Bill Text: NY A06828 | 2009-2010 | General Assembly | Introduced
Bill Title: Enacts the "New York sub-prime predatory lending prevention act"; establishes guidelines for sub-prime loans; establishes duties of mortgage bankers and mortgage brokers; relates to the qualifications for licensing and certification of real estate appraisers.
Spectrum: Partisan Bill (Democrat 30-1)
Status: (Introduced - Dead) 2010-01-06 - referred to banks [A06828 Detail]
Download: New_York-2009-A06828-Introduced.html
S T A T E O F N E W Y O R K
________________________________________________________________________
6828
2009-2010 Regular Sessions
I N A S S E M B L Y
March 13, 2009
___________
Introduced by M. of A. BRENNAN, MILLMAN, HOYT, DINOWITZ, MAISEL,
BOYLAND, NOLAN, GREENE, COLTON, ORTIZ, JAFFEE, REILLY, GABRYSZAK,
ZEBROWSKI, FIELDS, JACOBS, JOHN, P. RIVERA, WRIGHT, GUNTHER -- Multi-
Sponsored by -- M. of A. ALFANO, GLICK, GOTTFRIED, JEFFRIES, KOON,
LIFTON, MARKEY, PEOPLES, PHEFFER, SCHIMEL, SWEENEY, WEISENBERG -- read
once and referred to the Committee on Banks
AN ACT to amend the banking law and the real property actions and
proceedings law, in relation to enacting the "New York sub-prime
predatory lending prevention act"
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
1 Section 1. Short title. This act shall be known as and may be cited as
2 the "New York sub-prime predatory lending prevention act".
3 S 2. The banking law is amended by adding a new section 6-n to read as
4 follows:
5 S 6-N. SUB-PRIME HOME LOANS. 1. THE FOLLOWING DEFINITIONS APPLY FOR
6 THE PURPOSES OF THIS SECTION:
7 (A) "AFFILIATE" MEANS ANY COMPANY THAT CONTROLS, IS CONTROLLED BY, OR
8 IS UNDER COMMON CONTROL WITH ANOTHER COMPANY, AS SET FORTH IN THE BANK
9 HOLDING COMPANY ACT OF 1956 (12 U.S.C. S 1841 ET SEQ.), AS AMENDED FROM
10 TIME TO TIME.
11 (B) "ANNUAL PERCENTAGE RATE" MEANS THE ANNUAL PERCENTAGE RATE FOR THE
12 LOAN CALCULATED ACCORDING TO THE PROVISIONS OF THE FEDERAL
13 TRUTH-IN-LENDING ACT (15 U.S.C. S 1601, ET SEQ.), AND THE REGULATIONS
14 PROMULGATED THEREUNDER BY THE FEDERAL RESERVE BOARD (AS SAID ACT AND
15 REGULATIONS ARE AMENDED FROM TIME TO TIME).
16 (C) "BONA FIDE LOAN DISCOUNT POINTS" MEANS LOAN DISCOUNT POINTS KNOW-
17 INGLY PAID BY THE BORROWER FUNDED THROUGH ANY SOURCE, FOR THE PURPOSE OF
18 REDUCING, AND WHICH IN FACT RESULT IN A BONA FIDE REDUCTION OF, THE
19 INTEREST RATE OR TIME-PRICE DIFFERENTIAL APPLICABLE TO THE LOAN,
20 PROVIDED THAT THE AMOUNT OF THE INTEREST RATE REDUCTION PURCHASED BY THE
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD09794-01-9
A. 6828 2
1 DISCOUNT POINTS IS REASONABLY CONSISTENT WITH ESTABLISHED INDUSTRY NORMS
2 AND PRACTICES FOR SECONDARY MORTGAGE MARKET TRANSACTIONS. FOR PURPOSES
3 OF THIS SECTION, IT SHALL BE PRESUMED THAT A POINT IS A BONA FIDE LOAN
4 DISCOUNT POINT IF IT REDUCES THE INTEREST RATE BY A MINIMUM OF
5 TWENTY-FIVE BASIS POINTS PROVIDED ALL OTHER TERMS OF THE LOAN REMAIN THE
6 SAME.
7 (D) A "SUB-PRIME HOME LOAN" MEANS A HOME LOAN IN WHICH THE TERMS OF
8 THE LOAN EXCEED ONE OR MORE OF THE THRESHOLDS AS DEFINED IN PARAGRAPH
9 (G) OF THIS SUBDIVISION.
10 (E) "HOME LOAN" MEANS A HOME LOAN, INCLUDING AN OPEN-END CREDIT PLAN,
11 OTHER THAN A REVERSE MORTGAGE TRANSACTION, IN WHICH:
12 (I) THE PRINCIPAL AMOUNT OF THE LOAN DOES NOT EXCEED THE LESSER OF:
13 (A) CONFORMING LOAN SIZE LIMIT FOR A COMPARABLE DWELLING; OR (B) THREE
14 HUNDRED THOUSAND DOLLARS;
15 (II) THE BORROWER IS A NATURAL PERSON;
16 (III) THE DEBT IS INCURRED BY THE BORROWER PRIMARILY FOR PERSONAL,
17 FAMILY, OR HOUSEHOLD PURPOSES;
18 (IV) THE LOAN IS SECURED BY A MORTGAGE OR DEED OF TRUST ON REAL ESTATE
19 UPON WHICH THERE IS LOCATED OR THERE IS TO BE LOCATED A STRUCTURE OR
20 STRUCTURES INTENDED PRINCIPALLY FOR OCCUPANCY OF FROM ONE TO FOUR FAMI-
21 LIES WHICH IS OR WILL BE OCCUPIED BY THE BORROWER AS THE BORROWER'S
22 PRINCIPAL DWELLING; AND
23 (V) THE PROPERTY IS LOCATED IN THIS STATE.
