If a bank makes advances under a reverse mortgage decades after recording the mortgage, does the lender still keep first-priority lien position?

Plain-English summary

In 1996 the New York Banking Superintendent asked the Attorney General how two pieces of state mortgage law fit together. Reverse mortgages, authorized in 1984 for homeowners aged 60 and up, work by having a bank send the homeowner a stream of advances over many years instead of a single up-front loan. The 1993 Legislature said those individual advances are all secured back to the date the mortgage is recorded, so the bank's lien sits at the top of the pile no matter when the cash actually goes out.

But a different statute, Real Property Law § 281, applies a 20-year ceiling on lien priority for "credit-line mortgages." The 1993 amendments folded reverse mortgages into the definition of credit-line mortgage, which created the question: did the 20-year cap now eat into the lifetime-priority rule for reverse mortgages?

The AG concluded no. Sections 280 and 280-a expressly say the lien dates from recording "irrespective of the date of any advance" and "notwithstanding any inconsistent provision of law." That last phrase carried the day. The 20-year cap in § 281 is inconsistent with the lifetime-priority rule, so it does not apply to reverse-mortgage advances.

Currency note

This opinion was issued in 1996. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What was the practical worry that drove this opinion?

Banks were hesitant to offer reverse mortgages to homeowners in their 60s and 70s because the loans pay out over decades. A bank handing over a check in year 22 wanted to know its lien sat in front of anything recorded in year 5. If § 281's 20-year cap applied, the bank's priority on those late advances was suddenly junior, which would have killed reverse-mortgage lending.

What does the AG mean by "priority of liens"?

Priority controls who gets paid first if the property is sold or foreclosed. A first-priority mortgage gets repaid in full before any junior lender (or a tax lien, or a judgment creditor) sees a dollar. If a bank's advances after year 20 lost priority, the bank could be wiped out by a later-recorded creditor on those advances.

Why was reverse-mortgage authority even folded into the credit-line mortgage statute in 1993?

Reverse mortgages share a mechanical feature with credit-line mortgages, both involve a series of advances rather than one lump-sum closing. Chapter 641 of the Laws of 1993 grouped them together for some recording and tax purposes. The AG opinion was needed to make clear that the grouping did not silently shorten the priority rule the Legislature had just enacted in Chapter 613.

Did the AG think it was reading the law against the literal text?

The opinion treated the two phrases in §§ 280(5) and 280-a(5), "irrespective of the date of any advance" and "notwithstanding any inconsistent provision of law," as the controlling text. Section 281's 20-year limit is the inconsistent provision. The reading also matched the legislative history, which described the 1993 amendments as designed precisely to remove the lender-priority concern.

Background and statutory framework

The reverse mortgage was authorized by Chapter 789 of the Laws of 1984. Banking Law § 6-h lets a banking organization or licensed mortgage banker make a reverse mortgage that complies either with New York's Real Property Law §§ 280 or 280-a, or with the Federal Housing Administration's home-equity conversion mortgage program under 12 U.S.C. § 1715Z-20.

Section 280 covers loans to homeowners aged 60 and older. Section 280-a covers loans to homeowners aged 70 and older, with somewhat different terms. Both statutes carry a subsection (5), added by Chapter 613 of the Laws of 1993, which fixes lien priority at the date of recording rather than the date of each advance.

Section 281 of the Real Property Law defines a credit-line mortgage as a mortgage securing a series of advances and readvances up to a maximum amount, and subsection (2) limits the priority of those liens to advances made within 20 years of initial recording. Chapter 641 of the Laws of 1993 amended § 281 to include reverse mortgages within the definition of credit-line mortgage.

Citations

• Banking Law §§ 6-h, 14, authorizing reverse mortgage loans by banking organizations and licensed mortgage bankers.
• Real Property Law §§ 280 and 280-a, both as amended by L 1993 Ch 613, governing reverse mortgages and fixing lien priority from the date of recording.
• Real Property Law § 281, defining credit-line mortgages and imposing the 20-year lien-priority cap.
• Tax Law § 253-b(2), tax treatment of credit-line mortgages.
• 12 U.S.C. § 1715Z-20, federal home-equity conversion mortgage insurance demonstration program.
• L 1993 Ch 613 (amending RPL §§ 280, 280-a) and L 1984 Ch 789 (authorizing reverse mortgages).

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/96-F4_pw.pdf

Original opinion text

Opinions: 1993 amendments to Real Property Law not applicable to reverse mortgages

