Emma Fonti, over 60, deeded her home to her two adult children (both under 60) while keeping a life estate, and now wants a reverse mortgage with her children as co-mortgagors. Does that reverse mortgage qualify for New York's mortgage recording tax exemption, given that some titleholders are under 60 and there's no living trust involved?

Plain-English summary

Emma Fonti, over 60 and the owner of New York residential real property, wanted to obtain a federally-compliant reverse mortgage conforming to HUD Home Equity Conversion Mortgage (HECM) rules. Some time earlier, she had deeded the property to her two children, both under 60, while retaining a life estate; she and her children would be co-mortgagors on the reverse mortgage.

Tax Law § 252-a.2 exempts reverse mortgages from MRT if they conform to Real Property Law § 280 (borrowers 60+) or § 280-a (70+), or if they're exempt from those state provisions because they satisfy the federal HUD/HECM requirements (which, under RPL § 280(4)/280-a(4), are deemed to automatically satisfy the state provisions if not inconsistent with Banking Board rules). The Department compared this case to its own prior Edna Huff Trust opinion (TSB-A-96(4)R), where a grantor over 70 had conveyed her home to an irrevocable LIVING TRUST (with her adult children as trustees) while retaining a life estate — that mortgage qualified for exemption because the arrangement satisfied the HUD Handbook's specific provision allowing HECM-insured mortgages on property held in a qualifying living trust, and the taxpayer demonstrated actual conformance with federal HECM rules.

Here, there was no living trust — Mrs. Fonti's children held a direct remainder interest as co-mortgagors after a straightforward deed, not as living-trust trustees — so the Handbook's living-trust accommodation didn't apply. More importantly, the petitioner did not submit facts or documentation establishing that the reverse mortgage actually conformed to the federal HUD/HECM program (for example, no showing of a required second mortgage to the HUD Secretary). Without that showing, the facts as presented didn't appear to satisfy the HUD Handbook's requirements that all borrowers be at least 62 years old and that the property be each borrower's principal residence — both required under Paragraphs 4-4A and 4-4C of the HUD Handbook. Because federal conformance wasn't established, the mortgage didn't appear to satisfy Real Property Law § 280, and the affidavit required under 20 NYCRR § 644.1(c)(2)(i) — which requires certifying all mortgagors are 60+ — could not be truthfully completed given the children's ages. The Department therefore concluded the reverse mortgage exemption under Tax Law § 252-a.2 was not available on the facts and documentation submitted.

What this means for you

Reverse mortgage borrowers who have deeded property to family members while retaining a life estate

This exact fact pattern (life estate + younger family co-mortgagors) is NOT automatically disqualifying — a later opinion involving nearly identical facts, TSB-A-07(5)R (2007), reached the OPPOSITE result because that taxpayer submitted proof of federal HUD/HECM conformance (specifically, the required second mortgage to the HUD Secretary). The lesson from reading both opinions together: the outcome turns entirely on whether you can DOCUMENT federal program conformance, not on the underlying family-title structure.

Estate planning attorneys and lenders structuring reverse mortgages with family co-mortgagors

If your client's reverse mortgage involves co-mortgagors under the state-law age thresholds, gather and submit clear evidence of HUD/HECM conformance (particularly the required second HUD mortgage) at the time of recording — don't rely on the state-law affidavit alone, which requires ALL mortgagors to meet the age threshold and won't work here.

Common questions

Q: Does having co-mortgagors under 60 automatically disqualify a reverse mortgage from this exemption?
A: Not automatically — but it does mean you can't use the state-law-conformance affidavit (which requires all mortgagors to be 60+). You need to instead establish federal HUD/HECM conformance, as the follow-up opinion TSB-A-07(5)R shows is possible with the right documentation.

Q: What documentation was missing here that a later, similar case (TSB-A-07(5)R) had?
A: The later case submitted mortgage documents demonstrating actual HUD/HECM qualification, including the required second mortgage naming the HUD Secretary as mortgagee — proof this opinion's petitioner didn't provide.

