Prohibits certain financial institutions from charging a fee for making monthly, semi-monthly, and biweekly payments or for changing the frequency of mortgage payments.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A9588B
SPONSOR: Torres TITLE OF BILL:
An act to amend the banking law, in relation to prohibiting certain
financial institutions from charging fees based on the frequency of
mortgage payments or changing such payment schedule
PURPOSE OR GENERAL IDEA OF BILL:
To prohibit mortgage payment servicers from restricting or charging fees
to mortgagors who choose to change their mortgage payment schedule, and
to require mortgage payment servicers to provide borrowers with clear
information about payment options and potential interest savings. This
legislation will protect homeowners from unnecessary and predatory fees
while promoting transparency and consumer choice.
SUMMARY OF PROVISIONS:
SECTION 1:
Amends the Banking Law by adding a new section 9-aa.
SUBDIVISION I. DEFINITIONS
-Defines "mortgage payment servicer," "monthly," "semi-monthly," and
"biweekly."
SUBDIVISION 2. FEES PROHIBITED
-Prohibits any mortgage payment servicer from charging a fee to a
borrower for electing to pay their mortgage on a monthly, semi-monthly,
or biweekly basis.
- Prohibited fees include, without limitation, charges for switching
between payment schedules or requiring additional mortgage payments as a
condition of changing payment frequency.
SUBDIVISION 3. CHANGES TO PAYMENT SCHEDULE PERMITTED
-Prohibits mortgage payment servicers from prohibiting a mortgagor from
electing to pay a mortgage on a monthly, semi-monthly, or biweekly sche-
dule.
-Permits reasonable adjustments to implement a change in payment sched-
ule, including adjustments to align payment due dates or escrow obli-
gations, provided such adjustments are not unreasonably restrictive.
SUBDIVISION 4. DISCLOSURE
-Requires mortgage payment servicers to, upon mortgagor request, provide
an amortization schedule, information on potential interest savings from
alternative mortgage payment schedules, and clear instructions for
changing mortgage payment schedules.
-Requires the Department of Financial Services to develop a standardized
notice of mortgagor rights under this section, to be provided by mort-
gage payment servicers when servicing begins or upon mortgagor request.
SUBDIVISION 5. SEVERABILITY
-Includes a severability clause providing that any valid provisions
remain in effect if other provisions are held invalid.
SUBDIVISION 6. PREEMPTION
-Establishes that federal law preempts state law in case of a conflict.
SUBDIVISION 7. PENALTIES
-Provides that violations are subject to the enforcement authority,
penalties, and remedies available to the Department of Financial
Services.
SECTION 2: EFFECTIVE DATE:
-Provides that this act shall take effect one hundred eighty days after
becoming law and shall apply to mortgages serviced on or after the
effective date.
JUSTIFICATION:
Many homeowners seek to change the frequency of their mortgage payments,
such as moving from monthly to biweekly payments, to better align with
their pay schedules or to reduce the total interest paid over the life
of the loan. Despite the potential benefits to borrowers, some financial
institutions impose fees or additional requirements that effectively
penalize consumers for choosing these options.
These fees serve no legitimate purpose and function as junk fees that
increase housing costs for families already facing affordability chal-
lenges. Requiring additional payments or charging administrative fees
for payment frequency changes creates unnecessary financial barriers and
undermines consumer financial stability.
This bill ensures that homeowners can choose the payment schedule that
works best for their financial circumstances without incurring punitive
or arbitrary charges. By also requiring lender to provide clear amorti-
zation and interest- savings information, the bill empowers consumers
to' make informed decisions about their mortgagees and promotes trans-
parency in mortgage servicing practices.
PRIOR LEGISLATIVE HISTORY:
This is a new bill.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law and shall apply to mortgage loans serviced on or
after the effective date.
