Underwater homeowners in New York state are now eligible for an additional form of mortgage modification intended to help more of them keep their homes, in a development quietly passed in the state.
On July 9, the New York Department of Financial Servicesadopted regulations that allow for shared appreciation mortgage modifications under certain circumstances. The new regulations were announced in the state’s registerand went into effect that day.
The regulations, Section 6-f of New York banking law, state that if a borrower is at the risk of foreclosure due to owing more on their home than it is currently worth, a a lender or mortgage holder may reduce the principal amount of a loan to help the borrower stay in their home.
According to a letter from the DFS sent to New York lenders, the lender or mortgage holder would then be entitled to share in any appreciation of the market value of the property between the effective date of the reduction in the principal amount of the mortgage loan and the date when the property is sold or transferred.