Q: Can I rely on this opinion, or the later TSB-A-07(5)R opinion, for my own reverse mortgage?
A: No. Each opinion binds the Department only as to its own petitioner and facts — but reading them together illustrates exactly what documentation makes the difference.

Citations and references

Statutes and regulations:

• Tax Law § 252-a.2 (reverse mortgage MRT exemption, state-conformance or federal-conformance routes)
• Real Property Law § 280 (reverse mortgage loans for persons 60+); § 280-a (persons 70+)
• 20 NYCRR § 644.1(c)(2)(i) (affidavit requiring all mortgagors be 60+, among other state-conformance certifications)
• 3 NYCRR § 79.1(b) (Banking Board general regulations inapplicable to HUD/HECM loans)

Prior opinions cited:

• The Edna Huff Trust, TSB-A-96(4)R (May 22, 1996) (living-trust reverse mortgage exemption granted where federal HECM conformance was established)

Related later opinion (not cited in this text, but same fact pattern):

• TSB-A-07(5)R (October 18, 2007) (nearly identical life-estate/under-60-co-mortgagor facts, but exemption GRANTED because federal HECM conformance was documented)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/mortgage_rec_ao_2004.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/mortgage/a04_2r.pdf

Original ruling text

New York State Department of Taxation and Finance

Office of Tax Policy Analysis
Technical Services Division

TSB-A-04(2)R
Mortgage Recording Tax
July 19, 2004

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. M040122A

On January 22, 2004, a Petition for Advisory Opinion was received from William H. Bradt,
Esq., c/o Public Abstract Corporation, 407 South Warren Street, Syracuse, New York.
The issue raised by Petitioner, William H. Bradt, Esq., is whether the recording of a reverse
mortgage placed on certain real property 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.
Petitioner submits the following facts as the basis for this Advisory Opinion.
A reverse mortgage borrower, Emma Fonti, who owns residential real property in New York
and is over the age of 60, has been approved for and would like to receive the proceeds of a reverse
mortgage that is in compliance with relevant federal laws and conforms to the Department of
Housing and Urban Development (“HUD”) regulations. Some time ago, she deeded the property
to her children, who are under the age of 60, and retained a life estate interest in the property.
Mrs. Fonti and her two children will be co-mortgagors in this transaction.
Applicable law and regulations
Section 252-a.2 of the Tax Law, which provides an exemption for reverse mortgages,
provides:
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 shall be exempt
from any tax or fee imposed by this article. In each case where an exemption is claimed
under this subdivision, the lender shall provide documentation in a format approved by the
commissioner of taxation and finance to enable recording officers to affirmatively determine
when a mortgage being presented for recording is a reverse mortgage conforming to such
provisions of the real property law and entitled to an exemption under this subdivision.
Where such documentation is not furnished, the maximum principal debt or obligation which
shall be the measure of the tax imposed by and pursuant to the authority of this article in the
case of a reverse mortgage shall be the proceeds of the loan which the authorized lender is
obligated to lend the borrower at the execution of such mortgage or at any time thereafter
but determined without regard to any contingency relating to the addition of any unpaid
interest to principal or relating to any percentage of the future appreciation of the property
securing the loan as consideration or additional consideration for the making of the loan.

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Provided, however, if subsequent to the recording of such mortgage, the proceeds which the
authorized lender is obligated to lend the borrower are increased at any time, such new or
further indebtedness or obligation shall be the measure of the tax at such time unless at that
time an exemption is applicable under the first sentence of this subdivision or otherwise.
Section 280(4) of the Real Property Law, which deals with reverse mortgage loans for
persons sixty years of age or older, provides:
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-a 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)(i) of the Mortgage Recording Tax Regulations (the “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 of the Real
Property 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 60 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; and
(c) the reverse mortgage conforms to all other provisions of section 280 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 Conversion
Mortgages for Elderly Homeowners, also known as the "HUD/HECM" reverse mortgage
loan program, 12 USC §1715z-20.