24 (F) "POINTS AND FEES" MEANS:
25 (I) ALL ITEMS LISTED IN 15 U.S.C. S 1605(A)(1) THROUGH (4), EXCEPT
26 INTEREST OR THE TIME-PRICE DIFFERENTIAL;
27 (II) ALL CHARGES FOR ITEMS LISTED UNDER S 226.4(C)(7) OF TITLE 12 OF
28 THE CODE OF FEDERAL REGULATIONS, AS AMENDED FROM TIME TO TIME, BUT ONLY
29 IF THE LENDER RECEIVES DIRECT OR INDIRECT COMPENSATION IN CONNECTION
30 WITH THE CHARGE OR THE CHARGE IS PAID TO AN AFFILIATE OF THE LENDER;
31 OTHERWISE, THE CHARGES ARE NOT INCLUDED WITHIN THE MEANING OF THE PHRASE
32 "POINTS AND FEES";
33 (III) ALL COMPENSATION PAID DIRECTLY OR INDIRECTLY TO A MORTGAGE
34 BROKER, INCLUDING A BROKER THAT ORIGINATES A LOAN IN ITS OWN NAME IN A
35 TABLE-FUNDED TRANSACTION, NOT OTHERWISE INCLUDED IN SUBPARAGRAPHS (I)
36 AND (II) OF THIS PARAGRAPH;
37 (IV) THE COST OF ALL PREMIUMS FINANCED BY THE LENDER, DIRECTLY OR
38 INDIRECTLY, FOR ANY CREDIT LIFE, CREDIT DISABILITY, CREDIT UNEMPLOYMENT,
39 OR CREDIT PROPERTY INSURANCE, OR ANY OTHER LIFE OR HEALTH INSURANCE, OR
40 ANY PAYMENTS FINANCED BY THE LENDER DIRECTLY OR INDIRECTLY FOR ANY DEBT
41 CANCELLATION OR SUSPENSION AGREEMENT OR CONTRACT, EXCEPT THAT INSURANCE
42 PREMIUMS CALCULATED AND PAID ON A MONTHLY BASIS SHALL NOT BE CONSIDERED
43 FINANCED BY THE LENDER.
44 (G) "THRESHOLDS" MEANS:
45 (I) THE LOAN CONTAINS A PREPAYMENT PENALTY DUE MORE THAN THIRTY MONTHS
46 AFTER CLOSING, OR IN AN AMOUNT GREATER THAN TWO PERCENT; OR
47 (II) THE TOTAL POINTS AND FEES EXCEED: FIVE PERCENT OF THE TOTAL LOAN
48 AMOUNT; PROVIDED, THE FOLLOWING DISCOUNT POINTS SHALL BE EXCLUDED FROM
49 THE CALCULATION OF THE TOTAL POINTS AND FEES PAYABLE BY THE BORROWER:
50 (A) UP TO AND INCLUDING TWO BONA FIDE LOAN DISCOUNT POINTS PAYABLE BY
51 THE BORROWER IN CONNECTION WITH THE LOAN TRANSACTION, BUT ONLY IF THE
52 INTEREST RATE FROM WHICH THE LOAN'S INTEREST RATE WILL BE DISCOUNTED
53 DOES NOT EXCEED BY MORE THAN ONE PERCENTAGE POINT THE YIELD ON UNITED
54 STATES TREASURY SECURITIES HAVING COMPARABLE PERIODS OF MATURITY TO THE
55 LOAN MATURITY MEASURED AS OF THE FIFTEENTH DAY OF THE MONTH IMMEDIATELY
56 PRECEDING THE MONTH IN WHICH THE APPLICATION IS RECEIVED;
A. 6828 3
1 (B) ANY AND ALL BONA FIDE LOAN DISCOUNT POINTS FUNDED DIRECTLY OR
2 INDIRECTLY THROUGH A GRANT FROM A FEDERAL, STATE OR LOCAL GOVERNMENT
3 AGENCY OR A 501(C)(3) ORGANIZATION.
4 (H) "TOTAL LOAN AMOUNT" MEANS THE PRINCIPAL OF THE LOAN MINUS THOSE
5 POINTS AND FEES AS DEFINED IN PARAGRAPH (F) OF THIS SUBDIVISION THAT ARE
6 INCLUDED IN THE PRINCIPAL AMOUNT.
7 (I) "LENDER" MEANS A MORTGAGE BANKER AS DEFINED IN PARAGRAPH (F) OF
8 SUBDIVISION ONE OF SECTION FIVE HUNDRED NINETY OF THIS CHAPTER OR AN
9 EXEMPT ORGANIZATION AS DEFINED IN PARAGRAPH (E) OF SUBDIVISION ONE OF
10 SECTION FIVE HUNDRED NINETY OF THIS CHAPTER.
11 (J) "CONFORMING LOAN SIZE LIMIT" MEANS THE LIMIT OF CONFORMING LOANS
12 BASED ON THE MEAN PRICE OF COMPARABLE DWELLINGS AS ESTABLISHED FROM TIME
13 TO TIME BY THE FEDERAL NATIONAL MORTGAGE ASSOCIATION.
14 2. A SUB-PRIME HOME LOAN SHALL BE SUBJECT TO THE FOLLOWING LIMITA-
15 TIONS:
16 (A) NO "LOAN FLIPPING". NO LENDER OR MORTGAGE BROKER MAKING OR ARRANG-
17 ING A HIGH-COST HOME LOAN MAY ENGAGE IN THE UNFAIR ACT OR PRACTICE OF
18 "LOAN FLIPPING". "LOAN FLIPPING" IS MAKING A HOME LOAN TO A BORROWER
19 THAT REFINANCES AN EXISTING HOME LOAN WHEN THE NEW LOAN DOES NOT HAVE A
20 TANGIBLE NET BENEFIT TO THE BORROWER CONSIDERING ALL OF THE CIRCUM-
21 STANCES, INCLUDING THE TERMS OF BOTH THE NEW AND REFINANCED LOANS, THE
22 COST OF THE NEW LOAN, AND THE BORROWER'S SITUATION.
23 (B) NO LENDING WITHOUT DUE REGARD TO REPAYMENT ABILITY. A LENDER OR
24 MORTGAGE BROKER SHALL NOT MAKE OR ARRANGE A HIGH-COST HOME LOAN WITHOUT
25 DUE REGARD TO REPAYMENT ABILITY, BASED UPON CONSIDERATION OF THE RESI-
26 DENT BORROWER OR BORROWERS' CURRENT AND EXPECTED INCOME, CURRENT OBLI-
27 GATIONS, EMPLOYMENT STATUS, AND OTHER FINANCIAL RESOURCES (OTHER THAN
28 THE BORROWER'S EQUITY IN THE DWELLING WHICH SECURES REPAYMENT OF THE
29 LOAN), AS VERIFIED BY DETAILED DOCUMENTATION OF ALL SOURCES OF INCOME
30 AND CORROBORATED BY INDEPENDENT VERIFICATION. HOWEVER, A LENDER MAKING A
31 HIGH-COST HOME LOAN SHALL BENEFIT FROM A REBUTTABLE PRESUMPTION THAT THE
32 LOAN WAS MADE WITH DUE REGARD TO REPAYMENT ABILITY IF THE LENDER DEMON-
33 STRATES THAT AT THE TIME THE LOAN IS CONSUMMATED, THE RESIDENT BORROWER
34 OR BORROWERS' TOTAL MONTHLY DEBTS, INCLUDING AMOUNTS OWED UNDER THE
35 LOAN, DO NOT EXCEED FIFTY PERCENT OF THE RESIDENT BORROWER OR BORROWERS'
36 MONTHLY GROSS INCOME; AND THE LENDER FOLLOWS THE RESIDUAL INCOME GUIDE-
37 LINES ESTABLISHED IN 38 C.F.R. S 36.4337(E) AND VA FORM 26-6393.
38 (C) NO RECOMMENDATION OF DEFAULT. NO LENDER OR MORTGAGE BROKER MAKING
39 OR ARRANGING FOR A HIGH-COST HOME LOAN MAY RECOMMEND OR ENCOURAGE
40 NONPAYMENT OF AN EXISTING LOAN OR OTHER DEBT PRIOR TO AND IN CONNECTION
41 WITH THE CLOSING OR PLANNED CLOSING OF A HOME LOAN, REGARDLESS OF WHETH-
42 ER THE NEW RESIDENTIAL MORTGAGE WILL REFINANCE ANY PORTION OF THE EXIST-
43 ING LOAN OR DEBT.
44 (D) NO INFLUENCING OF APPRAISERS. A LENDER OR MORTGAGE BROKER SHALL
45 NOT COERCE, INTIMIDATE OR COMPENSATE, AND SHALL NOT IN ANY WAY CONTRIB-
46 UTE TO THE COERCION, INTIMIDATION OR COMPENSATION OF ANY REAL PROPERTY
47 APPRAISER FOR THE PURPOSE OF INFLUENCING THEIR INDEPENDENT JUDGMENT WITH
48 RESPECT TO THE VALUE OF REAL ESTATE THAT IS COVERED BY A HOME LOAN OR
49 THAT IS BEING OFFERED AS SECURITY IN ACCORDANCE WITH AN APPLICATION FOR
50 A HOME LOAN.
51 (E) FINANCING CREDIT INSURANCE. NO LENDER OR MORTGAGE BROKER SHALL
52 REQUIRE OR ALLOW THE ADVANCE COLLECTION OF A PREMIUM FOR ANY DISABILITY,
53 UNEMPLOYMENT, PROPERTY, LIFE OR HEALTH INSURANCE IN CONNECTION WITH ANY
54 HOME LOAN.
55 (F) LANGUAGE TRANSLATION. IF THE DISCUSSIONS BETWEEN A LENDER OR MORT-
