Klein pushes for reverse mortgage for co-ops

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State Sen. Jeffrey Klein is advocating for extending the reverse mortgage program to co-ops in New York. But the bid is facing a few hurdles. 

The reverse mortgage program allows homeowners aged 62 and older to tap into their home equity and take out a loan without monthly payments. The loan plus interest becomes due when the borrower moves out, sells the home or dies. 

Until a few years ago, the program had been drawing much criticism for abuse by lenders and for inviting irresponsible financial decisions by borrowers. But interest in reverse mortgages saw a comeback after the Department of Housing and Urban Development introduced regulations starting in 2009 to limit the possibility for abuse and irresponsible choices, according to HUD. 

Sen. Klein has teamed up with fellow state senator from Queens, Tony Avella, to develop projects that could benefit co-op and condo owners in their districts. If the partnership with Queens seems unexpected, the reason for this choice is that people who live in co-ops and condos in the northwest Bronx and in Queens face different concerns than their Manhattan counterparts, Sen. Klein said in an interview with The Press. 

The northwest Bronx and Queens “have more middle-income-type co-ops,” Sen. Klein told The Press on Dec. 21. “They are not as expensive as the Manhattan luxury co-ops and condos. So, [their owners] are more focusing on saving money.”

“We had several roundtables, with the Bronx and Queens together, coming up with some ideas,” Sen. Klein said. 

One of the products of those discussions was a bill that would open up the federal government’s reverse mortgage program to co-ops. 

But part of the difficulty is that people who live in co-ops do not own their actual apartments, but shares in a corporation. That was an objection that HUD Secretary Julian Castro raised when Rep. Eliot Engel discussed the project with him, the congressman’s chief of staff Bill Weitz said earlier this fall. 

“Their argument is that they are trying to stabilize the program. And their argument has been that because co-ops are not real property, but shares, it’s difficult for them to make loans and stabilize the program without some real property in hands as a collateral,” Mr. Weitz told a meeting of the Association of Riverdale Cooperatives and Condominiums on Nov. 30.  

The U.S. “Congress has approved that co-ops could be included,” Mr. Weitz said. “The problem though is that … it leaves discretion to the HUD secretary to determine if they want to put co-ops into the language of the law.”

A bill that would extend the program to co-ops passed in the state Senate, but did not make it through the Assembly. Because the state Legislature operates on a two-year cycle and a new one begins next year, any bill that did not pass both houses would have to be re-introduced before it has a chance to become law. 

“In other words, if it passed the Senate last year, it didn’t count,” Sen. Klein said. 

But “we’re gonna continue this, we’re gonna continue to work on these issues,” Sen. Klein said. 

co-ops, Jeffrey Klein, Eliot Engel, HUD, Bill Weitz, reverse mortgage, Anna Dolgov

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