A07277 Summary:

BILL NO    A07277 

SAME AS    No same as 

SPONSOR    Brennan (MS)

COSPNSR    Scarborough, Jacobs, Millman, Dinowitz, Benedetto, Stevenson, Colton,
           Galef, Jaffee, Zebrowski, Roberts, Barron, Robinson, Castro, Gibson,
           Markey, Weprin, Hooper

MLTSPNSR   Abinanti, Gabryszak, Glick

Amd S1303, add S1308, RPAP L; amd S14, Bank L; amd S1456, Tax L

Provides for mediation in foreclosure actions for fundamentally unaffordable
mortgage loans, provides for a tax credit for banks that renegotiate loans;
directs the banking board to promulgate rules and regulations further defining
mediation requirements.
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A07277 Actions:

BILL NO    A07277 

04/27/2011 referred to judiciary
01/04/2012 referred to judiciary
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A07277 Votes:

There are no votes for this bill in this legislative session.
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A07277 Memo:

BILL NUMBER:A7277

TITLE OF BILL:  An act to amend the real property actions and
proceedings law, the banking law and the tax law, in relation to
providing for mediation in foreclosure actions; and providing for the
repeal of such provisions upon expiration thereof

PURPOSE OR GENERAL IDEA OF BILL: Section 1 sets out the legislative
intent, to impose mediation in regards to real estate foreclosure due
to the extension of fundamentally unaffordable mortgage loans.

Section 2 amends the notice to any mortgagor, requiring the right to
petition for mediation. Such mediation could lead to a new mortgage
that protects the interest of the mortgagee while making it possible
for those who are imminent to foreclosure to make payments they can
afford.

Section 3 amends the real property actions and proceedings law by
adding a section entitled foreclosures; court relief. A mortgagor
named in any action to foreclose a mortgage may apply for relief in
state supreme court. The mortgagor has the right to petition the court
to require mediation. A procedure to require mediation is elaborated.
The mortgagor must establish a prima facie case. The court shall order
a period of time for mediation between the mortgagee and the
mortgagor. Then, the court shall issue an order Which sets forth its
terms. They shall maintain continuing jurisdiction until a final
resolution is reached.  Finally, after certifying such agreement, the
court can dismiss the foreclosure action.

Section 4 amends the banking law, adding a new paragraph to
subdivision 1 of section 14. The new paragraph defines the mortgagee's
duty of bargaining in good faith for the purposes of mediation.

Section 5 amends section 1456 of the tax law by adding subsection Loan
principle reduction tax credit. By 2012, a taxpayer shall be allowed a
credit against the tax imposed. The credit allowed shall not reduce
the tax due for any taxable year.

JUSTIFICATION: Many New Yorkers are to face foreclosure due to the
extension of fundamentally unaffordable mortgage loans under
deception, misrepresentation, and fraud circumstances, by lenders and
agents.

It is in the State's interest to encourage settlements instead of
lengthy litigations which will only prolong, and prevent a resolution
of, such a crisis. Towards that end, the New York State Legislature
finds mediation to be a viable alternative to foreclosure. It is
intended that this will provide an incentive to all parties to
compromise on the fundamental issues in dispute regarding each
individual mortgage to avoid foreclosure to the maximum extent
possible.

However, the mediation must not come wholly at the expense of the
mortgagee. To provide entitlement a mortgagor must establish that they
live in the home subject to foreclosure and that they own no other
real property. In addition to the establishment of a prima facie case
by the mortgagor which establishes that they are eligible for a court


ordered mediation. The court must be able to create a payment schedule
under such terms that are just and equitable to both parties.

The state of Washington has just adopted a mediation program - only
the state after Nevada and Maryland to adopt a foreclosure-mediation
program in which a homeowner can seek to modify terms of their loan.
The Foreclosure Mediation Program in Nevada, from July 2009-June 2010
saw 4,212 mediations completed, and out of this, 3,767 (or 89% of)
foreclosures were not issued.

