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For many New York City seniors who own their apartments, the pandemic drove home the urgency of staying in their place as long as possible. One of the ways seniors can do this is with a reverse mortgage, which flips a traditional mortgage arrangement, so the bank gets more equity in the property over time, not less.
This can suit owners who need help with medical or other expenses late in life. "For people who get sick, they have no way to tap into the equity in their homes, so they sell the home and use that money to move into a nursing home," says Bonnie Gilbert, a New York loan officer at Fairway Independent Mortgage Corporation. A reverse mortgage provides an alternative, giving an owner additional funds to stay in their apartment or house and bring care to them.
In spite of recent efforts to change the rules, reverse mortgages aren't allowed in co-ops. The predominant reverse mortgage is the FHA-insured reverse mortgage and FHA products must be on real property. The unique structure of a co-op means a buyer is a shareholder rather than an owner. (Reverse mortgages are available for condos owned as primary residences.) There are non-FHA insured products offered to shareholders in other states, but Steve Irwin, president of the National Reverse Mortgage Lenders Association, says, "It's New York where this prohibition on reverse mortgages for co-ops is unique."
Members of the real state industry in NYC have tried to change this over the years. Attorney Marc Luxemburg, president of the Council of New York Cooperatives & Condominiums, says he's still hoping the law can be adjusted.
"I would like to see seniors in co-ops to be able to use their housing as the basis for a reverse mortgage to avoid them being forced out, that would be good for everybody," he says.
A bill did reach Governor Andrew Cuomo's desk last year but was vetoed. The same bill has been put forward again this year and Irwin says he's hopeful it will pass. "We know there are a lot of co-op owners in New York who could really use the relief that a reverse mortgage might provide them, so that they could continue to age in place," he says.
Working out if a reverse mortgage is right for you
It's true reverse mortgages don't have a stellar reputation and Gilbert says they aren't right for everyone, for example, someone who is definitely not planning on remaining in their home for the foreseeable future and anyone for whom that property is needed by the family, for example if you have a child with a disability and want the child to stay in the apartment long-term.
However, Gilbert says she has seen cases where a senior child over the age of 62 and a parent have gone in on a reverse mortgage together and says "that allowed tremendous protections for both generations." (You need to be 62 years old or more to qualify for a reverse mortgage.)
Changes to the mortgage industry over the past decade have contributed to making reverse mortgages safer, Gilbert says. For starters, a financial assessment must be carried out to ensure you have enough money for the ongoing costs of the property.
The oversight role of a co-op board
In arguing for co-op owners to be allowed to access reverse mortgages, Luxemburg says the board has a crucial oversight role. "The board in that case is a check on a senior citizen living in a building being abused by an improper reverse mortgage because the board can look at the mortgage and say, 'this is not right.'"
Gilbert says she's seen an uptick in interest in these products over the past year.
"There's always been a desire to remain in your own home so when you look at the pandemic and the additional risks that people have had to incur when they could not stay in their own homes—how scary is that?" she asks.
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