Bill Text: NY A05615 | 2019-2020 | General Assembly | Introduced

Bill Title: Provides for the regulation of distressed home loans.

Spectrum: Partisan Bill (Democrat 14-0)

Status: (Engrossed) 2019-04-01 - RETURNED TO ASSEMBLY [A05615 Detail]

Download: New_York-2019-A05615-Introduced.html

                STATE OF NEW YORK
                               2019-2020 Regular Sessions
                   IN ASSEMBLY
                                    February 14, 2019
        Introduced  by M. of A. WEINSTEIN, COOK, LENTOL, HYNDMAN, TITUS, WEPRIN,
          WRIGHT, TAYLOR -- Multi-Sponsored by -- M. of  A.  BARRON,  THIELE  --
          read once and referred to the Committee on Judiciary
        AN ACT to amend the real property law, the civil practice law and rules,
          and the criminal procedure law, in relation to distressed home loans
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
     1    Section 1. Paragraphs (c) and (e) of subdivision 2 of section 265-a of
     2  the real property law, as added by chapter 308 of the laws of 2006,  are
     3  amended to read as follows:
     4    (c)  "Covered contract" means any contract, agreement, or arrangement,
     5  or any term thereof, between  an  equity  purchaser  and  equity  seller
     6  which:
     7    (i) is incident to the sale of a residence in foreclosure; or
     8    (ii)  is incident to the sale of a residence in foreclosure or default
     9  where such contract, agreement or arrangement  includes  a  reconveyance
    10  arrangement[.]; or
    11    (iii)  is  incident  to the sale of a residence that is the collateral
    12  for a "distressed home loan" as defined in paragraph (d) of  subdivision
    13  one of section two hundred sixty-five-b of this article.
    14    For  purposes  of this section, any reference to the "sale" of a resi-
    15  dence by an equity seller to an equity purchaser shall include a  trans-
    16  action  where  an  equity  seller receives consideration from the equity
    17  purchaser, and a transaction involving a transfer of title to the equity
    18  purchaser where no consideration is provided to the equity seller.
    19    (e) "Equity purchaser" means any person who or entity  which  acquires
    20  title  to any residence in foreclosure or, where applicable, default, or
    21  [his or her] the representative of such person or entity as  defined  in
    22  this subdivision, except a person who acquires such title as follows:
    23    (i)  to  use,  and who uses, such property as his or her primary resi-
    24  dence;
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.

        A. 5615                             2
     1    (ii) by a deed from a referee in a foreclosure sale conducted pursuant
     2  to article thirteen of the real property actions and proceedings law;
     3    (iii) at any sale of property authorized by statute;
     4    (iv) by order or judgment of any court;
     5    (v) from a spouse, or from a parent, grandparent, child, grandchild or
     6  sibling of such person or such person's spouse;
     7    (vi)  as  a not-for-profit housing organization or as a public housing
     8  agency; or
     9    (vii) a bona fide purchaser or encumbrancer for value.
    10    § 2. Paragraph (a) of subdivision 5 of section 265-a of the real prop-
    11  erty law, as added by chapter 308 of the laws of  2006,  is  amended  to
    12  read as follows:
    13    (a)  In  addition  to the right of rescission described in subdivision
    14  eight of this section, the equity seller has the  right  to  cancel  any
    15  covered  contract with an equity purchaser until midnight of the [fifth]
    16  fourteenth business day following the day on which the equity seller and
    17  equity purchaser  sign  a  covered  contract  that  complies  with  this
    18  section.
    19    §  3.  Paragraphs (a) and (d) of subdivision 7 of section 265-a of the
    20  real property law, as added by chapter 308 of  the  laws  of  2006,  are
    21  amended to read as follows:
    22    (a)  Before  midnight of the [fifth] fourteenth business day after the
    23  date on which the covered contract is  executed,  the  equity  purchaser
    24  shall not do any of the following:
    25    (i) accept from any equity seller an execution of, or induce any equi-
    26  ty  seller  to  execute, any instrument of conveyance of any interest in
    27  the residence in foreclosure or, where applicable, default;
    28    (ii) record with the county clerk any  document,  including,  but  not
    29  limited to, any instrument of conveyance, signed by the equity seller;
    30    (iii)  transfer  or  encumber  or  purport to transfer or encumber any
    31  interest in the residence in foreclosure or, where  applicable,  default
    32  to any third party;
    33    (iv) pay the equity seller any consideration; or
    34    (v)  suggest,  encourage,  or provide any form which allows the equity
    35  seller to waive his or  her  right  to  cancel  or  rescind  under  this
    36  section.
    37    (d)  It  is unlawful for any equity purchaser to initiate, enter into,
    38  negotiate, or consummate any covered contract involving residential real
    39  property in foreclosure or, where applicable, default if  such  [person]
    40  equity  purchaser,  by the terms of such covered contract, takes [uncon-
    41  scionable] undue advantage of the equity seller.
    42    § 4. Paragraph (e) of subdivision 1 of section 265-b of the real prop-
    43  erty law, as added by chapter 472 of the laws of 2008, subparagraphs (i)
    44  and (vii) as amended by chapter 507 of the laws of  2009,  subparagraphs
    45  (iii) and (ix) as further amended by section 104 of part A of chapter 62
    46  of the laws of 2011, is amended to read as follows:
    47    (e) "Distressed property consultant" or "consultant" means an individ-
    48  ual  or  a  corporation, partnership, limited liability company or other
    49  business entity that, directly or  indirectly,  solicits  or  undertakes
    50  employment  to  provide  consulting  services to a homeowner for compen-
    51  sation or promise of compensation with respect to a distressed home loan
    52  or a potential loss of the home for nonpayment of  taxes.  A  distressed
    53  property consultant does not include the following:
    54    (i) an attorney admitted to practice in the state of New York when the
    55  attorney  is  directly  providing  [consulting services] legal represen-
    56  tation to a homeowner pursuant to a retainer agreement, and has  entered

