Co-op Seniors Can Now Get Reverse Mortgages

A long, hard-fought battle ended in victory for housing cooperatives on Wednesday when Gov. Kathy Hochul signed a bill that will allow co-op shareholders 62 and older to take out reverse mortgages on their apartments. The law goes into effect in 180 days.

“I’m very, very, very pleased,” says Mary Ann Rothman, 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.”

Rothman credits Assemblyman Jeffrey Dinowitz, a Bronx Democrat, with shepherding the legislation to the governor’s desk. It passed in the Assembly by a 148-1 margin and in the Senate by 62-1.

“That tells me the vast majority of legislators understood that this will be a benefit to their constituents,” Dinowitz tells Habitat.

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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 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.”

Adds Dinowitz, “I brought together all the stakeholders to build a consensus — supporters and opponents, state agencies, co-op residents. There were skeptics who felt there had been issues in the past with consumer protections. I wanted to make sure nobody’s going to get ripped off.”

To that end, the new law has numerous requirements, including: lenders must obtain a $100,000 surety bond to cover claims in the event they fail to meet their obligations; the loans are subject to approval by the co-op board; lenders cannot use the words “government-insured” or “public service announcement” in promotional materials; lenders must maintain a minimum of $10 million in capital; the interest rate on the loans can be fixed or variable; and borrowers must undergo counseling before taking out such a loan.

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 apartment-unit loans are available only to shareholders who use the apartment as their primary residence. 

“I’m delighted that the governor has finally signed it,” Dinowitz says. “There are a lot of co-ops in my district. I live in a co-op, and I’m thrilled.”