PRIOR LEGISLATIVE HISTORY: New bill.

EFFECTIVE DATE: The act shall take effect immediately and expires in
three years.
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A07277 Text:

                           S T A T E   O F   N E W   Y O R K
       ________________________________________________________________________

                                         7277

                              2011-2012 Regular Sessions

                                 I N  A S S E M B L Y

                                    April 27, 2011
                                      ___________

       Introduced  by M. of A. BRENNAN, SCARBOROUGH, JACOBS, MILLMAN, DINOWITZ,
         BENEDETTO,  STEVENSON,  COLTON,  GALEF,  JAFFEE,  ZEBROWSKI,  ROBERTS,
         BARRON, ROBINSON, CASTRO, GIBSON, MARKEY, WEPRIN -- Multi-Sponsored by
         -- M. of A. GABRYSZAK, GLICK, PHEFFER -- read once and referred to the
         Committee on Judiciary

       AN ACT to amend the real property actions and proceedings law, the bank-
         ing  law  and  the  tax law, in relation to providing for mediation in
         foreclosure actions; and providing for the repeal of  such  provisions
         upon expiration thereof

         THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
       BLY, DO ENACT AS FOLLOWS:

    1    Section 1. Legislative intent. The legislature declares that a  public
    2  emergency  exists  in  regards  to  real  estate foreclosures due to the
    3  extension of fundamentally unaffordable  mortgage  loans,  fundamentally
    4  unaffordable second mortgages and fundamentally unaffordable home equity
    5  loans.  Many  such  loans  were  extended  under conditions which evince
    6  deception, misrepresentation and fraud on the part of many  lenders  and
    7  agents.  It is in the interest of New York state to ensure the rights of
    8  all  parties are protected and that all foreclosures which come into the
    9  New York courts during this period are carefully scrutinized.
   10    S 2. Subdivision 3 of section 1303 of the real  property  actions  and
   11  proceedings  law,  as  amended  by  chapter  507 of the laws of 2009, is
   12  amended to read as follows:
   13    3. The notice to any mortgagor required by paragraph (a)  of  subdivi-
   14  sion one of this section shall appear as follows:
   15                     Help for Homeowners in Foreclosure
   16    New  York  State  Law  requires that we send you this notice about the
   17  foreclosure process. Please read it carefully.
   18  Summons and Complaint
   19    You are in danger of losing your home. If you fail to respond  to  the
   20  summons  and  complaint  in  this  foreclosure action, you may lose your

        EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                             [ ] is old law to be omitted.
                                                                  LBD10250-03-1
       A. 7277                             2