56 GAGE BROKER AND A BORROWER REGARDING A HOME LOAN ARE CONDUCTED PRIMARILY
A. 6828 4
1 IN A LANGUAGE OTHER THAN ENGLISH, THE LENDER OR MORTGAGE BROKER SHALL,
2 AT LEAST FORTY-EIGHT HOURS PRIOR TO CLOSING, PROVIDE AN ADDITIONAL COPY
3 OF ALL INFORMATION REQUIRED TO BE DISCLOSED TO THE BORROWER UNDER THE
4 FEDERAL TRUTH IN LENDING ACT, 15 U.S.C. 1601 ET SEQ., TRANSLATED INTO
5 THE LANGUAGE IN WHICH DISCUSSIONS WERE PRIMARILY CONDUCTED. THE LENDER
6 SHALL NOT CHARGE A FEE FOR ANY TRANSLATED DOCUMENT REQUIRED BY THIS
7 PARAGRAPH.
8 (G) FALSE INFORMATION ON CREDIT APPLICATIONS. NO LENDER OR MORTGAGE
9 BROKER, OR ANY LOAN OFFICER OR OTHER EMPLOYEE OF A LENDER OR MORTGAGE
10 BROKER, MAY KNOWINGLY PERMIT, ENCOURAGE OR ASSIST A CONSUMER TO SUBMIT
11 FALSE INFORMATION ON ANY APPLICATION FOR CREDIT. NO LENDER OR MORTGAGE
12 BROKER, OR ANY LOAN OFFICER OR OTHER EMPLOYEE OF A LENDER OR MORTGAGE
13 BROKER MAY KNOWINGLY FALSIFY, OR IN ANY WAY PERMIT, CAUSE OR ENABLE
14 FALSIFIED INFORMATION TO BE INCLUDED ON A CONSUMER'S APPLICATION.
15 3. (A) SUB-PRIME HOME LOAN MORTGAGES SHALL INCLUDE A LEGEND ON TOP OF
16 THE MORTGAGE IN TWELVE-POINT TYPE STATING "THIS LOAN IS A SUB-PRIME HOME
17 LOAN AND IS SUBJECT TO THE NEW YORK SUB-PRIME PREDATORY LENDING
18 PREVENTION ACT".
19 (B) THE LENDER SHALL REPORT BOTH THE FAVORABLE AND UNFAVORABLE PAYMENT
20 HISTORY OF THE BORROWER TO A NATIONALLY RECOGNIZED CONSUMER CREDIT
21 BUREAU AT LEAST ANNUALLY DURING SUCH PERIOD AS THE LENDER HOLDS OR
22 SERVICES THE SUB-PRIME HOME LOAN.
23 4. THE PROVISIONS OF THIS SECTION SHALL APPLY TO ANY PERSON WHO IN BAD
24 FAITH ATTEMPTS TO AVOID THE APPLICATION OF THIS SECTION BY ANY SUBTER-
25 FUGE, INCLUDING BUT NOT LIMITED TO SPLITTING OR DIVIDING ANY LOAN TRANS-
26 ACTION INTO SEPARATE PARTS FOR THE PURPOSE OF EVADING THE PROVISIONS OF
27 THIS SECTION.
28 5. A LENDER OF A SUB-PRIME HOME LOAN THAT, WHEN ACTING IN GOOD FAITH,
29 FAILS TO COMPLY WITH THE PROVISIONS OF THIS SECTION, WILL NOT BE DEEMED
30 TO HAVE VIOLATED THIS SECTION IF THE LENDER ESTABLISHES THAT EITHER:
31 (A) WITHIN THIRTY DAYS OF THE LOAN CLOSING AND PRIOR TO THE INSTITU-
32 TION OF ANY ACTION UNDER THIS SECTION, THE BORROWER IS NOTIFIED OF THE
33 COMPLIANCE FAILURE, APPROPRIATE RESTITUTION IS MADE, AND WHATEVER
34 ADJUSTMENTS ARE NECESSARY ARE MADE TO THE LOAN TO EITHER, AT THE CHOICE
35 OF THE BORROWER, (I) MAKE THE SUB-PRIME HOME LOAN SATISFY THE REQUIRE-
36 MENTS OF THIS SECTION, OR (II) CHANGE THE TERMS OF THE LOAN IN A MANNER
37 BENEFICIAL TO THE BORROWER SO THAT THE LOAN IS NO LONGER A SUB-PRIME
38 HOME LOAN SUBJECT TO THE PROVISIONS OF THIS SECTION; OR
39 (B) THE COMPLIANCE FAILURE RESULTED FROM A BONA FIDE ERROR NOTWITH-
40 STANDING THE MAINTENANCE OF PROCEDURES REASONABLY ADAPTED TO AVOID SUCH
41 ERRORS AND, WITHIN SIXTY DAYS AFTER THE DISCOVERY OF THE COMPLIANCE
42 FAILURE AND PRIOR TO THE INSTITUTION OF ANY ACTION UNDER THIS SECTION OR
43 THE RECEIPT OF WRITTEN NOTICE OF THE COMPLIANCE FAILURE, THE BORROWER
44 IS NOTIFIED OF THE COMPLIANCE FAILURE, APPROPRIATE RESTITUTION IS MADE,
45 AND WHATEVER ADJUSTMENTS ARE NECESSARY ARE MADE TO THE LOAN TO EITHER,
46 AT THE CHOICE OF THE BORROWER, (I) MAKE THE SUB-PRIME HOME LOAN SATISFY
47 THE REQUIREMENTS OF THIS SECTION, OR (II) CHANGE THE TERMS OF THE LOAN
48 IN A MANNER BENEFICIAL TO THE BORROWER SO THAT THE LOAN IS NO LONGER A
49 SUB-PRIME HOME LOAN SUBJECT TO THE PROVISIONS OF THIS SECTION. EXAMPLES
50 OF A BONA FIDE ERROR INCLUDE CLERICAL, CALCULATION, COMPUTER MALFUNCTION
51 AND PROGRAMMING, AND PRINTING ERRORS. AN ERROR OF LEGAL JUDGMENT WITH
52 RESPECT TO A PERSON'S OBLIGATIONS UNDER THIS SECTION IS NOT A BONA FIDE
53 ERROR.
54 6. THE ATTORNEY GENERAL, THE SUPERINTENDENT, OR ANY PARTY TO A
55 SUB-PRIME HOME LOAN MAY ENFORCE THE PROVISIONS OF THIS SECTION.
A. 6828 5
1 7. A PRIVATE ACTION AGAINST THE LENDER OR MORTGAGE BROKER PURSUANT TO
2 THIS SECTION MUST BE COMMENCED WITHIN SIX YEARS OF ORIGINATION OF THE
3 SUB-PRIME HOME LOAN.
4 8. ANY PERSON FOUND BY A PREPONDERANCE OF THE EVIDENCE TO HAVE
5 VIOLATED THIS SECTION SHALL BE LIABLE TO THE BORROWER FOR THE FOLLOW-
6 ING:
7 (A) ACTUAL DAMAGES, INCLUDING CONSEQUENTIAL AND INCIDENTAL DAMAGES;
8 AND
9 (B) STATUTORY DAMAGES OF FIVE THOUSAND DOLLARS PER VIOLATION OR TWICE
10 THE AMOUNT OF POINTS AND FEES AND CLOSING COSTS AS DEFINED IN THIS
11 SECTION, WHICHEVER IS GREATER.
12 9. A COURT MAY ALSO AWARD REASONABLE ATTORNEYS' FEES TO A PREVAILING
13 BORROWER.
14 10. IN ADDITION, THE COURT SHALL, AS IT MAY CONSIDER APPROPRIATE:
15 (A) ISSUE AN ORDER OR INJUNCTION RESCINDING A HOME MORTGAGE LOAN
16 CONTRACT WHICH VIOLATES THIS SECTION, OR BARRING THE LENDER FROM
17 COLLECTING UNDER ANY HOME MORTGAGE LOAN WHICH VIOLATES THIS SECTION;
18 (B) ISSUE AN ORDER OR INJUNCTION BARRING ANY JUDICIAL OR NONJUDICIAL
19 FORECLOSURE OR OTHER LENDER ACTION UNDER THE MORTGAGE OR DEED OF TRUST
20 SECURING ANY HOME MORTGAGE LOAN WHICH VIOLATES THIS SECTION;
21 (C) ISSUE AN ORDER OR INJUNCTION REFORMING THE TERMS OF THE HOME MORT-
22 GAGE LOAN TO CONFORM TO THIS SECTION;
23 (D) ISSUE AN ORDER OR INJUNCTION ENJOINING A LENDER FROM ENGAGING IN
24 ANY PROHIBITED CONDUCT; OR
25 (E) IMPOSE SUCH OTHER RELIEF, INCLUDING INJUNCTIVE RELIEF, AS THE
26 COURT MAY CONSIDER JUST AND EQUITABLE.
27 11. (A) ANY PERSON FOUND TO HAVE KNOWINGLY AND DELIBERATELY VIOLATED
28 ANY PROVISION OF THIS SECTION MAY BE CRIMINALLY LIABLE FOR A FINE OF
29 LESS THAN FIVE THOUSAND DOLLARS, COMMUNITY SERVICE OF NOT MORE THAN FIVE
30 HUNDRED HOURS OR IMPRISONMENT NOT EXCEEDING SIX MONTHS, OR ANY COMBINA-
31 TION THEREOF.
32 (B) FOR ANY SECOND OR SUBSEQUENT VIOLATION HE OR SHE MAY BE CRIMINALLY
33 LIABLE FOR A FINE OF LESS THAN TEN THOUSAND DOLLARS, COMMUNITY SERVICE
34 OF NOT MORE THAN ONE THOUSAND HOURS OR IMPRISONMENT NOT EXCEEDING TWELVE
35 MONTHS, OR ANY COMBINATION THEREOF.
36 12. IT IS A VIOLATION OF THIS SECTION FOR ANY PERSON TO ATTEMPT IN BAD
37 FAITH TO AVOID THE PROVISIONS OF THIS SECTION BY DIVIDING ANY LOAN TRAN-
38 SACTION INTO SEPARATE PARTS OR STRUCTURING A RESIDENTIAL MORTGAGE LOAN
39 TRANSACTION AS AN OPEN-END LOAN FOR THE PURPOSE OF EVADING THE
40 PROVISIONS OF THIS SECTION WHEN THE LOAN WOULD HAVE BEEN A HIGH-RATE
41 MORTGAGE HAD IT BEEN STRUCTURED AS A CLOSED-END LOAN OR BY ENGAGING IN
42 ANY OTHER SUBTERFUGE WITH THE INTENT OF EVADING ANY PROVISION OF THIS
43 SECTION.
44 13. UPON A FINDING BY THE COURT OF AN INTENTIONAL VIOLATION BY THE
45 LENDER OF THIS SECTION, OR REGULATION THEREUNDER, THE HOME LOAN AGREE-
46 MENT SHALL BE RENDERED VOID, AND THE LENDER SHALL HAVE NO RIGHT TO
47 COLLECT, RECEIVE OR RETAIN ANY PRINCIPAL, INTEREST, OR OTHER CHARGES
48 WHATSOEVER WITH RESPECT TO THE LOAN, AND THE BORROWER MAY RECOVER ANY
49 PAYMENTS MADE UNDER THE AGREEMENT.
50 14. UPON A JUDICIAL FINDING THAT A SUB-PRIME HOME LOAN VIOLATES ANY
51 PROVISION OF THIS SECTION, WHETHER SUCH VIOLATION IS RAISED AS AN AFFIR-
52 MATIVE CLAIM OR AS A DEFENSE, THE LOAN TRANSACTION MAY BE RESCINDED.
53 SUCH REMEDY OF RESCISSION SHALL BE AVAILABLE AS A DEFENSE WITHOUT TIME
54 LIMITATION.
55 15. THE REMEDIES PROVIDED IN THIS SECTION ARE NOT INTENDED TO BE THE
56 EXCLUSIVE REMEDIES AVAILABLE TO A BORROWER OF A SUB-PRIME HOME LOAN.
A. 6828 6
1 16. IN ANY ACTION BY AN ASSIGNEE TO ENFORCE A LOAN AGAINST A BORROWER
2 IN DEFAULT MORE THAN SIXTY DAYS OR IN FORECLOSURE, A BORROWER MAY ASSERT
3 ANY CLAIMS IN RECOUPMENT AND DEFENSES TO PAYMENT UNDER THE PROVISIONS
4 OF THIS SECTION AND WITH RESPECT TO THE LOAN, WITHOUT TIME LIMITATIONS,
5 THAT THE BORROWER COULD ASSERT AGAINST THE ORIGINAL LENDER OF THE LOAN.
6 17. NO LENDER MAY MAKE OR CAUSE TO MAKE, DIRECTLY OR INDIRECTLY, ANY
7 FALSE, DECEPTIVE OR MISLEADING STATEMENT OR REPRESENTATION IN CONNECTION
8 WITH A RESIDENTIAL LOAN TRANSACTION INCLUDING, BUT NOT LIMITED TO, A
9 FALSE, DECEPTIVE OR MISLEADING STATEMENT OR REPRESENTATION REGARDING THE
10 BORROWER'S ABILITY TO QUALIFY FOR ANY MORTGAGE PRODUCT.