        A. 5615                             3
     1  an  appearance  on  behalf  of  a homeowner, in the course of his or her
     2  regular legal practice. This exception shall not apply  to  non-attorney
     3  individuals  engaged  in  activities  covered by subdivision two of this
     4  section  who  are  employed  by, associated with, or consultants for law
     5  firms when such law firms are not providing legal  representation  to  a
     6  homeowner in a foreclosure action pursuant to a retainer agreement;
     7    (ii)  a person or entity who holds or is owed an obligation secured by
     8  a lien on any  property  in  foreclosure  while  the  person  or  entity
     9  performs services in connection with the obligation or lien;
    10    (iii)  a  bank,  trust  company, private banker, bank holding company,
    11  savings bank, savings and  loan  association,  thrift  holding  company,
    12  credit  union  or  insurance  company  organized  under the laws of this
    13  state, another state or the United States, or a subsidiary or  affiliate
    14  of  such  entity or a foreign banking corporation licensed by the super-
    15  intendent of financial services or the comptroller of the currency;
    16    (iv) a federal Department of Housing and  Urban  Development  approved
    17  mortgagee  and  any  subsidiary  or affiliate of such mortgagee, and any
    18  agent or employee of these persons while engaged in the business of such
    19  mortgagee;
    20    (v) a judgment creditor of the homeowner, if the  judgment  creditor's
    21  claim accrued before the written notice of foreclosure sale is sent;
    22    (vi)  a  title  insurer authorized to do business in this state, while
    23  performing title insurance and settlement services;
    24    (vii) a person licensed as a mortgage banker or registered as a  mort-
    25  gage  broker  or  registered  as  a mortgage loan servicer as defined in
    26  article twelve-D of the banking law, provided that no such person  shall
    27  take  any  upfront  fee  in conjunction with activities constituting the
    28  business of a distressed property consultant;
    29    (viii) a bona fide not-for-profit organization that offers  counseling
    30  or advice to homeowners in foreclosure or loan default; or
    31    (ix)  a  person  licensed  or registered in the state to engage in the
    32  practice of other  professions  that  the  superintendent  of  financial
    33  services has determined should not be subject to this section.
    34    §  5.  Paragraphs (d) and (e) of subdivision 2 of section 265-b of the
    35  real property law, as added by chapter 472 of  the  laws  of  2008,  are
    36  amended  and  nine new paragraphs (f), (g), (h), (i), (j), (k), (l), (m)
    37  and a closing paragraph are added to read as follows:
    38    (d) retaining any original loan document or  other  original  document
    39  related  to the distressed home loan, the property or the potential loss
    40  of the home for nonpayment of taxes; [or]
    41    (e) inducing or attempting to induce a homeowner to enter a consulting
    42  contract that does not fully comply with the provisions  of  this  arti-
    43  cle[.];
    44    (f) inducing the transfer of a deed to any person or entity, including
    45  to the distressed property consultant;
    46    (g)  accepting  or taking ownership of a deed from a homeowner for any
    47  period of time whatsoever;
    48    (h) simulating in any manner a law enforcement officer, or a represen-
    49  tative of any governmental agency;
    50    (i) disclosing or threatening to disclose  information  affecting  the
    51  homeowner's reputation for credit worthiness with knowledge or reason to
    52  know that the information is false;
    53    (j)  communicating  with  the homeowner or any member of his family or
    54  household with such frequency or at such unusual  hours  or  in  such  a
    55  manner as can reasonably be expected to abuse or harass the homeowner;

