New York To Encourage Shared Appreciation Modifications

December 11, 2013 at 8:40 am Leave a comment

Benjamin Lawsky, the head of New York State’s Department of Financial Services, released a press release and proposed regulation yesterday intended to give lenders one more tool as they seek to modify mortgage loans for underwater borrowers who potentially have the resources to stay in their house, but may lack the financial incentive.

The proposed regulations, which have yet to be published in the State Register, establish a framework for the use of shared appreciation mortgages whereby lenders are authorized to modify the terms of mortgages in return for using the anticipated appreciated value of the home as collateral to be recouped at a future date. What makes New York’s proposal unique is that it is specifically designed for borrowers who do not qualify for HAMP modifications or those offered by the FHA, Fannie Mae, or Freddie Mac.

The proposed regulation is helpful if only because it underscores the use of a mortgage modification technique that could become increasingly attractive if you believe that housing prices have stabilized and will most likely increase in value over the next several years. However, even without this regulation, NCUA has authorized the use of such appreciation modifications for federal credit unions since 2009. Specifically, NCUA issued a legal opinion letter authorizing federal credit unions to enter into shared appreciation mortgage modifications under the Federal Credit Union Act. Presumably one of the benefits of New York’s regulations will be to remove any confusion as to whether or not state credit unions can exercise the same power.

On that note, have a nice day.

Entry filed under: Compliance, New York State, Regulatory. Tags: , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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