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A08917 Summary:BILL NO A08917A
SAME AS No same as
SPONSOR Weinstein (MS)
COSPNSR Lentol, Towns, Lopez V, Titus, Spano, Cook
MLTSPNSR Brennan, Lancman, O'Donnell, Perry, Rivera P
Amd SS1304, 221 & 713, add SS1305 - 1307, RPAP; amd R3408, CPLR; amd S3-a, Chap
472 of 2008; amd SS6-l, 6-m, 590 & 595-a, Bank L; amd S187.00, add S187.01, Pen
L; amd S265-b, RP L
Relates to home mortgage loans, the crime of mortgage fraud and the filing of
transfers and assignments of mortgages.
A08917 Actions:BILL NO A08917A
06/15/2009 referred to judiciary
06/18/2009 reported referred to codes
06/18/2009 reported referred to rules
06/19/2009 amend and recommit to rules 8917a
06/22/2009 reported
06/22/2009 rules report cal.618
06/22/2009 ordered to third reading rules cal.618
06/22/2009 passed assembly
06/22/2009 delivered to senate
06/22/2009 REFERRED TO RULES
01/06/2010 DIED IN SENATE
01/06/2010 RETURNED TO ASSEMBLY
01/06/2010 ordered to third reading cal.633
01/25/2010 recommitted to rules
01/25/2010 enacting clause stricken
A08917 Votes:BILL: A08917A DATE: 06/22/2009 MOTION: YEA/NAY: 112/028
Abbate Y Cahill Y Englebr Y Hooper Y Maisel Y Powell Y Skartad Y
Alessi Y Calhoun NO Errigo NO Hoyt Y Markey ER Pretlow Y Spano Y
Alfano Y Camara Y Espaill Y Hyer-Sp Y Mayerso Y Quinn NO Stirpe Y
Amedore Y Canestr Y Farrell Y Jacobs Y McDonou ER Rabbitt NO Sweeney Y
Arroyo ER Carrozz Y Fields Y Jaffee Y McEneny Y Raia NO Tedisco Y
Aubry Y Castro Y Finch NO Jeffrie NO McKevit Y Ramos Y Thiele Y
Bacalle NO Christe Y Fitzpat NO John Y Meng Y Reilich NO Titone Y
Ball Y Clark Y Gabrysz Y Jordan NO Miller NO Reilly Y Titus Y
Barclay NO Colton Y Galef Y Kavanag Y Millman Y Rive J Y Tobacco NO
Barra Y Conte Y Gantt Y Kellner Y Molinar NO Rive N ER Towns Y
Barron Y Cook Y Gianari Y Kolb NO Morelle Y Rive PM Y Townsen NO
Benedet Y Corwin NO Gibson Y Koon Y Nolan Y Robinso Y Walker Y
Benjami Y Crespo Y Giglio NO Lancman Y Oaks NO Rosenth Y Weinste Y
Bing Y Crouch Y Glick Y Latimer Y O'Donne Y Russell Y Weisenb Y
Boyland Y Cusick Y Gordon Y Lavine Y O'Mara NO Saladin Y Weprin Y
Boyle NO Cymbrow Y Gottfri Y Lentol Y Ortiz Y Sayward Y Wright Y
Bradley Y DelMont Y Gunther Y Lifton Y Parment Y Scarbor ER Zebrows Y
Brennan Y DenDekk Y Hawley NO Lope PD NO Paulin Y Schimel Y Mr Spkr Y
Brodsky Y Destito Y Hayes NO Lope VJ Y Peoples ER Schimmi Y
Brook-K Y Dinowit Y Heastie Y Lupardo Y Peralta Y Schroed Y
Burling Y Duprey NO Hevesi ER Magee Y Perry ER Scozzaf NO
Butler NO Eddingt Y Hikind ER Magnare Y Pheffer Y Seminer ER
A08917 Memo:BILL NUMBER:A8917A
TITLE OF BILL: An act to amend the real property actions and
proceedings law, the civil practice law and rules, the banking law and
chapter 472 of the laws of 2008 amending the real property actions and
proceedings law and other laws relating to foreclosure actions on home
mortgage loans, in relation to home mortgage loans; to amend the penal
law, in relation to the crime of mortgage fraud; and to amend the real
property law, in relation to assignments of mortgages and distressed
property consulting contracts; and providing for the repeal of certain
provisions upon expiration thereof
Purpose: This bill would: (1) allow a larger population of distressed
homeowners to benefit from consumer protection laws and foreclosure
prevention, opportunities currently available only to borrowers of
"high-cost," "subprime" and "non-traditional" home loans; (2) establish
certain requirements for plaintiffs in foreclosure actions to maintain
the foreclosed property; (3) establish protections for tenants residing
in foreclosed properties; and (4) strengthen certain consumer
protections to prevent distressed homeowners from falling prey to rescue
scams.
