senate Bill S3779

Signed by Governor

Makes provisions allowing any individual to make limited loans to family members without requiring an individual to obtain a mortgage banking license

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Bill Status


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

  • 03 / Mar / 2011
    • REFERRED TO BANKS
  • 01 / Jun / 2011
    • 1ST REPORT CAL.902
  • 02 / Jun / 2011
    • 2ND REPORT CAL.
  • 06 / Jun / 2011
    • ADVANCED TO THIRD READING
  • 07 / Jun / 2011
    • PASSED SENATE
  • 07 / Jun / 2011
    • DELIVERED TO ASSEMBLY
  • 07 / Jun / 2011
    • REFERRED TO BANKS
  • 04 / Jan / 2012
    • DIED IN ASSEMBLY
  • 04 / Jan / 2012
    • RETURNED TO SENATE
  • 04 / Jan / 2012
    • REFERRED TO BANKS
  • 09 / Jan / 2012
    • 1ST REPORT CAL.1
  • 10 / Jan / 2012
    • 2ND REPORT CAL.
  • 18 / Jan / 2012
    • ADVANCED TO THIRD READING
  • 19 / Jan / 2012
    • PASSED SENATE
  • 19 / Jan / 2012
    • DELIVERED TO ASSEMBLY
  • 19 / Jan / 2012
    • REFERRED TO BANKS
  • 07 / May / 2012
    • SUBSTITUTED FOR A9123
  • 07 / May / 2012
    • ORDERED TO THIRD READING CAL.521
  • 07 / May / 2012
    • PASSED ASSEMBLY
  • 07 / May / 2012
    • RETURNED TO SENATE
  • 21 / May / 2012
    • DELIVERED TO GOVERNOR
  • 31 / May / 2012
    • SIGNED CHAP.47

Summary

Makes provisions allowing any individual to make not more than three mortgage loans, nor more than five in a two year period, to family members without requiring an individual to obtain a mortgage banking license.

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Bill Details

See Assembly Version of this Bill:
A9123
Versions:
S3779
Legislative Cycle:
2011-2012
Law Section:
Banking Law
Laws Affected:
Amd ยง590, Bank L
Versions Introduced in Previous Legislative Cycles:
2009-2010: S3703A, A8083
2007-2008: S2745

Sponsor Memo

BILL NUMBER:S3779

TITLE OF BILL:
An act to amend the banking law, in relation to the requirement for
licensure to make mortgage loans

PURPOSE:
This bill would tighten the mortgage banker licensing exemption,
thereby helping to prevent and address problems resulting from
unregulated residential mortgage loans which are not subject to
existing consumer protections.

SUMMARY:
Section 590(2) of the Banking Law -- which currently exempts from the
mortgage banker licensing requirement any person or entity that does
not make five or more personal mortgage loans in a calendar year is
amended so that the exemption applies only to a person or entity which
makes not more than three loans in a calendar year, or more than five
in a two year period. This subdivision is also amended to provide that
an entity shall not be exempt if any loan is made which was solicited,
processed, placed or negotiated by a mortgage broker, mortgage banker
or exempt organization.

Section 590(5) (b) is amended to provide that mortgage brokers may
solicit, process, place and negotiate mortgage loans only with a
mortgage banker or exempt organization, thereby prohibiting
relationships with unlicensed and unregulated private lenders.

EXISTING LAW:
Section 590(2) of the Banking Law currently prohibits persons or
entities from making five or more mortgage loans in any one calendar
year unless they have obtained a mortgage banker license from the
Superintendent of Banks.

JUSTIFICATION:
In order to protect consumers, legislation was enacted in 1981 to
require the licensing and regulation of persons or entities who make
mortgage loans. This law originally exempted anyone who made fewer
than 20 mortgage loans within any 12 month period.

In 1986, New York's laws governing mortgage banking were overhauled
and strengthened in response to continuing problems and abuses within
the industry. As part of that effort, the licensing exemption was
tightened so that anyone who made five or more mortgage loans in a
calendar year had to be licensed. This revised exemption was intended
to enable persons who are not in the regular business of making such
loans -- such as a. person making a loan to a family member -- to make
occasional mortgage loans without having to be subject to the
statutory and regulatory scheme applicable to those whose primary
occupation is that of a mortgage banker.

