We have just learned that the New York State Governor has signed a law that will allow Co-op shareholders to take out reverse mortgages, using their shares as collateral. The shareholder must be sixty-two years or older.
The stated justification of the bill is to provide the older population of Co-op owners the ability to obtain reverse mortgages so that they can remain in their homes. Previously, Co-op owners were denied reverse mortgages since they are not considered real property.
The legislation does contain many caveats and protections for the shareholder, some of which are highlighted below:
- The Co-op unit must be the primary residence of the shareholder in order to be eligible for the reverse mortgage.
- The Lender is prohibited from using or attaching any property or assets of the shareholder, other than the Co-op apartment.
- The loan is a non-recourse loan.
- The Lender is subject to numerous disclosure requirements to provide further protection to the Co-op shareholder.
- The reverse mortgage is subject to the prior approval of the Board’s Board of Directors.
For more details please find a link to the legislation.
