My elderly mother's house is held in an irrevocable trust, with her as trustee's grantor keeping a life estate. She wants a HUD-approved reverse mortgage. Is recording that mortgage exempt from New York's mortgage recording tax, even though the borrower is technically the trust rather than my mother individually?

Plain-English summary

Edna Huff, then about 77 years old, had conveyed her Greenburgh, New York home to an irrevocable trust in 1988, reserving a life estate so she could keep living there for the rest of her life. Her adult son and daughter served as trustees. Nearly a decade later, the trust obtained a reverse equity mortgage from the Bank of New York Mortgage Company, secured by the house. The Trust asked whether recording that mortgage was exempt from New York's mortgage recording tax under the reverse-mortgage exemption, Tax Law § 252-a.2, even though the borrower on paper was the trust rather than Edna Huff individually.

The Department said yes, provided the mortgage genuinely conformed to the federal program. Tax Law § 252-a.2 exempts reverse mortgages that conform to Real Property Law § 280-a (which covers reverse mortgages for borrowers 70 or older). Under the Banking Board's regulations, a mortgage that conforms to the federal HUD-insured Home Equity Conversion Mortgage ("HUD/HECM") program is automatically treated as conforming to § 280-a. Before the loan closed, the bank's attorney determined the trust needed to be modified to require notifying the lender of any change in occupancy or transfer of beneficial interest — a condition the HUD Handbook imposes specifically for reverse mortgages originated in the name of a living trust. Once the trust was amended to add that notice provision, the mortgage was treated as HUD/HECM-compliant and therefore exempt from mortgage recording tax.

What this means for you

Families using a trust to hold an elderly relative's home

Putting a home in an irrevocable trust with a reserved life estate — a common estate-planning move to manage Medicaid look-back or probate — does not by itself block a later reverse mortgage from getting the MRT exemption. What matters is that the mortgage documentation actually satisfies the HUD/HECM program's requirements for trust-held property, including a notice-to-lender provision on any occupancy or beneficial-interest change.

Estate-planning attorneys and trustees

If a reverse mortgage is being originated against trust-held real property, get (or provide) an opinion confirming the trust instrument complies with the relevant HUD Handbook provision for living-trust-held reverse mortgages, and amend the trust if it doesn't. Without that, the mortgage may not qualify as a genuine HUD/HECM loan, and the MRT exemption depends on that federal conformance.

Lenders

To claim the exemption at recording, submit the affidavit required by 20 NYCRR § 644.1(c)(2)(ii), attesting that the mortgagor is 70 or older, the property is a one- to four-family residence or condominium unit that is the mortgagor's residence, and the mortgage otherwise conforms to Real Property Law § 280-a.

Common questions

Q: Does holding title in a trust disqualify a reverse mortgage from the MRT exemption?
A: No — the exemption turns on whether the mortgage conforms to Real Property Law § 280-a (which the HUD/HECM program satisfies automatically), not on whether the mortgagor is an individual or a trust.

Q: What extra step did this trust need to take?
A: The trust was modified to require notice to the lender of any change in occupancy or transfer of beneficial interest, per the HUD Handbook's rules for reverse mortgages made to living trusts.

Q: Can any elderly homeowner rely on this specific ruling?
A: No. It binds the Department only as to this petitioner and these facts. Other trust-held reverse mortgages need their own documentation confirming HUD/HECM (or § 280-a) conformance — see the companion doctrine on documentation mattering more than family structure in TSB-A-04(2)R (denied) versus TSB-A-07(5)R (granted).

Citations and references

Statutes and regulations:

• Tax Law § 252-a.2 (reverse mortgage exemption)
• Real Property Law § 280-a (reverse mortgage loans for persons 70+)
• 20 NYCRR § 644.1(c)(2)(ii) (affidavit required to claim the exemption at recording)
• 3 NYCRR Part 79, § 79.1(b) (Banking Board regulations; HUD/HECM carve-out)
• 12 U.S.C. § 1715-20 (federal HUD/HECM reverse mortgage program)
• HUD Handbook (Revision No. 1, Nov. 18, 1994), Paragraph 4-5 of § 4235.1 (conditions for a HUD/HECM reverse mortgage originated in the name of a living trust)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mortgage_rec_ao_1996.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mortgage/a96_4r.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-96 (4) R
Mortgage Tax
May 22, 1996

