2010 New York Code
BNK - Banking
Article 12-D - (589 - 599) LICENSED MORTGAGE BANKERS
590-A - Junior mortgage loans.

§ 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 banking
  board may prescribe. Such regulations by the banking board  may  include
  such  restrictions  as  the banking board 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.
    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  banking  board  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.