        A. 5615                             4
     1    (k) claiming, attempting, or threatening to enforce a right with know-
     2  ledge or reason to know that the right does not exist;
     3    (l) using a communication which simulates in any manner legal or judi-
     4  cial  process  or which gives the appearance of being authorized, issued
     5  or approved by a government, governmental agency,  or  attorney  at  law
     6  when it is not; or
     7    (m)  encumbering  the  property with a lien without any contractual or
     8  legal basis.
     9    If any provision of this subdivision or the application thereof to any
    10  person or circumstances is held invalid, the  invalidity  thereof  shall
    11  not  affect  other  provisions or applications of this subdivision which
    12  can be given effect without the invalid provision or application, and to
    13  this end the provisions of this subdivision are severable.
    14    § 6. The opening paragraph of subdivision (b)  of  rule  6312  of  the
    15  civil  practice  law  and rules, as amended by chapter 24 of the laws of
    16  1996, is amended to read as follows:
    17    Except as provided in  section  2512  and  in  actions  brought  under
    18  section  two hundred sixty-five-a of the real property law, prior to the
    19  granting of a preliminary injunction, the plaintiff shall give an under-
    20  taking in an amount to be fixed by the court, that the plaintiff, if  it
    21  is  finally determined that he or she was not entitled to an injunction,
    22  will pay to the defendant all damages and costs which may  be  sustained
    23  by reason of the injunction, including:
    24    §  7.  The  criminal  procedure law is amended by adding a new section
    25  420.45 to read as follows:
    26  § 420.45 Post-trial motion relating  to  certain  instruments  affecting
    27             residential real property.
    28    1. When a defendant has been convicted after a trial or pled guilty to
    29  violating either section 175.30 or 175.35 of the penal law in connection
    30  to  an  instrument that is material to the transfer or purchase of resi-
    31  dential real property, the district attorney may file a  motion  in  the
    32  supreme  court  in  the county where the property that is subject to the
    33  instrument is located on behalf of the victim  to  void  the  instrument
    34  that  is  the  subject  of such criminal information or indictment. Such
    35  motion must be in writing and provide reasonable notice to  all  persons
    36  who  have  an interest in the property affected by such instrument.  The
    37  motion papers must state the county or borough, if in the  city  of  New
    38  York, and block, lot, street address of such property, and a description
    39  of  such  property.  The  motion  papers  must  state the grounds of the
    40  motion, must contain sworn allegations of fact supporting such  grounds,
    41  and include a copy of the guilty disposition attached to the document.
    42    2.  Within  ten days after filing a motion pursuant to subdivision one
    43  of this section, the district attorney shall record a copy of the notice
    44  of motion in the office of the clerk of the county in which the property
    45  is situated. The notice shall be indexed by  the  clerk  in  the  manner
    46  prescribed  by  subdivision (c) of rule sixty-five hundred eleven of the
    47  civil practice law and rules for a notice  of  pendency  of  action  and
    48  shall have the same effect as such notice.
    49    3.  The supreme court must conduct a hearing and make findings of fact
    50  essential  to  the  determination  whether  to  declare  the  instrument
    51  described in subdivision one of this section void ab initio. All persons
    52  providing  factual  information at such hearing must testify under oath.
    53  There will be a rebuttable presumption that where a party  is  convicted
    54  after  a  trial  in  criminal  court  or a guilty plea to either section
    55  175.30 or section 175.35 of the penal law in connection with an  instru-

        A. 5615                             5
     1  ment  that is material to the transfer or sale of residential real prop-
     2  erty, that such instrument is void ab initio.
     3    4. Upon the defendant's conviction of or guilty plea to section 175.30
     4  or  section  175.35  of the penal law as described in subdivision one of
     5  this section, and after conducting a  hearing  pursuant  to  subdivision
     6  three  of this section, a court shall make a determination and if appro-
     7  priate shall order that the instrument described in subdivision  one  of
     8  this  section  be  declared  void  ab  initio or grant other appropriate
     9  relief to the victim. The order of the court shall describe  the  nature
    10  of  the  false  statement or false information contained in such instru-
    11  ment. A copy of such instrument shall be attached to the  order  of  the
    12  court.
    13    5.  If  the  order  relates to an instrument that has been filed with,
    14  registered, or recorded in a public office, the district attorney  shall
    15  record  a  certified  copy  of such order in the office of the recording
    16  officer of the county in which such property is situated,  in  the  same
    17  manner  as  a conveyance duly acknowledged or proved and certified so as
    18  to entitle it to be recorded. Such recording officer  shall  record  the
    19  same in his or her said office.
    20    6.  For purposes of this section, "all persons who have an interest in
    21  the property affected by such instrument" shall  mean  all  parties  who
    22  have  recorded  an  instrument  affecting  the real property that is the
    23  subject of the instrument described in subdivision one of this  section,
    24  including  any  party  or  entity that may have liens of interest on the
    25  property, and any current residents of the property, as of the  date  of
    26  the filing of the criminal information or indictment.
    27    7.  Nothing  in  this  section shall be deemed to inhibit or prevent a
    28  party's right to appeal such order.
    29    § 8. This act shall take effect immediately.