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Opn. No. 96-F4
BANKING LAW §§ 6-h, 14; REAL PROPERTY LAW §§ 280 and 280-a, 281; TAX LAW § 253-b(2);
12 USC § 1715Z-20; L 1993 Ch 613; L 1984 CH 789.
The 1993 amendments to the Real Property Law imposing a twenty year limit on priority of liens for
credit line mortgages are not applicable to reverse mortgages.
April 2, 1996
Hon. Neil D. Levin Formal Opinion
Superintendent No. 96-F4
Banking Department
2 Rector Street
New York, NY 10006
Dear Superintendent Levin:
Your counsel has requested a formal opinion from this office regarding the priority of liens on reverse
mortgage loans made pursuant to Banking Law § 6-h. Under Real Property Law §§ 280 and 280-a, "the
priority of the lien of a reverse mortgage shall date from the recording of the reverse mortgage
irrespective of the date of any advance of reverse mortgage loan proceeds" (Real Property Law §§ 280
[5], 280-a[5]), "or the date by which an authorized lender shall be entitled to shared appreciation or
accrued but unpaid interest" ( id. , § 280-a[5]). In contrast, the statute establishing the priority of liens of
a credit line mortgage, which was amended in 1993 to include reverse mortgages in the definition of
credit line mortgage, dates the liens to the time the mortgage was entered into but only as to those
advances made within twenty years of the date of its initial recording. Id. , § 281(2).
You inquire whether the priority of reverse mortgage liens
is governed by sections 280 and 280-a of the Real Property Law, or whether their priority is subject to
the twenty year limitation contained in Real Property Law § 281. It is our opinion that the priority of
such liens dates from the recording of the reverse mortgage loan irrespective of when the actual
advances are made and that the twenty year limitation set forth in Real Property Law § 281 does not
apply.
First authorized by Chapter 789 of the Laws of 1984, reverse mortgage loans were designed by the
Legislature to serve as a vehicle through which homeowners who are over 60 years of age and who are
"house rich, but cash poor" could borrow on the equity of their homes without having to forfeit
possession or ownership. See , Bill Jacket, L 1993 Ch 613; see also , New York State Senate Research
Service, "Issues in Focus", 92-67; 1993 Summary of Legislation 5-13 to 5-18. 1 As defined by section 6h, reverse mortgages must conform to the provisions of RPL §§ 280 or 280-a, or to the requirements of
the Federal Housing Administration's home equity conversion mortgage insurance demonstration
program for so long as such program exists as provided for in section 1715Z-20 of Title 12 of the United
States Code. See , Banking Law § 6-h; see also , Practice Commentaries, RPL § 280. A reverse
mortgage loan made under either RPL §§ 280 or 280-a may be a "term reverse mortgage loan" (any
reverse mortgage loan that has a fixed time to maturity) or a "tenure reverse mortgage loan" (a reverse
mortgage loan that does not have such a fixed term but rather matures solely upon a contingent event).
Through a reverse mortgage a lender agrees to provide a stream of payments to a borrower either for his
or her life, for a term of years, or until the occurrence of a specific event (such as the sale of the home). 2
The amounts and times of the advances may vary according to the agreement between the bank and the

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borrower, but they are usually calculated by using standard annuity tables based upon the value of the
home and the age of the homeowner at the time that the mortgage is contracted for. At the end of the
loan term, the borrower is responsible for the repayment of the loan, usually from the proceeds of the
sale of the house. See , Bill Jacket, L 1993 Ch 641.
In contrast to a reverse mortgage, a credit line mortgage is a mortgage or deed of trust, other than one
made pursuant to a building loan contract, which states that it secures indebtedness under a note, credit
agreement, or other financing agreement that reflects the fact that the parties reasonably contemplate
entering into a series of advances, payments, and readvances, and that limits the aggregate amount at
any time outstanding to a maximum amount specified in the mortgage or deed of trust. See , Real
Property Law § 281; Tax Law § 253-b(2). Chapter 641 of the Laws of 1993 amended section 281 to
include a reverse mortgage loan in the definition of a credit line mortgage, raising the issue whether the
twenty year limitation applies.
Since the inception of reverse mortgages in 1984, authorized banking institutions have been hesitant to
offer reverse mortgages to people over the age of 60. As your letter of inquiry notes, one of the specific
impediments was lender uncertainty as to the priority of the reverse mortgage lien, given that advances
are made throughout the life of the loan. The 1993 amendments to Real Property Law §§ 280 and 280-a
were designed precisely to remedy this concern, by pegging the priority of the lien to the date the
reverse mortgage is recorded.
Chapter 613 of the Laws of 1993 added a new subsection 5 to Real Property Law § 280, stating that,
notwithstanding any other provisions of law, the priority of liens on reverse mortgage loans to persons
aged 60 and older "shall date from the recording of the reverse mortgage irrespective of the date of any
advance of reverse mortgage loan proceeds". Real Property Law § 280(5) (emphasis added). A
subsection 5 was added to section 280-a which provided similar priority language for reverse mortgage
loans made to persons aged 70 and older. Real Property Law § 280-a(5).
Clearly, the legislative intent behind Real Property Law §§ 280 and 280-a was to remove impediments
to lender participation in reverse mortgage loan programs and allow increased flexibility in the
development of reverse mortgage loan products. Any advances by the mortgagee receive a priority of
lien, limited only by the terms of the agreement. See , footnote 1, supra .
Under sections 280 and 280-a, the lender obtains a priority of liens on reverse mortgage loans "
irrespective of the date of any advance " and " notwithstanding any inconsistent provision of law ".
Therefore, any provision of law limiting or inconsistent with these provisions is inapplicable. This
conclusion implements the legislative scheme and statement of legislative intent to encourage banking
organizations to make reverse mortgage loans, in some cases for the life of the borrower. In that
subdivision two of section 281 limits the priority of liens of credit line mortgages to loans made within
twenty years of the recording of the credit line mortgage, that provision is inconsistent with the above
provisions of sections 280 and 280-a and, therefore, is inapplicable to reverse mortgage loans made
under those sections.
Sincerely,

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DENNIS C. VACCO
Attorney General

1 Section 6-h of the Banking Law and Paragraph (s) of subdivision 1 of section 14 of the Banking Law,

as added by L 1984 Ch 789 and as amended by L 1993 Ch 613, authorize reverse mortgage loans
made by banking organizations and licensed mortgage bankers.
2 The proceeds of a reverse mortgage loan would be paid out to the mortgagor in periodic installments,
helping the mortgagor meet some of the expenses of remaining in the home such as real property tax
payments, utilities, health care, and maintenance costs.

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