Unfortunately, the exemption continues to be subject to abuse by
unscrupulous persons within the mortgage industry. In particular, the
Banking Department has found that certain mortgage brokers have
developed active mortgage businesses by steering consumers to exempt
private lenders that they have recruited, thus exploiting this


exemption. These private loans are not governed by the statutory and
regulatory requirements which have been adopted in New York to protect
consumers from deceptive and abusive lending practices. As a result,
these loans are often made on grossly unfair terms to persons in
distress, with brokers charging excessive points and the lenders
charging the maximum allowable interest rate and structuring the loan
in a manner which typically leads to foreclosure. While the Banking
Department has received complaints about these types of private loans,
they have been unable to provide assistance as these private lenders
are not subject to regulation.

By tightening the licensing exemption, this bill should help ensure
that borrowers are protected from the abusive practices which are
currently being committed by some unlicensed and unregulated private
lenders. Higher risk customers, who are typically involved in these
loans, can be better served by dealing with licensed entities that are
subject to the consumer protections, disclosure requirements and
regulatory structure established by the Banking Law. These borrowers
have an increasing number of legitimate alternatives, from
government-sponsored programs to loans from regulated mortgage
companies which have expanded their market to better serve borrowers
who may have less desirable credit histories.

This bill seeks to ensure that the licensing exemption remains limited
to the person or entity that makes the occasional mortgage loan to
family or friends, rather than persons or entities who engage in such
activities as a business venture. Private lenders who have
relationships with mortgage brokers or mortgage bankers are clearly
involved in the business of making mortgage loans, and should be
regulated to the same extent as other mortgage lenders. Potential
borrowers who have gone to a mortgage broker or banker should be
assured that they will be afforded all of the existing statutory and
regulatory protections applicable to licensed mortgage bankers.

PRIOR LEGISLATIVE HISTORY:
4/21/09 - S.3703-A, advanced to third reading, 5/5/09 - passed Senate,
delivered to Assembly and referred to Assembly Banks, 1/6/10- died in
Assembly, 2/23/10- S.3703-A advanced to third reading, 3/1/10 - passed
Senate, delivered to Assembly and referred to Assembly Banks

FISCAL IMPACT:
None.

EFFECTIVE DATE:
The first of January next succeeding the date on which it shall have
become a law.

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

                                  3779

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                              March 3, 2011
                               ___________

Introduced  by  Sen.  SMITH  -- read twice and ordered printed, and when
  printed to be committed to the Committee on Banks

AN ACT to amend the banking law, in  relation  to  the  requirement  for
  licensure to make mortgage loans

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

  Section 1. Paragraph (a) of subdivision 2 of section 590 of the  bank-
ing  law,  as  amended by chapter 472 of the laws of 2008, is amended to
read as follows:
  (a) No INDIVIDUAL, person, partnership,  association,  corporation  or
other entity shall engage in the business of making [five or more] mort-
gage  loans [in any one calendar year] without first obtaining a license
from the superintendent  in  accordance  with  the  licensing  procedure
provided  in  this article and such regulations as may be promulgated by
the banking board or prescribed by  the  superintendent.  The  licensing
provisions of this subdivision shall not apply to: (I) any exempt organ-
ization [nor to]; (II) any entity or entities which shall be exempted in
accordance  with regulations promulgated by the banking board hereunder;
OR (III) ANY INDIVIDUAL, PERSON, PARTNERSHIP,  ASSOCIATION,  CORPORATION
OR OTHER ENTITY WHICH MAKES NOT MORE THAN THREE SUCH LOANS IN A CALENDAR
YEAR,  NOR  MORE  THAN  FIVE IN A TWO YEAR PERIOD, PROVIDED THAT NO SUCH
MORTGAGE LOANS HAVE BEEN MADE WHICH WERE SOLICITED, PROCESSED, PLACED OR
NEGOTIATED BY A MORTGAGE BROKER, MORTGAGE BANKER OR EXEMPT ORGANIZATION.
  S 2. Paragraph (b) of subdivision 5 of section 590 of the banking law,
as amended by chapter 472 of the laws of 2008, is  amended  to  read  as
follows:
  (b) Mortgage brokers shall solicit, process, place and negotiate mort-
gage loans WITH A MORTGAGE BANKER LICENSED PURSUANT TO THE PROVISIONS OF
THIS  ARTICLE  OR  EXEMPT  ORGANIZATION AS DEFINED HEREIN OR PURSUANT TO
REGULATIONS AS PROMULGATED BY THE BANKING BOARD  OR  PRESCRIBED  BY  THE
SUPERINTENDENT  AND  in  conformity with the provisions of this chapter,

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD09853-01-1

S. 3779                             2

such rules and regulations as may be promulgated by the banking board or
prescribed by the superintendent thereunder and all  applicable  federal
laws and the rules and regulations promulgated thereunder;
  S  3. This act shall take effect on the first of January next succeed-
ing the date on which it shall have become a law.

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