Summary of Provisions: Section 1 of the bill would amend Real Property
Actions and Proceedings Law ("RPAPL") S 1304 to: (1) expand the 90-day
notice requirement, currently applicable to "high-cost," "subprime" and
"non-traditional" home loans, to all home loans made before September 1,
2008; (2) make clear that the requirement to send a 90-day notice
applies not only to the original lender, but to its assignee as well, if
applicable; (3) require lenders, servicers and assignees to mail the
90-day notice to the borrower in a separate envelope from any other
mailing or notice; (4) eliminate the requirement that the principal
amount of loan be less than the Federal National Mortgage Association
("Fannie Mae") conforming loan size limit in order for the loan to qual-
ify as a "home loan"; and (5) include loans made for the purchase of
cooperative ownership within the definition of "home loan."
Section 2 of the bill would add a new RPAPL, S 1305 to establish
protections for tenants in foreclosed residential real property by
requiring a "successor in interest," as such term is defined in the
bill, to provide written notice to the tenant: (1) that the tenant is
entitled to remain in occupancy of such property for the remainder of
the lease term, or a period of 90-days from the date of mailing of the
notice, whichever is greater, on the same terms and conditions as were
in effect at the time of issuance of the judgment of foreclosure and
sale, or the time of transfer of ownership, if such order is not issued;
and (2) of the name and address for communication with the new owner.
This section of the bill would also make clear that the rights conferred
upon tenants by this provision are in addition to any other rights of
the tenant under law.
Section 3 of the bill would add a new RPAPL, S 1306 to require each
lender, assignee or mortgage loan servicer to make a regulatory filing
with the Superintendent of Banks ("Superintendent"). In particular, the
filing would be made within three business days of the mailing of the
90-day notice to the borrower under RPAPL, S 1304, and would include the
name, address and the last known telephone number of the borrower, the
amount claimed as due and owing on the mortgage, and any other informa-
tion the Superintendent may require to determine the type of loan at
issue.
Section 3 of the bill would also require the Superintendent, with the
assistance of the Commissioner of the Division of Housing and Community
Renewal ("Commissioner"), to, among other things, develop an electronic
database capable of receiving all filings required by this section, and
to compile information allowing the State to target counseling and fore-
closure prevention efforts to borrowers at risk of foreclosure. The
information acquired by the Superintendent under this section of the
bill would be exempt from the Freedom of Information Law and various
parts of the Personal Privacy Law. Finally, this section of the bill
would authorize the Superintendent to promulgate rules and regulations
to implement the purpose of this section.
Section 4 of the bill would impose a duty to maintain foreclosed resi-
dential real property upon a plaintiff in a foreclosure action who
obtains a judgment of foreclosure and sale pursuant to RPAPL S 1351.
This duty would continue until ownership is transferred through the
closing of title in foreclosure, or other disposition, and the deed for
such property has been duly recorded. In particular, the bill would
require the plaintiff in a foreclosure action to keep abandoned property
in a manner that it does not pose a blight or nuisance, or create a
blighting influence upon neighboring property. If the property is occu-
pied by a tenant, the plaintiff would have the additional obligation of
keeping the property in a safe and habitable condition. The municipality
in which the property is located, any tenant, a board of managers of a
condominium or a homeowners association may enforce this obligation.
This section of the bill is not intended to diminish any obligations of
the mortgagor or receiver to maintain the property prior to the closing
of the title.
Sections 5 and 6 of the bill would make technical amendments to RPAPL
221 and 713 in recognition of the additional rights afforded to tenants
under section 4 of the bill.
