senate Bill S2906

Allows a mortgagor to receive an assignment of mortgage in lieu of a discharge of mortgage when the mortgagor is refinancing an existing loan

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 03 / Feb / 2011
    • REFERRED TO JUDICIARY
  • 01 / Mar / 2011
    • 1ST REPORT CAL.125
  • 02 / Mar / 2011
    • 2ND REPORT CAL.
  • 03 / Mar / 2011
    • ADVANCED TO THIRD READING
  • 14 / Jun / 2011
    • PASSED SENATE
  • 14 / Jun / 2011
    • DELIVERED TO ASSEMBLY
  • 14 / Jun / 2011
    • REFERRED TO JUDICIARY
  • 04 / Jan / 2012
    • DIED IN ASSEMBLY
  • 04 / Jan / 2012
    • RETURNED TO SENATE
  • 04 / Jan / 2012
    • REFERRED TO JUDICIARY
  • 01 / May / 2012
    • 1ST REPORT CAL.623
  • 02 / May / 2012
    • 2ND REPORT CAL.
  • 07 / May / 2012
    • ADVANCED TO THIRD READING
  • 12 / Jun / 2012
    • PASSED SENATE
  • 12 / Jun / 2012
    • DELIVERED TO ASSEMBLY
  • 12 / Jun / 2012
    • REFERRED TO JUDICIARY

Summary

Allows a mortgagor to receive an assignment of mortgage in lieu of a discharge of mortgage when the mortgagor is refinancing an existing loan.

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Bill Details

See Assembly Version of this Bill:
A8300
Versions:
S2906
Legislative Cycle:
2011-2012
Current Committee:
Assembly Judiciary
Law Section:
Real Property Law
Laws Affected:
Amd §275, RP L
Versions Introduced in Previous Legislative Cycles:
2009-2010: S2566, S2566
2011-2012: S2906

Sponsor Memo

BILL NUMBER:S2906

TITLE OF BILL:
An act
to amend the real property law, in relation to allowing an
assignment of mortgage in lieu of a certificate of discharge

PURPOSE:
To allow property owners who have paid off their mortgage as
part of refinancing their property with a new bank to get either a
certificate of discharge or an assignment of the mortgage.

SUMMARY OF SPECIFIC PROVISIONS:
The bill amends subdivision 2 of § 275
of the Real Property Law to allow a property owner who has paid off a
mortgage to demand either an assignment of their mortgage or a
certificate of discharge from the bank which holds the mortgage. The
assignment or certificate of discharge shall be available only for
refinancing purposes thereby preventing the problem of dormant
mortgages. If the mortgagor wishes an assignment rather than a
certificate of discharge, the demand must be made in writing and
state that the reason for the assignment is to effectuate the
refinancing of an existing loan with a new lender. The original
lender shall then assign the note and mortgage securing its payment
to another lender.

JUSTIFICATION:
Prior to 1989, § 275 of the Real Property Law allowed an
owner of property covered by a mortgage to demand an assignment of a
mortgage in lieu of a certificate of discharge whenever the "full
amount of the principal and interest due on the mortgage is tendered
or paid....". In 1989 and 1990, however, RPL § 275 was changed
completely, in large part to curtail the use of "dormant mortgages"
(mortgages used by mortgagors who would pay off their old mortgages
and have them assigned to themselves and would use these same dormant
mortgages to borrow "new" money in order to avoid paying a new
mortgage tax).

When RPL § 275 was changed in 1989, however, despite the fact that the
"new" § 275 still allowed for the possibility of mortgagors getting an
assignment from the original bank, see
RPL § 275.2 (c) and 3, the right of
a mortgagor to demand an assignment of mortgage upon payment in full
-- in lieu of a certificate of discharge -- was deleted from the new
section. Currently, many banks are taking the position that they are
no longer required to deliver an assignment of the mortgage in
connection with a refinancing with a new lender and, when their
mortgage is paid off by a customer refinancing with a different bank,
are delivering certificates of discharge only. This causes mortgagors
who are refinancing existing mortgage debt with a new bank to have to
pay a part of their mortgage tax twice -- not only on the amount
refinanced which is "new debt" (any increase over the amount still
due on the first mortgage), which has not yet been taxed, but on the
"original" mortgage debt as well, which was taxed when the original
mortgage was taken out, likely many
years earlier.