    1  home. Please read the summons and complaint carefully. You should  imme-
    2  diately  contact  an  attorney  or your local legal aid office to obtain
    3  advice on how to protect yourself.
    4  RIGHT TO PETITION FOR MEDIATION
    5    YOU  HAVE  THE  RIGHT TO PETITION THE COURT TO ORDER MEDIATION BETWEEN
    6  YOURSELF AND THE MORTGAGEE. THE MORTGAGEE IS REQUIRED TO SUBMIT TO MEDI-
    7  ATION IF SO ORDERED BY THE COURT. SUCH MEDIATION COULD  LEAD  TO  A  NEW
    8  MORTGAGE  THAT  PROTECTS  THE INTERESTS OF THE MORTGAGEE WHILE MAKING IT
    9  POSSIBLE FOR YOU TO MAKE PAYMENTS YOU CAN  AFFORD.  YOU  SHOULD  DISCUSS
   10  THIS OPTION WITH AN ATTORNEY OR YOUR LOCAL LEGAL AID OFFICE.
   11  Sources of Information and Assistance
   12    The  State  encourages  you  to  become informed about your options in
   13  foreclosure. In addition to seeking assistance from an attorney or legal
   14  aid office, there are government agencies and  non-profit  organizations
   15  that  you  may contact for information about possible options, including
   16  trying to work with your lender during this process.
   17    To locate an entity near you, you  may  call  the  toll-free  helpline
   18  maintained by the New York State Banking Department at (enter number) or
   19  visit the Department's website at (enter web address).
   20  Foreclosure rescue scams
   21    Be careful of people who approach you with offers to "save" your home.
   22  There  are  individuals  who watch for notices of foreclosure actions in
   23  order to unfairly profit from a  homeowner's  distress.  You  should  be
   24  extremely  careful  about any such promises and any suggestions that you
   25  pay them a fee or sign over your deed. State law requires anyone  offer-
   26  ing  such  services  for  profit  to  enter  into a contract which fully
   27  describes the services they will perform and fees they will charge,  and
   28  which  prohibits  them  from  taking  any money from you until they have
   29  completed all such promised services.
   30    S 3. The real property actions  and  proceedings  law  is  amended  by
   31  adding a new section 1308 to read as follows:
   32    S  1308.  FORECLOSURES; COURT RELIEF. 1. VENUE. IN ANY ACTION TO FORE-
   33  CLOSE A MORTGAGE UNDER THIS ARTICLE A MORTGAGOR NAMED IN SUCH ACTION MAY
   34  APPLY FOR RELIEF IN STATE SUPREME COURT PURSUANT TO THIS SECTION.
   35    2. RIGHT TO PETITION FOR MEDIATION. UPON RECEIPT BY THE MORTGAGOR OF A
   36  NOTICE FROM THE MORTGAGEE PURSUANT TO SECTION THIRTEEN HUNDRED THREE  OF
   37  THIS  ARTICLE,  THE MORTGAGOR SHALL HAVE THE RIGHT TO PETITION THE COURT
   38  TO REQUIRE MEDIATION BETWEEN THE PARTIES PURSUANT TO SUBDIVISION FIVE OF
   39  THIS SECTION.
   40    3. PROCEDURE. A.   IF AN ACTION  TO  FORECLOSE  A  MORTGAGE  HAS  BEEN
   41  COMMENCED  PRIOR  TO THE EFFECTIVE DATE OF THIS SECTION, A MORTGAGOR MAY
   42  PETITION THE COURT BEFORE WHICH SUCH ACTION IS  COMMENCED,  PURSUANT  TO
   43  SUBDIVISION  TWO  OF  THIS  SECTION,  TO  REQUIRE MEDIATION, PURSUANT TO
   44  SUBDIVISION FIVE OF THIS SECTION, INSTEAD OF CONTINUING THE  FORECLOSURE
   45  ACTION.
   46    B.  IF A FORECLOSURE ACTION HAS NOT BEEN COMMENCED PRIOR TO THE EFFEC-
   47  TIVE DATE OF THIS SECTION,  A  MORTGAGEE  MUST  COMMENCE  A  FORECLOSURE
   48  ACTION  IN  STATE SUPREME COURT BY FILING AND SERVING A SUMMONS PURSUANT
   49  TO ARTICLE THREE OF THE CIVIL PRACTICE LAW AND RULES WITH A REQUEST  FOR
   50  RELIEF  PURSUANT TO THE TERMS OF THIS SECTION. IN SUCH CASE, SUCH FILING
   51  SHALL BE DEEMED TO HAVE BEEN FILED BY A POOR PERSON PURSUANT TO  ARTICLE
   52  ELEVEN OF THE CIVIL PRACTICE LAW AND RULES AND ALL FILING AND COURT FEES
   53  OTHERWISE  APPLICABLE  TO SUCH ACTIONS AND PAYABLE BY A MORTGAGOR IN THE
   54  FORM OF INDEX AND MOTION FEES SHALL BE WAIVED.
       A. 7277                             3