Section 7 of the bill would amend the Civil Practice Law and Rules
("CPLR") Rule 3408 to: (1) expand the scope of the mandatory settlement
conference in foreclosure proceedings to include cases pertaining to all
home loans; (2) impose upon both plaintiff and defendant a duty to nego-
tiate in good faith to determine whether a mutually agreeable resolution
is possible; (3) require the court to compile certain foreclosure infor-
mation; (4) require the parties to bring certain key documents to the
mandatory settlement conference; and (5) require the plaintiff to file a
motion of discontinuance and vacatur of the lis pendens within 120 days
following the execution of any settlement agreement or loan modifica-
tion.
Section 7-a of the bill would amend Chapter 472 of the Laws of 2008 to
require notice to a defendant in a pending foreclosure case involving
home loans made prior to January 1, 2003 of his or her right to a
settlement conference.
Section 8 of the bill has been intentionally omitted.
Section 9 of the bill would amend Banking Law S 6-1 to amend the defi-
nition of "home loan" to make clear that it includes loans for the
purchase of cooperatives.
Section 10 of the bill would amend Banking Law S 6-I to make clear that
the prohibition on pre-payment penalties is not overridden by General
Obligations Law S 5-501, which allows prepayment penalties during the
first year of a loan. This section of the bill also makes clear that a
mortgage broker must disclose the amount and methodology of total
compensation that the broker will receive on the transaction.
Section 11 of the bill would amend Banking Law S 6-m to: (1) clarify
that the definition of "subprime home loan" includes loans for the
purchase of cooperatives; (2) clarify that mortgage bankers, like Mort-
gage brokers are prohibited from giving or accepting kickbacks; and (3)
make certain other technical and conforming charges.
Section 12 of the bill would make technical changes to Banking Law S 6-m
and provide or modify titles for each subdivision.
Section 13 of the bill would amend Banking Law S 590 to clarify that it
includes cooperatives within the definition of "mortgage loan." The
term also would include manufactured homes if so determined by the Bank-
ing Board.
Section 14 of the bill would permit the promulgation of rules and regu-
lation pertaining to the origination, sale or servicing of manufactured
hone loans.
Section 15 of the bill would amend Banking Law S 590 to make clear that
the Superintendent may require all registrations and notifications of
mortgage loan servicers to be made through the Nationwide Mortgage Loan
System and Registry, and that such an application must be accompanied by
a fee as provided by law.
Section 16 of the bill would amend Banking Law S 595-a to prohibit a
licensee or registrant from taking any upfront fees in connection with
activities constituting the business of distressed property consulting.
Sections 17 and 18 of the bill would amend the definition of "person" in
Penal Law S 187.00 due to a technical error with that definition and add
a new Penal law S 187.01 to create an exemption from mortgage fraud for
an individual person who applies for a loan and who intends to occupy
the mortgaged property, other than as part of a criminal conspiracy.
Section 17 of the bill also amends the definition of "residential mort-
gage loan" to conform it to the definition in Banking Law SS 6-land 6-m.
Section 19 is intentional omitted.
Section 20 of the bill would amend the Real Property Law S 265-b to make
certain technical and conforming changes.
Section 21 of the bill contains the severability clause of the legis-
lation. Section 22 of the bill provides for the effective date.
Existing Law: RPAPL S 1304(1) requires lenders and servicers to send a
notice to borrowers of "high-cost," "subprime" and "non-traditional"
home loans made between January 1, 2003 and September 1, 2008, advising
the borrower of, among other things, the availability of counseling in
their area. This notice must be sent to the borrower at least 90 days
before any legal action may be commenced against the borrower.
RPAPL SS 221 and 713 provide for a mechanism to evict occupants from
foreclosed property. Tenants who are named in the underlying foreclosure
action may be evicted by the foreclosure auction purchaser in various
ways, including by the service of a 10-day notice to quit under Article
7 of RPAPL. Rent controlled and rem stabilized tenants are immune from
eviction post foreclosure.
The law does not currently provide for the collection of statewide pre-
foreclosure statistics.
CPLR Rule 3408 currently requires a mandatory settlement conference for
high-cost, subprime and non-traditional home loans made between January
1, 2003 and September 1, 2008.
The duty to maintain abandoned foreclosed property, or property occupied
by a tenant is not currently imposed on the plaintiff in a foreclosure
action at the issuance of a judgment of foreclosure and sale. The duty
is imposed upon transfer of title, which could be many months following
the issuance of the judgment.
Banking Law S 590(b-1) does not require mortgage loan servicers to
register with the Superintendent using the Nationwide Mortgage Licensing
System and to pay the annual fees of such system.