11 18. (A) ALL LENDERS AND MORTGAGE BROKERS OFFERING SUB-PRIME HOME LOAN
12 PRODUCTS SHALL FILE AN ELECTRONIC REPORT WITH THE DEPARTMENT DETAILING
13 EACH LOAN AGREEMENT.
14 (B) SUCH LENDERS AND MORTGAGE BROKERS SHALL FILE A REPORT WITH THE
15 DEPARTMENT IN INSTANCES OF LOAN DEFAULT OR FORECLOSURE WITHIN THIRTY
16 DAYS OF SUCH DEFAULT OR DISCLOSURE. THE DEPARTMENT SHALL DEVELOP RULES
17 AND REGULATIONS FOR SUCH REPORTS AND MAKE SUMMARY TABLES BY LENDER AND
18 BROKER AVAILABLE ON THE DEPARTMENT'S OFFICIAL WEBSITE.
19 19. LENDERS AND MORTGAGE BROKERS SHALL FILE A REPORT WITH THE DEPART-
20 MENT THAT DETAILS THE NUMBER OF HIGH-COST HOME LOANS THEY HAVE MADE OVER
21 THE PAST FIVE YEARS AND THE NUMBER OF SUCH LOANS THAT HAVE ENDED IN
22 DEFAULT OR FORECLOSURE. THIS DATA SHALL BE PROVIDED STATEWIDE, BY COUN-
23 TY, AND ZIP CODE. THE DEPARTMENT SHALL BE REQUIRED TO PRODUCE AND POST
24 THIS DATA TO ITS OFFICIAL STATE WEBSITE IN A SEARCHABLE FORM.
25 20. THE FOLLOWING INFORMATION SHALL BE DISCLOSED AND PROVIDED AT LEAST
26 THREE BUSINESS DAYS PRIOR TO CLOSING A HIGH-COST HOME LOAN:
27 (A) THE ANNUAL PERCENTAGE RATE;
28 (B) THE AMOUNT OF THE REGULAR MONTHLY (OR OTHER PERIODIC) PAYMENT AND
29 THE AMOUNT OF ANY BALLOON PAYMENT;
30 (C) FOR VARIABLE RATE LOANS, A STATEMENT THAT THE INTEREST RATE AND
31 MONTHLY PAYMENT MAY INCREASE, AND THE AMOUNT OF THE MAXIMUM MONTHLY
32 PAYMENT BASED UPON THE MAXIMUM INTEREST RATE;
33 (D) A COPY OF THE REPORT REQUIRED BY SUBDIVISION NINETEEN OF THIS
34 SECTION, INCLUDING DATA FOR THE RELEVANT COUNTY AND ZIP CODE; AND
35 (E) CONTACT INFORMATION FOR THE DEPARTMENT INCLUDING THE INTERNET
36 ADDRESS TO ACCESS THE DEPARTMENT'S POSTINGS OF INFORMATION ON HIGH-COST
37 MORTGAGES PURSUANT TO SUBDIVISIONS EIGHTEEN AND NINETEEN OF THIS
38 SECTION; AND
39 (F) A NOTICE THAT READS AS FOLLOWS: "YOU ARE NOT REQUIRED TO COMPLETE
40 THIS AGREEMENT MERELY BECAUSE YOU HAVE RECEIVED THESE DISCLOSURES OR
41 HAVE SIGNED A LOAN APPLICATION. IF YOU OBTAIN THIS LOAN, THE LENDER WILL
42 HAVE A MORTGAGE ON YOUR HOME. YOU COULD LOSE YOUR HOME AND ANY MONEY YOU
43 HAVE PUT INTO IT IF YOU DO NOT MEET YOUR OBLIGATIONS UNDER THE LOAN."
44 21. THE PROVISIONS OF THIS SECTION SHALL BE SEVERABLE, AND IF ANY
45 PHRASE, CLAUSE, SENTENCE, OR PROVISION IS DECLARED TO BE INVALID, OR IS
46 PREEMPTED BY FEDERAL LAW OR REGULATION, THE VALIDITY OF THE REMAINDER OF
47 THIS SECTION SHALL NOT BE AFFECTED THEREBY. IF ANY PROVISION OF THIS
48 SECTION IS DECLARED TO BE INAPPLICABLE TO ANY SPECIFIC CATEGORY, TYPE,
49 OR KIND OF POINTS AND FEES, THE PROVISIONS OF THIS SECTION SHALL NONE-
50 THELESS CONTINUE TO APPLY WITH RESPECT TO ALL OTHER POINTS AND FEES.
51 S 3. Section 1302 of the real property actions and proceedings law is
52 amended by adding a new subdivision 3 to read as follows:
53 3. ANY COMPLAINT SERVED IN A PROCEEDING INITIATED PURSUANT TO THIS
54 ARTICLE RELATING TO A SUB-PRIME HOME LOAN, AS DEFINED IN SECTION SIX-N
55 OF THE BANKING LAW, MUST CONTAIN AN AFFIRMATIVE ALLEGATION, WHICH ALLE-
56 GATION MUST BE PROVEN TO THE SATISFACTION OF THE COURT BEFORE ENTRY OF
A. 6828 7
1 JUDGMENT BY DEFAULT OR OTHERWISE, THAT THE PLAINTIFF MORTGAGE BANKER OR
2 EXEMPT ORGANIZATION HAS COMPLIED WITH ALL OF THE PROVISIONS OF SECTION
3 FIVE HUNDRED NINETY-FIVE-A AND SECTION SIX-N OF THE BANKING LAW.
4 S 4. The banking law is amended by adding a new section 590-c to read
5 as follows:
6 S 590-C. DUTIES OF MORTGAGE BANKERS AND MORTGAGE BROKERS. 1. IN THE
7 CASE OF A MORTGAGE LOAN, A MORTGAGE BANKER OR MORTGAGE BROKER SHALL BE
8 DEEMED TO HAVE A FIDUCIARY RELATIONSHIP WITH THE CONSUMER AND HE OR SHE
9 SHALL BE SUBJECT TO ALL REQUIREMENTS FOR FIDUCIARIES OTHERWISE APPLICA-
10 BLE UNDER STATE OR FEDERAL LAW.
11 2. EACH MORTGAGE BANKER OR MORTGAGE BROKER SHALL WITH RESPECT TO EACH
12 MORTGAGE LOAN IN WHICH HE OR SHE IS INVOLVED:
13 (A) ACT WITH REASONABLE SKILL, CARE AND DILIGENCE; AND
14 (B) ACT IN GOOD FAITH AND WITH FAIR DEALING IN ANY TRANSACTION, PRAC-
15 TICE OR COURSE OF BUSINESS ASSOCIATED WITH THE MORTGAGE LOAN.
16 3. (A) EACH MORTGAGE BANKER OR MORTGAGE BROKER SHALL, BEFORE ENTERING
17 INTO OR OTHERWISE FACILITATING ANY MORTGAGE LOAN, VERIFY THE REASONABLE
18 ABILITY OF THE BORROWER TO PAY THE PRINCIPAL AND INTEREST ON THE LOAN
19 AND ANY REAL ESTATE TAXES AND HOMEOWNERS INSURANCE FEES AND PREMIUMS.
20 (B) IN THE CASE OF A MORTGAGE LOAN WITH RESPECT TO WHICH THE APPLICA-
21 BLE RATE OF INTEREST MAY VARY, FOR PURPOSES OF PARAGRAPH (A) OF THIS
22 SUBDIVISION, THE ABILITY TO PAY SHALL BE DETERMINED BASED ON THE MAXIMUM
23 POSSIBLE MONTHLY PAYMENT THAT COULD BE DUE FROM THE BORROWER DURING THE
24 FIRST SEVEN YEARS OF THE LOAN TERM, WHICH SHALL BE CALCULATED BY:
25 (I) USING THE MAXIMUM INTEREST RATE ALLOWABLE UNDER THE LOAN; AND
26 (II) ASSUMING NO DEFAULT BY THE BORROWER, A REPAYMENT SCHEDULE WHICH
27 ACHIEVES FULL AMORTIZATION OVER THE LIFE OF THE LOAN.
28 (C) FOR PURPOSES OF PARAGRAPH (A) OF THIS SUBDIVISION, A MORTGAGE
29 BANKER OR MORTGAGE BROKER SHALL BASE A DETERMINATION OF THE ABILITY TO
30 PAY ON:
31 (I) DOCUMENTATION OF THE INCOME AND FINANCIAL RESOURCES OF THE BORROW-
32 ER, INCLUDING TAX RETURNS, PAYROLL RECEIPTS, BANK RECORDS, OR OTHER
33 SIMILARLY RELIABLE DOCUMENTS; AND
34 (II) THE DEBT-TO-INCOME RATIO AND RESIDUAL INCOME OF THE BORROWER, AS
35 DETERMINED UNDER SECTION 36.4337 OF TITLE 38 OF THE CODE OF FEDERAL
36 REGULATIONS, OR ANY SUCCESSOR THERETO.
37 (D) A STATEMENT PROVIDED BY THE BORROWER OF THE INCOME AND FINANCIAL
38 RESOURCES OF THE BORROWER, WITHOUT OTHER DOCUMENTATION REFERRED TO IN
39 PARAGRAPH (C) OF THIS SUBDIVISION, IS NOT SUFFICIENT VERIFICATION FOR
40 PURPOSES OF ASSESSING THE ABILITY OF THE CONSUMER TO PAY.
41 4. (A) IN THE CASE OF A RATE SPREAD MORTGAGE TRANSACTION, THE OBLIGOR
42 SHALL BE REQUIRED TO MAKE MONTHLY PAYMENTS INTO AN ESCROW ACCOUNT
43 ESTABLISHED BY THE MORTGAGE BANKER FOR THE PURPOSE OF PAYING TAXES,
44 HAZARD INSURANCE PREMIUMS, AND, IF APPLICABLE, FLOOD INSURANCE PREMIUMS.
45 (B) THIS SUBDIVISION DOES NOT APPLY IN ANY CASE IN WHICH THE MORTGAGE
46 BANKER REASONABLY BELIEVES THAT, FOLLOWING THE LOAN CLOSING, THE OBLIGOR
47 SHALL BE REQUIRED, OR SHALL CONTINUE TO BE REQUIRED, TO MAKE ESCROW
48 PAYMENTS DESCRIBED IN PARAGRAPH (A) OF THIS SUBDIVISION ON THE PROPERTY
49 SECURING THE LOAN IN CONNECTION WITH ANOTHER LOAN SECURED BY THE SAME
50 PROPERTY.
51 (C) IN ANY CASE IN WHICH A MORTGAGE BROKER SELLS OR DELIVERS A RATE
52 SPREAD MORTGAGE LOAN TO A LENDER, THE LENDER SHALL BE LIABLE FOR THE
53 ACTS, OMISSIONS AND REPRESENTATIONS MADE BY THE MORTGAGE BROKER IN
54 CONNECTION WITH SUCH MORTGAGE LOAN.
55 (D) FOR THE PURPOSES OF THIS SUBDIVISION, THE TERM "RATE SPREAD MORT-
56 GAGE TRANSACTION" MEANS A HOME MORTGAGE LOAN THAT HAS AN ANNUAL PERCENT-
A. 6828 8
1 AGE RATE OF INTEREST THAT EQUALS OR EXCEEDS THE RATE THAT WOULD REQUIRE
2 REPORTING UNDER THE HOME MORTGAGE DISCLOSURE ACT (12 U.S.C. 2801 ET
3 SEQ.) AS A RATE SPREAD LOAN, WITHOUT REGARD TO WHETHER SUCH LOAN IS
4 OTHERWISE SUBJECT TO THE HOME MORTGAGE DISCLOSURE ACT.
5 5. (A) IN CONNECTION WITH A MORTGAGE LOAN, A MORTGAGE BANKER OR MORT-
6 GAGE BROKER MAY NOT STEER, COUNSEL, OR DIRECT A CONSUMER TO RATES,
7 CHARGES, PRINCIPAL AMOUNT, OR PREPAYMENT TERMS THAT ARE NOT REASONABLY
8 ADVANTAGEOUS TO THE CONSUMER, IN LIGHT OF ALL OF THE CIRCUMSTANCES ASSO-
9 CIATED WITH THE TRANSACTION, INCLUDING THE CHARACTERISTICS OF THE PROP-
10 ERTY THAT SECURES OR WILL SECURE THE EXTENSION OF CREDIT AND THE LOAN
11 TERMS FOR WHICH THE CONSUMER QUALIFIES.
12 (B) IF UNABLE TO SUGGEST, OFFER, OR RECOMMEND TO A CONSUMER A REASON-
13 ABLY ADVANTAGEOUS HOME LOAN, A MORTGAGE BANKER OR MORTGAGE BROKER SHALL:
14 (I) BASED ON THE INFORMATION REASONABLY AVAILABLE AND USING THE SKILL,
15 CARE, AND DILIGENCE REASONABLY EXPECTED FOR A MORTGAGE BANKER OR MORT-
16 GAGE BROKER, ORIGINATE OR OTHERWISE FACILITATE A REASONABLY ADVANTAGEOUS
17 HOME MORTGAGE LOAN BY ANOTHER CREDITOR TO A CONSUMER, IF PERMITTED BY
18 AND IN ACCORDANCE WITH ALL OTHERWISE APPLICABLE LAW; OR
19 (II) DISCLOSE TO A CONSUMER:
20 (A) THAT THE CREDITOR DOES NOT OFFER A MORTGAGE LOAN THAT WOULD BE
21 REASONABLY ADVANTAGEOUS TO A CONSUMER, BUT THAT OTHER CREDITORS MAY
22 OFFER SUCH A LOAN; AND
23 (B) THE REASONS THAT THE PRODUCTS AND SERVICES OFFERED BY THE MORTGAGE
24 BANKER OR MORTGAGE BROKER ARE NOT AVAILABLE TO OR REASONABLY ADVANTA-
25 GEOUS FOR THE CONSUMER.
26 (C) IN CONNECTION WITH A MORTGAGE LOAN, A MORTGAGE BANKER OR MORTGAGE
27 BROKER MAY NOT:
28 (I) MISCHARACTERIZE THE CREDIT HISTORY OF A CONSUMER OR THE HOME LOANS
29 AVAILABLE TO A CONSUMER;
30 (II) MISCHARACTERIZE OR SUBORN MISCHARACTERIZATION OF THE APPRAISED
31 VALUE OF THE PROPERTY SECURING THE EXTENSION OF CREDIT; OR
32 (III) IF UNABLE TO SUGGEST, OFFER, OR RECOMMEND TO A CONSUMER A
33 REASONABLY ADVANTAGEOUS MORTGAGE LOAN, DISCOURAGE A CONSUMER FROM SEEK-
34 ING A HOME MORTGAGE LOAN FROM ANOTHER CREDITOR OR WITH ANOTHER MORTGAGE
35 BANKER OR MORTGAGE BROKER.
36 (D) NOTHING IN THIS SUBDIVISION SHALL BE DEEMED TO PROHIBIT A MORTGAGE
37 BANKER OR MORTGAGE BROKER FROM PROVIDING A CONSUMER WITH ACCURATE,
38 UNBIASED, GENERAL INFORMATION ABOUT HOME MORTGAGE LOANS, UNDERWRITING
39 STANDARDS, WAYS TO IMPROVE CREDIT HISTORY, OR ANY OTHER MATTER RELEVANT
40 TO A CONSUMER.
41 6. (A) NO MORTGAGE BANKER OR MORTGAGE BROKER MAY ENTER INTO A MORTGAGE
42 LOAN WITH RESPECT TO WHICH THE MORTGAGE BANKER OR MORTGAGE BROKER HAS
43 REASON TO BELIEVE THAT, WITH RESPECT TO THE APPRAISAL OF THE VALUE OF
44 THE PROPERTY SECURING THE LOAN:
45 (I) THE APPRAISER FAILED TO ACT IN GOOD FAITH AND FAIR DEALING WITH
46 RESPECT TO THE CONSUMER IN CONNECTION WITH THE APPRAISAL;
47 (II) THE APPRAISAL WAS CONDUCTED OTHER THAN IN ACCORDANCE WITH ALL
48 APPLICABLE STATE AND FEDERAL STANDARDS REQUIRED OF CERTIFIED
49 APPRAISERS, OR WAS OTHERWISE NOT ACCURATE AND REASONABLE;
50 (III) THE APPRAISER HAD A DIRECT OR INDIRECT INTEREST IN THE PROPERTY
51 OR THE TRANSACTION;
52 (IV) THE APPRAISER CHARGED, SOUGHT, OR RECEIVED COMPENSATION FOR THE
53 APPRAISAL, AND THE APPRAISAL WAS NOT COVERED BY A QUALIFYING BOND; OR
54 (V) THE APPRAISAL ORDER OR ANY OTHER COMMUNICATION IN ANY FORM
55 INCLUDES THE REQUESTED LOAN AMOUNT OR ANY ESTIMATE OF VALUE FOR THE
56 PROPERTY TO SERVE AS COLLATERAL, EITHER EXPRESSED OR IMPLIED.
A. 6828 9
1 (B) NO MORTGAGE BANKER OR MORTGAGE BROKER MAY, WITH RESPECT TO A HOME
2 MORTGAGE LOAN, IN ANY WAY:
3 (I) SEEK TO INFLUENCE AN APPRAISER OR OTHERWISE TO ENCOURAGE A TARGET-
4 ED VALUE IN ORDER TO FACILITATE THE MAKING OR PRICING OF THE MORTGAGE
5 LOAN; OR
6 (II) SELECT AN APPRAISER ON THE BASIS OF AN EXPECTATION THAT SUCH
7 APPRAISER WOULD PROVIDE A TARGETED VALUE IN ORDER TO FACILITATE THE
8 MAKING OR PRICING OF THE MORTGAGE LOAN.
9 (C) IT SHALL NOT BE A DEFENSE TO ENFORCEMENT OF THE REQUIREMENTS OF
10 THIS SUBDIVISION THAT THE MORTGAGE BANKER OR MORTGAGE BROKER USED ANOTH-
11 ER PERSON IN THE APPRAISAL PROCESS OR TO REVIEW THE APPRAISAL PROCESS.
12 (D) IN ANY CASE IN WHICH AN APPRAISAL IS PERFORMED IN CONNECTION WITH
13 A MORTGAGE LOAN, THE MORTGAGE ORIGINATOR SHALL PROVIDE A COPY OF THE
14 APPRAISAL REPORT TO AN APPLICANT FOR A MORTGAGE LOAN, WHETHER CREDIT IS
15 GRANTED, DENIED, OR THE APPLICATION WAS WITHDRAWN.
16 S 5. Subdivision 1 of section 14 of the banking law is amended by
17 adding a new paragraph (r) to read as follows:
18 (R) TO CREATE AND MAINTAIN A LIST DISCLOSING BORROWER'S RIGHTS ON THE
19 DEPARTMENT'S WEBSITE.
20 S 6. This act shall take effect on the one hundred eightieth day after
21 it shall have become a law and shall apply only to loans for which
22 application is made on or after such effective date; provided, however,
23 that the superintendent of banks is authorized to promulgate any and all
24 rules and regulations and take any other measures necessary to implement
25 this act on its effective date on or before such date.