    1    4. PRIMA FACIE CASE. A MORTGAGOR MUST ESTABLISH A PRIMA FACIE CASE  IN
    2  THE  MOTION  OR PLEADING. AMENDMENTS TO SUCH MOTION OR PLEADING SHALL BE
    3  LIBERALLY GRANTED. SUCH PLEADING MUST ESTABLISH THAT:
    4    A. THE MORTGAGOR IS A NATURAL PERSON; AND
    5    B. THE DEBT IS INCURRED BY THE MORTGAGOR PRIMARILY FOR PERSONAL, FAMI-
    6  LY OR HOUSEHOLD PURPOSES; AND
    7    C.  THE  LOAN IS SECURED BY A MORTGAGE, SECOND MORTGAGE OR HOME EQUITY
    8  LOAN ON REAL PROPERTY WHICH IS  IMPROVED  WITH  A  RESIDENTIAL  BUILDING
    9  CONTAINING ONE TO FOUR DWELLING UNITS; AND
   10    D. THE REAL PROPERTY SUBJECT TO FORECLOSURE IS THE PRINCIPAL RESIDENCE
   11  OF THE MORTGAGOR; AND
   12    E. THE MORTGAGOR OWNS NO OTHER REAL PROPERTY; AND
   13    F. THE REAL PROPERTY IS LOCATED IN THIS STATE.
   14    5. MEDIATION AND MONTHLY PAYMENT SCHEDULE.  A. UPON RECEIPT OF A PETI-
   15  TION  FROM  THE  MORTGAGOR,  THE COURT SHALL ORDER A PERIOD OF TIME, NOT
   16  LESS THAN SIX MONTHS, FOR MEDIATION BETWEEN THE MORTGAGEE AND  MORTGAGOR
   17  TO  ARRIVE  AT  A MODIFICATION OF THE LOAN THAT IS EQUITABLE AND JUST TO
   18  BOTH PARTIES. THE MEDIATOR, APPOINTED BY THE COURT, SHALL  INQUIRE  INTO
   19  THE  FINANCES  OF  BOTH  THE MORTGAGEE AND THE MORTGAGOR. THE PURPOSE OF
   20  SUCH INQUIRY SHALL BE TO DETERMINE THE MINIMUM AMOUNT NECESSARY TO MAIN-
   21  TAIN THE MORTGAGEE'S FINANCIAL POSITION  AND  TO  DETERMINE  THE  AMOUNT
   22  WHICH  THE MORTGAGOR WILL BE ABLE TO AFFORD. SUCH MONTHLY PAYMENTS SHALL
   23  BE APPLIED TO THE PRINCIPAL AND INTEREST UPON THE INDEBTEDNESS.  IF  THE
   24  FINANCIAL  CONDITION  OF THE MORTGAGOR EXCEEDS THE MINIMUM AMOUNT NECES-
   25  SARY TO MAINTAIN THE FINANCIAL POSITION OF THE MORTGAGEE,  SUCH  MONTHLY
   26  AMOUNT  MAY  BE INCREASED BEYOND THE MINIMUM AMOUNT AS DETERMINED WITHIN
   27  THE DISCRETION OF THE MEDIATOR. IT IS WITHIN THE COURT'S  DISCRETION  TO
   28  DETERMINE WHETHER THE ESTABLISHMENT OF SUCH PAYMENT SCHEDULE IS POSSIBLE
   29  UNDER TERMS WHICH ARE EQUITABLE AND JUST.