Banking Law S 595-a does not specifically prohibit a mortgage banker or
broker acting as a distressed property consultant from taking an upfront
fee. However, Banking Department regulations permit only specified
upfront fees before there is a commitment from a mortgage lender.
Penal Law S 187.00 contain mortgage fraud provisions of the Penal Law.
Legislative History: This is a new proposal.
Statement in Support: The mortgage crisis of the past several years has
uprooted families, devastated neighborhoods, and contributed to the
collapse of our financial markets. In 2008, New York State had over
50,000 foreclosure filings - an increase of almost 30% from 2007. In
response to this crisis, and in light of inaction by the federal govern-
ment, New York enacted comprehensive subprime lending reform legislation
in 2008. See Chapter 472 of the Laws of 2008. That legislation was
designed to accomplish two purpose! - to protect borrowers at risk of
losing their homes, and to prevent similar crises from occurring n the
future. As the mortgage crisis has worsened, however, it has, become
evident that more must be accomplished to protect New Yorkers in these
difficult times and beyond.
This bill would build upon the reforms enacted in the 2008 legislation.
In particular, this bill would: (1) allow a larger population of
distressed homeowners to benefit from consumer protection laws and fore-
closure prevention opportunities currently available only to borrowers
of "high-cost," "subprime" and "non-traditional" home loans; (2) estab-
lish certain requirements for plaintiffs in foreclosure actions to main-
tain the foreclosed property; (3) establish protections for tenants
residing in foreclosed properties; and (4) enhancing consumer protection
provisions to prevent distressed homeowners from falling prey to rescue
scams.
1. Helping Protect Distressed Homeowners. ad Providing Foreclosure
Prevention Opportunities
A.Expansion of 90-Day Notice Requirement
In 2008, the Legislature enacted RPAPL S 1304 to require lenders and
mortgage loan servicers to provide a notice to distressed borrowers with
"high-cost," "subprime" or "nontraditional" loans consummated between
January, 1, 2003 and September 1, 2008. RPAPL S 1304 requires that the
notice contain, among other things, the names and telephone numbers of
government approved housing counseling agencies serving the borrower's
area, and further mandates that the notice must be sent at least 90 days
before any legal action may be commenced against the borrower.
This bill would expand the scope of this notice by requiring lenders,
mortgage loan servicers and assignees to send the notice to distressed
borrowers of all "home loans." In addition, the bill would amend the
definition of "home loan" under current law to remove the requirement
that the principal amount of the loan not exceed the "Fannie Mae"
conforming loan size limit of $417,000 (with some exceptions) to meet
the definition of "home loan." Finally, the bill would include within
the definition of "home loan" those loans that are made for the purchase
of cooperative apartments.
Taken together, these changes would significantly expand the number of
borrowers who would benefit from the information contained in the notice
and from the 90-day time period during which the lender and the borrower
may attempt to reach a mutually agreeable resolution without imminent
threat of a foreclosure action. The bill will therefore help reduce the
number of foreclosures in the State, while preserving the remedy of
foreclosure where a settlement is not possible.
B."Expansion of Mandatory Settlement conference
The 2008, legislation created CPLR Rule 3418 - a rule that established
an early mandatory settlement conference before a court between the
litigants in a foreclosure action. In particular, CPLR Rule 3408
requires the court in a residential foreclosure action involving a
"high-cost," "subprime," or "non-traditional" home loan made between
January 1, 2003 and September 1, 2008, to schedule a mandatory settle-
ment conference within 60 days of the filing of the proof of service of
the complaint with the county clerk. Under the law, the plaintiff, or a
representative with authority to settle the matter, must appear at that
conference. If the homeowner appears and does not have an attorney, he
or she will be deemed to have made a motion to proceed as a "poor
person" under CPLR S 1101 and the court may, in its discretion, waive
certain procedural requirements and even appoint counsel for the home-
owner under CPLR S 1102(a).