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Mortgage Recording Tax
July 19, 2004

Paragraph 4-4A of section 4235.1 of the HUD Handbook-Revision No. 1 (the “Handbook”),
which covers the HUD approved Reverse Mortgage Program, provides:
A. The borrower’s age. All borrowers must be at least 62 years old when they sign
the Uniform Residential Loan Application (URLA) and the HUD/VA Addendum (Form
HUD 92900-A). The lender should request evidence of the ages of all borrowers, and accept
all reasonable forms of evidence.
Paragraph 4-4C of section 4235.1 provides, in part:
C. The borrower’s principal residence. The property must be the principal
residence of each borrower, as defined in Paragraph 4-7A of this chapter....
Paragraph 4-5 of section 4235.1 of the Handbook provides that HUD will insure Home
Equity Conversion Mortgages (“HECM’s”) for property held in the name of an inter vivos trust, also
known as a living trust. Paragraph 4-5 provides, in part:
HUD will insure HECMs on property held in the name of an inter vivos trust, also
known as a living trust. In general, a living trust is created during the lifetime of a person
[as opposed to a testamentary trust which is created by the person’s will after his/her death].
A living trust is created when the owner of property conveys his/her property to a trust for
his or her own benefit or for that of a third party [the beneficiaries]. The trust holds legal
title and the beneficiary holds equitable title. The person may name him/herself as the
beneficiary. The trustee is under a fiduciary responsibility to hold and manage the trust
assets for the beneficiary. The trustee’s responsibilities are set out in a trust agreement.
Property held in a land trust is eligible for a HECM if the requirements for a living
trust are met....
Opinion
The Edna Huff Trust, Adv Op Comm T&F, May 22, 1996, TSB-A-96(4)R, addressed the
reverse mortgage exemption pursuant to section 252-a.2 of the Tax Law, relating to a reverse
mortgage conforming to the provisions of section 280-a of the Real Property Law. The relevant
provisions of section 280-a are substantively the same as section 280, but cover reverse mortgages
by persons at least 70 rather than 60 years of age.
The facts in The Edna Huff Trust, supra, indicated that the grantor, Edna Huff, contributed
the property to a living trust which complied with the requirements of paragraph 4-5 of section
4235.1 of the Handbook. The trustees were the grantor's adult son and daughter. A reverse equity
mortgage was given by the grantor and the trustees to the Bank of New York Mortgage Company.
The lien of the mortgage encumbered a single-family house and the premises were occupied solely

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Mortgage Recording Tax
July 19, 2004

by the grantor. The grantor created the Trust, which was 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 advisory opinion concluded that, provided that the mortgage was in conformity with
federal law and regulations addressing reverse mortgages and not inconsistent with any regulations
of the Banking Board, it would 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 could be recorded without payment of the tax if the affidavit
described in section 644.1(c)(2)(ii) of the Regulations establishing the exemption was submitted to
the recording officer at the time of recording.
It does not appear in the present case that the facts surrounding the reverse mortgage
described by Petitioner conform to the HUD requirements. In the present case, the mortgagors
consist of Emma Fonti and her two children, both of whom are less than sixty years of age. Like
Edna Huff, Mrs. Fonti has retained only a life estate interest in the property, which constitutes her
principal residence. However, since there is no living trust agreement, her children, the co­
mortgagors, hold the remainder interest in the property. Therefore, it appears that the reverse
mortgage in this case does not meet the requirements of paragraphs 4-4A and 4-4C of section 4235.1
of the Handbook.
Unless it can be demonstrated that the mortgage in this case does actually qualify under the
HUD/HECM reverse mortgage loan program, it would not appear to comply with section 280 of the
Real Property Law. Moreover, since the statements required under clauses (a) and (c) on the
affidavit required by section 644.1(c)(2)(i) of the Regulations would not be satisfied, the reverse
mortgage exemption provided under section 252-a.2 of the Tax Law would not be available.

DATED: July 19, 2004

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Technical Services Division

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