   30    B.  THE  AIM  OF MEDIATION PURSUANT TO THIS SUBDIVISION SHALL BE A NEW
   31  MORTGAGE THAT IS NEGOTIATED IN A MANNER TO PROTECT THE INTERESTS OF  THE
   32  MORTGAGEE WHILE MAKING IT POSSIBLE FOR THE MORTGAGOR TO MAKE PAYMENTS IN
   33  HIS  OR  HER  CURRENT  CIRCUMSTANCE.  THESE GOALS MAY BE ACCOMPLISHED BY
   34  REDUCING THE PRINCIPAL OWED, REDUCING THE INTEREST  RATE  ON  THE  LOAN,
   35  EXTENDING THE LIFE OF THE LOAN, OR ANY OTHER MODIFICATION OR COMBINATION
   36  OF  MODIFICATIONS  THAT  PROVIDES FOR A SATISFACTORY END RESULT FOR BOTH
   37  PARTIES. THE MORTGAGEE SHALL BARGAIN IN GOOD FAITH.
   38    6. POSTPONEMENT ORDER. ONCE THE COURT DETERMINES THAT AN EQUITABLE AND
   39  JUST PAYMENT SCHEDULE CAN BE ESTABLISHED  THROUGH  MEDIATION,  IT  SHALL
   40  ISSUE  AN  ORDER WHICH SETS FORTH THE TERMS OF SUCH PAYMENT SCHEDULE AND
   41  SERVE IT UPON ALL PARTIES TO THE PROCEEDING. SUCH ORDER SHALL SET  FORTH
   42  A  RETURN DATE FOR THE REEXAMINATION OF SUCH MATTER AFTER PASSAGE OF THE
   43  POSTPONEMENT TIME PERIOD AT A FORMAL HEARING ON NOTICE TO  THE  PARTIES.
   44  THE  COURT  MAY TAILOR RELIEF AS REQUIRED BY THE FACTS OF EACH CASE THAT
   45  FALLS WITHIN THE PURVIEW OF THIS SECTION. HOWEVER,  IN  NO  EVENT  SHALL
   46  SUCH  ORDER  POSTPONE FINAL ACTION BEYOND ONE YEAR WITHOUT A RE-EXAMINA-
   47  TION OF THE PARTIES' FINANCIAL CIRCUMSTANCES  AFTER  FORMAL  HEARING  ON
   48  NOTICE  TO THE PARTIES. THE TIME PERIOD OF SUCH ORDER SHALL RUN FROM THE
   49  DATE OF THE ENTRY OF SUCH ORDER.  SUCH ABEYANCE SHALL  NOT  BEGIN  UNTIL
   50  THE  FORECLOSURE  PROCESS  HAS  REACHED THE POINT WHERE A FINAL DETERMI-
   51  NATION IS POSSIBLE BUT SHALL BE WITHHELD UNTIL THE  POSTPONEMENT  PERIOD
   52  HAS ELAPSED. ENTITLEMENT TO SUCH ABEYANCE MAY BE ESTABLISHED AT ANY TIME
   53  REGARDLESS  OF  WHETHER  FORECLOSURE  IS  BEING SOUGHT BY THE MORTGAGEE.
   54  MULTIPLE POSTPONEMENTS MAY BE GRANTED IN THE DISCRETION OF THE COURT  IF
   55  WARRANTED  BY  THE  FACTS  OF  A  GIVEN CASE AND THE ECONOMIC CONDITIONS
   56  ACROSS THE STATE.
       A. 7277                             4

