASIS ON THIS PROPERTY.

 

 

THE LENDER MAY FORECLOSE THE REVERSE MORTGAGE AND YOU MAY LOSE YOUR HOME IF:

(A)   YOU DO NOT PAY THE TAXES OR OTHER ASSESSMENTS ON THE HOME EVEN IF YOU ARE ELIGIBLE TO DEFER PAYMENT OF PROPERTY TAXES;

(B)    YOU DO NOT MAINTAIN AND PAY FOR PROPERTY INSURANCE ON THE HOME AS REQUIRED BY THE LOAN DOCUMENTS;

(C)   YOU FAIL TO MAINTAIN THE HOME IN A STATE OF GOOD CONDITION AND REPAIR;

(D)   YOU CEASE OCCUPYING THE HOME FOR A PERIOD LONGER THAN 12 CONSECUTIVE MONTHS WITHOUT THE PRIOR WRITTEN APPROVAL FROM THE LENDER OR, IF THE EXTENSION OF CREDIT IS USED FOR THE PURCHASE OF THE HOME, YOU FAIL TO TIMELY OCCUPY THE HOME AS YOUR PRINCIPAL RESIDENCE WITHIN A PERIOD OF TIME AFTER THE EXTENSION OF CREDIT IS MADE THAT IS STIPULATED IN THE WRITTEN AGREEMENT CREATING THE LIEN ON THE HOME;

(E)    YOU SELL THE HOME OR OTHERWISE TRANSFER THE HOME WITHOUT PAYING OFF THE LOAN;

(F)    ALL BORROWERS HAVE DIED AND THE LOAN IS NOT REPAID;

(G)   YOU COMMIT ACTUAL FRAUD IN CONNECTION WITH THE LOAN; OR

(H)   YOU FAIL TO MAINTAIN THE PRIORITY OF THE LENDER’S LIEN ON THE HOME, AFTER THE LENDER GIVES NOTICE TO YOU, BY PROMPTLY DISCHARGING ANY LIEN THAT HAS PRIORITY OR MAY OBTAIN PRIORITY OVER THE LENDER’S LIEN WITHIN 10 DAYS AFTER THE DATE YOU RECEIVE THE NOTICE, UNLESS YOU:

(1)    AGREE IN WRITING TO THE PAYMENT OF THE OBLIGATION SECURED BY THE LIEN IN A MANNER ACCEPTABLE TO THE LENDER;

(2)    CONTEST IN GOOD FAITH THE LIEN BY, OR DEFEND AGAINST ENFORCEMENT OF THE LIEN IN, LEGAL PROCEEDINGS SO AS TO PREVENT THE ENFORCEMENT OF THE LIEN OR FORFEITURE OF ANY PART OF THE HOME; OR

(3)    SECURE FROM THE HOLDER OF THE LIEN AN AGREEMENT SATISFACTORY TO THE LENDER SUBORDINATING THE LIEN TO ALL AMOUNTS SECURED BY THE LENDER’S LIEN ON THE HOME.

 

 

IF A GROUND FOR FORECLOSURE EXISTS, THE LENDER MAY NOT COMMENCE FORECLOSURE UNTIL THE LENDER GIVES YOU WRITTEN NOTICE BY MAIL THAT A GROUND FOR FORECLOSURE EXISTS AND GIVES YOU AN OPPORTUNITY TO REMEDY THE CONDITION CREATING THE GROUND FOR FORECLOSURE OR TO PAY THE REVERSE MORTGAGE DEBT WITHIN THE TIME PERMITTED BY SECTION 50(k)(10), ARTICLE XVI, OF THE TEXAS CONSTITUTION.  THE LENDER MUST OBTAIN A COURT ORDER FOR FORECLOSURE EXCEPT THAT A COURT ORDER IS NOT REQUIRED IF THE FORECLOSURE OCCURS BECAUSE:

(1)   ALL BORROWERS  HAVE DIED; OR

(2)   THE HOMESTEAD PROPERTY SECURING THE LOAN IS SOLD OR OTHERWISE TRANSFERRED.

 

 

YOU SHOULD CONSULT WITH YOUR HOME COUNSELOR OR AN ATTORNEY IF YOU HAVE ANY CONCERNS ABOUT THESE OBLIGATIONS BEFORE YOU CLOSE YOUR REVERSE MORTGAGE LOAN.  TO LOCATE AN ATTORNEY IN YOUR AREA, YOU MAY WISH TO CONTACT THE STATE BAR OF TEXAS.

 

 

THIS NOTICE IS ONLY A SUMMARY OF YOUR RIGHTS UNDER THE TEXAS CONSTITUTION.  YOUR RIGHTS ARE GOVERNED IN PART BY SECTION 50, ARTICLE XVI, OF THE TEXAS CONSTITUTION, AND NOT BY THIS NOTICE.

 

NEW YORK ASSEMBLY BILL 5582

 

 

In any residential foreclosure action involving a home loan in which the borrower is a resident of the property that is subject to foreclosure, the complaint must be accompanied by a certificate, signed by the attorney for the lender, certifying that the attorney has reviewed the facts of the case and that, based on consultation with the representatives of the lender identified in the certificate and the attorney’s review of pertinent documents, including the mortgage, security instrument, and note or bond underlying the mortgage executed by the borrower and all instruments of assignment, if any, and any other instrument of indebtedness including any modification, extension, and consolidation, to the best of the attorney’s knowledge, information, and belief there is a reasonable basis for the commencement of the action and that the lender is currently the lender entitled to enforce rights under the documents.

 

 

If not attached to the summons and complaint in the action, a copy of the mortgage, security agreement, and note or bond underlying the mortgage executed by the borrower and all instruments of assignment, if any, and any other instrument of indebtedness including any modification, extension, and consolidation must be attached to the certificate.

 

 

Where a certificate is required, a single certificate must be filed for each action even if more than one borrower has been named in the complaint or is subsequently named.

 

 

Where the documents required above are not attached to the summons and complaint or to the certificate, the attorney for the lender must attach to the certificate supplemental affidavits by the attorney or representative of the lender attesting that the documents are lost, whether by destruction, theft, or otherwise.  The lender’s obligations set forth in the New York Uniform Commercial Code are not replaced or cancelled by the above provisions.

 

 

If the lender willfully fails to provide copies of the required papers and documents and the court finds, upon the motion of any party or on its own motion on notice to the parties, that the papers and documents ought to have been provided, the court may dismiss the complaint or make a final or conditional order with regard to the failure as is just, including, but not limited to, the denial of the accrual of any interest, costs, attorneys’ fees, and other fees relating to the underlying mortgage debt.  Any dismissal will be without prejudice and not on the merits.

 

 

In any residential foreclosure action involving a home loan in which the borrower is a resident of the property subject to foreclosure, the lender must file proof of service within 20 days of the service, however service is made.