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M960126B

On January 26, 1996, a Petition for Advisory Opinion was received from The Edna Huff
Trust, c/o Edna Huff, 106 Maryton Road, White Plains, New York.
The issue raised by Petitioner, The Edna Huff Trust (the "Trust"), is whether the recording
of a reverse mortgage placed on premises held in trust is exempt from the mortgage recording tax
(Article ll of the Tax Law) based on the exemption provided in section 252-a.2 of the Tax Law (the
exemption for reverse mortgages).
Petitioner presents the following facts. The grantor of the Trust, Edna Huff (the "grantor"),
is approximately 77 years old. The trustees are the grantor's adult son and daughter.
A reverse equity mortgage (the "mortgage") was given by the grantor and the trustees to the
Bank of New York Mortgage Company. The lien of the mortgage encumbers a single-family house
in the Town of Greenburgh. The premises are occupied solely by the grantor. The grantor created
the Trust, which is irrevocable, in 1988 and conveyed the premises to the Trust. The grantor reserved
a life estate in the premises upon the conveyance to the Trust.
The Bank of New York Mortgage Company received an opinion from an attorney prior to
the execution of the mortgage. In the opinion the attorney indicated that if the Trust were modified
to provide notice to the lender in the event of a change of occupancy or transfer of beneficial interest,
it would comply with Paragraph 4-5 of §4235.1 of the Department of Housing and Urban
Development ("HUD") Handbook-Revision No. 1 dated November 18, 1994, which covers the HUD
approved Reverse Mortgage Program. Paragraph 4-5 sets forth the conditions under which a Home
Equity Conversion Mortgage (i.e., a HUD approved reverse mortgage) may be originated in the name
of a living trust. Based on the opinion, the Trust was modified to provide the requisite notice to the
lender and, therefore, according to Petitioner, the mortgage is in compliance with all relevant federal
laws and regulations, and Paragraph 4-5 of the HUD Handbook.
Section 252-a.2 of the Tax Law provides an exemption from all taxes imposed or authorized
to be imposed by Article 11 in the case of the recording of "Reverse mortgages conforming to the
provisions of section two hundred eighty or two hundred eighty-a of the real property law securing
obligations of mortgagors or exempted therefrom pursuant to subdivision four of section two
hundred eighty or subdivision four of section two hundred eighty-a of the real property law .... "
Section 280-a(4) of the Real Property Law which deals with reverse mortgage loans for
persons seventy years of age or older, provides:

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TSB-A-96 (4) R
Mortgage Tax
May 22, 1996
The banking board shall adopt those rules or regulations as it
considers appropriate to govern reverse mortgage loans made
pursuant to this section. No reverse mortgage loan shall be made
unless it conforms to the requirements of this section and such rules
and regulations as the banking board may adopt except those reverse
mortgage loans made pursuant to section two hundred eighty of this
article. A reverse mortgage loan made by any authorized lender,
national banking association, federal savings and loan association or
federal credit union in conformity with applicable federal laws and
regulations specifically regulating reverse mortgage loans shall be
deemed to conform to the requirements of this section unless such
reverse mortgage loan fails to conform to such rules and regulations
as the banking board has expressly declared to be neither preempted
by, nor otherwise inconsistent with such federal laws or regulations.
Section 644.1(c)(2)(ii) of 20 NYCRR (the mortgage recording tax regulations) provides that
in order to claim an exemption from the mortgage recording taxes based on the claim that a mortgage
is a reverse mortgage made pursuant to the provisions of section 280-a of the Tax Law, an affidavit,
made in duplicate, signed by the mortgagee, setting forth the following must be submitted to the
recording officer at the time the mortgage is presented for recording:
(a) the mortgage is a reverse mortgage given by a mortgagor who is
or mortgagors all of whom are at least 70 years of age;
(b) the reverse mortgage is of real property improved by a one- to
four- family residence or condominium unit that is the residence of
the mortgagor or mortgagors;
(c) the reverse mortgage conforms to all other provisions of section
280-a of the Real Property Law.
Section 79.1(b) of Part 79 of the General Regulations of the Banking Board (3 NYCRR Part
79), which governs reverse mortgages, provides:
Neither this Part nor Parts 38, 39, 80 or 82 shall apply to any loan
which conforms to the requirements of the Demonstration Program
of Insurance of Home Equity Conversation Mortgages for Elderly
Homeowners, also known as the "HUD/HECM" reverse mortgage
loan program, 12 USC Section 1715-20.

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TSB-A-96 (4) R
Mortgage Tax
May 22, 1996
Provided that the mortgage is in conformity with federal law and regulations addressing
reverse mortgages and not inconsistent with any regulations of the Banking Board, it shall be deemed
to conform with the requirements of section 280-a of the Real Property Law and be exempt from the
mortgage recording tax under section 252-a.2 of the Tax Law. Accordingly, the mortgage may be
recorded without payment of the tax if the affidavit described in section 644.1(c)(2)(ii) of the
regulations establishing the exemption is submitted to the recording officer at the time of recording.

DATED: May 22, 1996

/s/
Doris S. Bauman
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.