The bill, introduced in the 220th Session (S.2787/A.73,
Lack/Feldman), was vetoed by Governor Cuomo (S.6935-A/A.9115-A; Veto
32 of 1994) and Governor Pataki (S.1298/A.253; Veto
87 of
1996),
both citing the severe loss in mortgage recording tax revenue as the
reason for the veto.
However, these vetoes ignored a memo issued by the Department of
Taxation & Finance on August 3, 1989, to clarify the meaning of RPL
§ 275 when it was amended. That memo outlines the common route an
individual might take to refinance a loan and concludes that
"throughout this chain of events the property remains subject to
the lien of the original mortgage, which collateralizes the debt that
is owed first to the old lender and then to the new lender. The
common refinancing transaction will not
(emphasis added) be subject to
section 275 because the mortgaged property continues at all times to
serve as collateral for a bona fide debt." If there is new debt added
to the loan in the course of refinancing, that part of the debt would
be subject to the mortgage recording tax, and this bill does nothing
to change that.

Since the veto by Governor Pataki in 1996, several Tax Tribunal
decisions and a court decision, City of New York v. NYS Tax
Tribunal,
(231AD2d 267, 660 NYS2d 753), have overturned the argument
that refinancing of a mortgage should require payment of a mortgage
tax on the amount refinanced - which upholds the above explanation
from the Department of Taxation & Finance. Therefore, the argument
that this bill will cause a revenue loss to the state or localities
is inaccurate. In fact, the mortgage taxes collected on refinanced
amounts of mortgages since the law was changed in 1989, were
illegally collected.

This bill allows mortgagors who are refinancing to demand either an
assignment or a certificate of discharge from the original
mortgagee-bank. It would require banks to deliver either an
assignment of mortgage or a certificate of discharge of a mortgage,
at the mortgagor's option, as well as any necessary accompanying
papers or affidavits (see current RPL § 275.3).

LEGISLATIVE HISTORY:
1994 - S.6935-A/A.9115-A
1995 - S.1298/A.253
1996 - S.1298/A.253
1997 - S.2787/A.73
1998 - S.2787/A.73
2001-02 - S.6363/A.9989
2003-04 - S.2287
2005-06 - S.42 Passed Senate
2007-08 - S.1264/A.10469
2009-10 - S.2566

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:


30 days after it shall become a law.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  2906

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                            February 3, 2011
                               ___________

Introduced  by  Sens.  DeFRANCISCO, JOHNSON, LARKIN, RANZENHOFER -- read
  twice and ordered printed, and when printed to  be  committed  to  the
  Committee on Judiciary

AN  ACT  to  amend  the  real  property  law, in relation to allowing an
  assignment of mortgage in lieu of a certificate of discharge

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Subdivision  2 of section 275 of the real property law is
amended by adding a new closing paragraph to read as follows:
  IN THE SITUATION PROVIDED FOR IN PARAGRAPH (C)  OF  THIS  SUBDIVISION,
THE  MORTGAGOR,  AT  HIS  OR  HER OPTION MAY DEMAND AN ASSIGNMENT OF THE
MORTGAGOR'S NOTE AND MORTGAGE SECURING ITS PAYMENT  TO  ANOTHER  LENDER.
THE  ORIGINAL  LENDER  SHALL  ASSIGN  THE  MORTGAGOR'S NOTE AND MORTGAGE
SECURING ITS PAYMENT TO ANOTHER LENDER UPON SUCH DEMAND. THE DEMAND  FOR
THE ASSIGNMENT OF MORTGAGE SHALL BE MADE BY THE MORTGAGOR TO THE MORTGA-
GEE  IN  WRITING  WITHIN  TWENTY  DAYS OF CLOSING ON THE REFINANCING AND
SHALL STATE THAT THE PURPOSE FOR SUCH ASSIGNMENT IS  TO  EFFECTUATE  THE
REFINANCING  OF  THE EXISTING LOAN WITH A NEW LENDER. THE PERSON SIGNING
THE ASSIGNMENT SHALL DELIVER THE ASSIGNMENT AND ANY NECESSARY ACCOMPANY-
ING PAPERS OR AFFIDAVITS AT LEAST TWO DAYS PRIOR TO SUCH CLOSING, TO THE
ESCROW AGENT DESIGNATED BY THE MORTGAGOR AND THE MORTGAGEE  OR  ORIGINAL
LENDER. UPON CLOSING, THE ESCROW AGENT SHALL TRANSMIT THE ASSIGNMENT AND
ANY  NECESSARY  ACCOMPANYING  PAPERS  OR AFFIDAVITS TO THE NEW LENDER OR
MORTGAGEE. THE PROVISIONS OF THIS PARAGRAPH  SHALL  NEITHER  EXPAND  NOR
DIMINISH  THE  LIABILITY  AGAINST  A  MORTGAGEE  WHO, AFTER A GOOD FAITH
EFFORT, IS UNABLE TO DELIVER THE NOTE TO THE ESCROW  AGENT  BECAUSE  THE
NOTE WAS MISPLACED OR LOST.
  S  2.  This  act shall take effect on the thirtieth day after it shall
have become a law.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD03771-01-1

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