A trade group is looking into why New York Gov. Andrew Cuomo felt foreclosure risks were too high to sign a bill that would have approved reverse mortgages for cooperative properties.
"We are working to determine why the governor felt that foreclosure risks were too great despite all the consumer protection language," Steve Irwin, president of the National Reverse Mortgage Lenders Association, said in a statement posted on the group's website shortly before the holidays.
Cuomo vetoed the bill earlier in the month, citing concerns in a letter to the state senate about "unnecessary risks that could lead to foreclosure" and the fact that the federal reverse-mortgage program prohibits such loans.
"While the goal of this legislation is laudable, and it remains crucial that we find ways to support the needs of senior citizens, this bill does cause some concerns," he said. "Primarily, most reverse mortgages are issued through the Home Equity Conversion Mortgage program, which is insured by the Federal Housing Administration of the Department of Housing and Urban Development. HUD requirements for reverse mortgages preclude co-ops because the loan is not secured by real property."
The ownership interest of a resident in a cooperative is secured by equity shares in the building rather than real estate.
While nationwide, a small percentage of residential housing units are cooperative, many of the residential buildings in New York are co-ops, and many of the residents in these building are low-to-moderate income seniors who own shares in their buildings. Reverse mortgages would have allowed them to withdraw home equity without making payments under certain conditions.
Financially, reverse mortgages have not performed as well as the home loans in the FHA's traditional book of business, the finances of the government agency’s overall portfolio are strong.
