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