    1    7. CONTINUING JURISDICTION. THE COURT SHALL MAINTAIN CONTINUING JURIS-
    2  DICTION OF THE MATTER UNTIL IT REACHES FINAL RESOLUTION. UPON THE APPLI-
    3  CATION OF EITHER PARTY, PRIOR TO  THE  EXPIRATION  OF  THE  POSTPONEMENT
    4  PERIOD,  UPON PRESENTATION OF EVIDENCE THAT THE TERMS FIXED BY THE COURT
    5  ARE  NO  LONGER  JUST AND EQUITABLE, THE COURT MAY REVISE AND ALTER SUCH
    6  TERMS IN SUCH MANNER AS THE CHANGED  CIRCUMSTANCES  AND  CONDITIONS  MAY
    7  REQUIRE.
    8    8. FINAL MODIFICATION. UPON AGREEMENT BY THE MORTGAGOR AND THE MORTGA-
    9  GEE  ON  THE  TERMS  OF A PAYMENT SCHEDULE THAT IS EQUITABLE AND JUST TO
   10  BOTH PARTIES, THE COURT SHALL, AFTER CERTIFYING SUCH AGREEMENT,  DISMISS
   11  THE FORECLOSURE ACTION.
   12    S  4.  Subdivision  1  of  section 14 of the banking law is amended by
   13  adding a new paragraph (ff) to read as follows:
   14    (FF) TO DEFINE THE MORTGAGEE'S DUTY OF BARGAINING IN  GOOD  FAITH  FOR
   15  THE  PURPOSES OF MEDIATION PURSUANT TO SUBDIVISION FIVE OF SECTION THIR-
   16  TEEN HUNDRED EIGHT OF THE REAL PROPERTY  ACTIONS  AND  PROCEEDINGS  LAW.
   17  SUCH  DEFINITION SHALL INCLUDE INCENTIVES, PURSUANT TO SUBSECTION (Y) OF
   18  SECTION FOURTEEN HUNDRED FIFTY-SIX OF THE TAX LAW AND SANCTIONS  INCLUD-
   19  ING,  BUT NOT LIMITED TO WITHDRAWAL OF STATE DEPOSITS FROM SUCH INSTITU-
   20  TION AND THE DELISTING OF SUCH INSTITUTION FROM STATE BUSINESS.
   21    S 5. Section 1456 of the tax law is amended by adding a new subsection
   22  (y) to read as follows:
   23    (Y) LOAN PRINCIPAL REDUCTION TAX CREDIT. (1) FOR TAXABLE YEARS  BEGIN-
   24  NING ON OR AFTER JANUARY FIRST, TWO THOUSAND TWELVE, A TAXPAYER SHALL BE
   25  ALLOWED A CREDIT AGAINST THE TAX IMPOSED BY THIS ARTICLE IF SUCH TAXPAY-
   26  ER  AGREES  TO MODIFY A LOAN THROUGH MEDIATION PURSUANT TO SECTION THIR-
   27  TEEN HUNDRED EIGHT OF THE REAL PROPERTY ACTIONS AND PROCEEDINGS LAW. THE
   28  AMOUNT OF THE CREDIT SHALL BE EQUAL TO THE REDUCTION IN THE PRINCIPAL OF
   29  SUCH LOAN AND SUCH CREDIT SHALL BE  APPLIED  OVER  TEN  YEARS  WITH  TEN
   30  PERCENT OF SUCH CREDIT ALLOWED EACH YEAR.
   31    (2)  THE  CREDIT  AND  CARRYOVERS  OF  SUCH  CREDIT ALLOWED UNDER THIS
   32  SUBSECTION FOR ANY TAXABLE YEAR SHALL NOT, IN THE AGGREGATE, REDUCE  THE
   33  TAX  DUE  FOR SUCH YEAR TO LESS THAN THE MINIMUM TAX FIXED BY SUBSECTION
   34  (B) OF SECTION FOURTEEN HUNDRED FIFTY-FIVE OF THIS ARTICLE. HOWEVER,  IF
   35  THE  AMOUNT  OF  CREDIT  OR  CARRYOVERS OF SUCH CREDIT, OR BOTH, ALLOWED
   36  UNDER THIS SUBSECTION FOR ANY TAXABLE  YEAR  REDUCES  THE  TAX  TO  SUCH
   37  AMOUNT,  THEN ANY AMOUNT OF CREDIT OR CARRYOVERS OF SUCH CREDIT THUS NOT
   38  DEDUCTIBLE IN SUCH TAXABLE YEAR MAY BE CARRIED  OVER  TO  THE  FOLLOWING
   39  YEAR  OR YEARS AND MAY BE DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH YEAR
   40  OR YEARS; PROVIDED, HOWEVER,  THAT  ANY  TAX  CREDIT  PURSUANT  TO  THIS
   41  SUBSECTION SHALL NOT BE APPLIED FOR MORE THAN FIVE TAXABLE YEARS.
   42    S  6.  This  act shall take effect immediately and shall expire and be
   43  deemed repealed 3 years after such date; provided however  that  section
   44  four  of  this  act  shall take effect on the same date as section 90 of
   45  part A of chapter 62 of the laws of 2011, takes effect.
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