Banking Interpretations

Banking Law §6-f
Part 82 - GRBB

April 22, 2003 


Re:  Alternative Loan Programs 

Dear                      :   

Your February 11, 2003 e-mail to Deputy Superintendent Ken Bielemeier has been referred to me for response.  In connection with your request, I have reviewed applicable provisions of the Banking Law of the State of New York (the "Banking Law") and the regulations promulgated thereunder, and such other materials as I have deemed appropriate.  You have asked for our opinion with respect to the following two mortgage products your company proposes to offer in the State of New York:   

  • Interest Only Loan - offered for __________, _______ mortgage loans, to ______________ customers for all refinances and purchases of owner-occupied properties only.  The program allows the borrower to pay only the interest on the loan for __________________ of the terms, with full amortization of the loan over the remaining ______________.  

  • One Time Rate Reduction Loan - offered to __________________, __________ loans, including all current and future _________, ________________ loans for the purchase and refinance of owner occupied single family residences, planned unit developments, and condominiums.  The program offers borrowers who are not ___________________________ _____________________ during the first 24 months of the loan a reduction of up to __% of their mortgage rate.  The rate reduction will take effect after ___________________ payment is received and processed and will be achieved with _____________________________________________.   

Section 6-f of the Banking Law, and more specifically Part 82 of the General Regulations of the Banking Board ("Part 82") promulgated thereunder, deal directly with alternative mortgage instruments that may be offered by New York State-regulated institutions.  Essentially, Part 82 authorizes the following types of alternative mortgage instruments:  adjustable-rate mortgage loans, graduated payment mortgage loans, graduated payment adjustable-rate mortgage loans, balloon-payment mortgage loans, growing equity mortgage loans and pledged-account mortgage loans.  Part 82 discusses in detail the features and limitations that may be placed on such alternative mortgage instruments.  For your convenience I have enclosed a copy of Part 82.  Based on the information provided with respect to your proposed loan programs, it appears that they meet the criteria specified by Part 82 and, therefore, may be offered in New York State.   

I trust that this letter is responsive to your inquiry.   

Very truly yours, 

Jacquelyn A. Hart
Associate Counsel