This bill would expand the number of borrowers who are eligible to
receive the benefit of this settlement conference by eliminating the
requirement that the loans be "high-cost," "subprime" and "non-tradi-
tional" home loans made after January 1, 2003. As such, all borrowers
with cases involving home loans would be eligible for the settlement
conference for a period of five years, at which point the law would
revert back :o the current law. In addition, this bill would also estab-
lish a requirement for the litigants to negotiate in good faith to try
to reach a mutually agreeable resolution and would require them to bring
certain critical documents to the settlement conference. The purpose of
the good faith requirement is to ensure that both plaintiff and defend-
ant are prepared to participate in a meaningful effort at the settlement
conference to reach resolution. Finally, this provision of the bill
would also require the court to compile certain information on newly
filed foreclosure actions so that enhanced outreach may be conducted in
particular parts of the State. These provisions of the bill would there-
fore allow more homeowners to benefit from the "second opportunity"
afforded by participation in the mandatory settlement conference after
the 90-day notice period expires.
C.Establishment of Data Collection Efforts to Target Help for Distressed
Homeowners
In order to help reduce the number of preventable foreclosures, it is
critical to identify distressed homeowners as soon as possible, and to
target counseling help effectively and expeditiously. Toward that end,
this bill would require lenders, servicers and assignees to make a regu-
latory filing with the Superintendent containing information on borrow-
ers who have been served a 90-day notice. The Superintendent, in consid-
eration with the Commissioner of DHCR, would be required to create a
database of information gleaned from such filings so that the State may
effectively monitor distressed borrowers and tat,get counseling help
efficiently.
2.Helping Protect Neighborhoods and Tenants
A. Requiring Plaintiffs in Foreclosure Actions to Maintain Certain Prop-
erty
A significant issue confronting the State as a result of the spike in
foreclosure filings is the maintenance of abandoned property. Homeown-
ers often abandon their homes upon commencement of a foreclosure action,
and the prop arty goes into disrepair, serving as an eye sore and
nuisance for the rest of the neighborhood. The problem is compounded
when multiple homes are foreclosed upon in the same neighborhood. Even-
tually, these properties may become a haven for crime and drugs, thus
decreasing property value in the surrounding areas and beyond.
This bill would require a plaintiff in a foreclosure action, upon the
issuance of a judgment of foreclosure and sale pursuant to RPAPL S 1351,
to maintain the property. In particular, the bill would require the
plaintiff, post-judgment, to keep the property in a manner so that it
does not pose a blight or nuisance, or create a blighting influence upon
neighboring properties. If the property is occupied by a tenant, the
plaintiff must also maintain the property in a safe and habitable condi-
tion. This provision of the bill may be enforced by the municipality in
which the property is located, the tenant occupying the property or the
board of managers or homeowners association, if applicable. This
provision of the bill is not intended to diminish in any way the obli-
gations of the mortgagor of the property or the receiver to maintain the
property prior to the closing of title pursuant to the foreclosure sale.
B Establishing a 90-Day Notice Requirement for Tenants in Foreclosed
Property
The Joint Center for Housing Studies of Harvard University has found
that in 2007, 20% of all foreclosure filings across the country were in
non-owner occupied properties. New York University's Furman Center for
Real Estate and Urban Policy conservatively estimates that 15,000 renter
households, or about 38,000 New York City residents were impacted by
foreclosure. Often, renters have been unaware that their landlords are
in default until utilities are shut off or an eviction notice appears on
their door.
This bill would establish protections for tenants in foreclosed residen-
tial real property. In particular, it would require a person or entity
that acquires title to the property to provide notice to the tenant: (1)
that he or she is entitled to remain in occupancy of the property for
the remainder of the lease term, or a period of 90 days from the mailing
of the notice, whichever is greater, on the same terms and conditions as
were in effect at the time of issuance of the judgment of sale, or as
were in effect at the time of transfer of ownership of the property if
no judgment is issued; and (2) of the name and address of the new owner.
This provision would also make clear that the rights conferred upon a
tenant under this bill would be in addition to any other rights of such
tenants as provided by law.
3.Protecting Distressed Homeowners from Rescue Scams
Chapter 472 of the Laws of 2008 enacted comprehensive protections for
distressed homeowners to protect them from falling prey to rescue scams.
One such protection prohibited distressed property consultants from
accepting upfront fees. Because mortgage bankers and brokers are regu-
lated by the Banking Department, they were exempted them from the scope
of this provision. This bill would expressly preclude all licensees or
registrants from accepting up front fees in connection with performing
the business of distressed property consulting. The bill would also
extend certain provisions of the rescue scam legislation contained in
Chapter 472 of the Laws of 2008 to certain attorneys.
Budget Implications: This bill will not have an impact on State
finances.
Effective Date: This bill would take effect immediately, except as
provided in section 20 of the bill.
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