A07277 Summary:

BILL NOA07277
 
SAME ASNo same as
 
SPONSORBrennan (MS)
 
COSPNSRScarborough, Jacobs, Millman, Dinowitz, Benedetto, Stevenson, Colton, Galef, Jaffee, Zebrowski, Roberts, Barron, Robinson, Castro, Gibson, Markey, Weprin, Hooper
 
MLTSPNSRAbinanti, 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 NOA07277
 
04/27/2011referred to judiciary
01/04/2012referred to judiciary
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A07277 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A7277
 
SPONSOR: Brennan (MS)
  TITLE OF BILL: An act to amend the real property actions and proceedings law, the banking law and the tax law, in relation to provid- ing 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 main- tain 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 compro- mise 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 mort- gagee. To provide entitlement a mortgagor must establish that they live in the home subject to foreclosure and that they own no other real prop- erty. 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 Fore- closure 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:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          7277
 
                               2011-2012 Regular Sessions
 
                   IN ASSEMBLY
 
                                     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    § 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    § 3. The real property actions  and  proceedings  law  is  amended  by
    31  adding a new section 1308 to read as follows:
    32    §  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    §  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    § 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    §  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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