Reverse Mortgages Now Open to NYC Seniors Living in Co-ops

Good news. A long, hard-fought battle ended in victory for housing cooperatives when Gov. Kathy Hochul signed a bill in December 2021 that will allow co-op shareholders 62 and older to take out reverse mortgages on their apartments. The law goes into effect on May 30.

Big payoff. “I’m very, very, very pleased,” says Mary Ann Rothman, the executive director of the Council of New York Cooperatives & Condominiums. “We’ve been working on this for probably eight years. More and more of us old folks are finding that our savings, Social Security and pensions are not going to cover our living expenses. A reverse mortgage allows an individual to tap into the equity in their home, and it will let people live out their lives in their homes. This law sustains communities and doesn’t take from the public trough.”

About-face. Reverse mortgages, also known as reverse apartment-unit loans, funnel money to the borrower in one of four ways: a lump-sum payment; a line of credit; “term” monthly payments for a fixed number of months; or “tenure” monthly payments until the full loan is paid out. Reverse mortgages are available only to shareholders who use the apartment as their primary residence.

Safety net. Until now, reverse mortgages were available in New York State to owners of one- to four-family homes and condominiums, but not co-op apartments. Former Gov. Andrew M. Cuomo vetoed similar legislation over concerns that inadequate consumer protections left open the possibility that predatory lenders could swindle older shareholders out of their homes. “This legislation has more consumer protections than you can imagine,” Rothman says. “It’s a very carefully crafted bill.”

What’s required. Lenders must obtain a $100,000 surety bond to cover claims in the event they fail to meet their obligations and must maintain a minimum of $10 million in capital. The interest rate on the loans can be fixed or variable. Borrowers must undergo counseling before taking out such loans, which are subject to approval by the co-op board.