§ 590-a. Junior mortgage loans. 1. A licensee may make a loan to a natural person upon the security of a mortgage on residential real property which is not a first lien at the rate or rates agreed to by the licensee and the borrower, subject to such regulations as the superintendent of financial services may prescribe. Such regulations by the superintendent of financial services may include such restrictions as the superintendent of financial services finds necessary or proper. For purposes of this section, the term mortgage shall include a lien on an existing ownership interest in certificates of stock or other evidence of an ownership interest in, and a proprietary lease from, a corporation or partnership formed for the purpose of the cooperative ownership of residential real estate.

Terms Used In N.Y. Banking Law 590-A

  • Contract: A legal written agreement that becomes binding when signed.
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
  • Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
  • Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
  • Lien: A claim against real or personal property in satisfaction of a debt.
  • Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
  • Mortgage loan: shall mean a loan to a natural person made primarily for personal, family or household use, secured by either a mortgage or deed of trust on residential real property, any certificate of stock or other evidence of ownership in, and proprietary lease from, a corporation or partnership formed for the purpose of cooperative ownership of residential real property or, if determined by the superintendent by regulation, shall include such a loan secured by a security interest on a manufactured home;

    (b) "Residential real property" shall mean real property located in this state improved by a one-to-four family dwelling used or occupied, or intended to be used or occupied, wholly or partly, as the home or residence of one or more persons, but shall not refer to unimproved real property upon which such dwellings are to be constructed;

    (c) "Making a mortgage loan" shall mean for compensation or gain, either directly or indirectly, advancing funds, offering to advance funds, or making a commitment to advance funds to an applicant for a mortgage loan or a mortgagor as a mortgage loan;

    (d) "Soliciting, processing, placing or negotiating a mortgage loan" shall mean for compensation or gain, either directly or indirectly, accepting or offering to accept an application for a mortgage loan, assisting or offering to assist in the processing of an application for a mortgage loan, soliciting or offering to solicit a mortgage loan on behalf of a third party or negotiating or offering to negotiate the terms or conditions of a mortgage loan with a lender on behalf of a third party;

    (e) "Exempt organization" shall mean any insurance company, banking organization, foreign banking corporation licensed by the superintendent or the comptroller of the currency to transact business in this state, national bank, federal savings bank, federal savings and loan association, federal credit union, or any bank, trust company, savings bank, savings and loan association, or credit union organized under the laws of any other state, or any instrumentality created by the United States or any state with the power to make mortgage loans. See N.Y. Banking Law 590
  • Mortgage loan: A loan made by a lender to a borrower for the financing of real property. Source: OCC
  • Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
  • Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
  • Variable Rate: Having a "variable" rate means that the APR changes from time to time based on fluctuations in an external rate, normally the Prime Rate. This external rate is known as the "index." If the index changes, the variable rate normally changes. Also see Fixed Rate.

2. A contract, note or instrument evidencing or securing a junior mortgage loan shall not contain any acceleration clause which would provide that the junior mortgage loan may be declared due and payable upon the condition that the licensee deems itself insecure with respect to the unpaid balance of such junior mortgage loan; shall not contain clauses which authorize confession of judgment; shall allow the borrower to prepay the loan in whole or in part without penalty, and shall contain the following notice in bold face type, at least ten point size:

"DEFAULT IN THE PAYMENT OF THIS LOAN AGREEMENT MAY RESULT IN THE LOSS OF THE PROPERTY SECURING THE LOAN. UNDER FEDERAL LAW, YOU MAY HAVE THE RIGHT TO CANCEL THIS AGREEMENT. IF YOU HAVE THIS RIGHT, THE CREDITOR IS REQUIRED TO PROVIDE YOU WITH A SEPARATE WRITTEN NOTICE SPECIFYING THE CIRCUMSTANCES AND TIMES UNDER WHICH YOU CAN EXERCISE THIS RIGHT."

3. Where the contract, note or instrument evidencing or securing a junior mortgage loan provides for a variable rate of interest, said rate shall be based on a published index that is (a) readily available, (b) independently verifiable, (c) beyond the control of the licensee, and (d) approved by the superintendent. The interest rate of the junior mortgage loan shall be reduced in proportion to any decrease in the index rate. Increases in the interest rate may be made at the option of the licensee.

4. The superintendent of financial services shall adopt regulations, including but not limited to: (a) providing for disclosure to the borrower by the licensee of the circumstances under which the rate may increase, any limitations on the increase, the effect of an increase and an example of the payment terms that would result from an increase, (b) providing for disclosure to the borrower by the licensee of a history of the fluctuations of the index over a reasonable period of time, and (c) providing for notice to the borrower from the licensee of any rate increase or change in the terms of payment.

5. A line of credit secured by a junior mortgage shall be established in an amount of no less than twenty-five hundred dollars; and shall be repayable in monthly installments.

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