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

                                  6756

                       2009-2010 Regular Sessions

                          I N  A S S E M B L Y

                             March 12, 2009
                               ___________

Introduced by M. of A. BRENNAN, CLARK, JEFFRIES, ORTIZ, ROBINSON, ROSEN-
  THAL,  DIAZ, PERRY, CAMARA, CAHILL, GALEF, J. RIVERA, P. RIVERA, SCAR-
  BOROUGH, BOYLAND, N. RIVERA,  BRODSKY,  LANCMAN,  KAVANAGH,  DINOWITZ,
  RAMOS,  MAISEL,  ESPAILLAT,  HOOPER, ENGLEBRIGHT, SPANO -- Multi-Spon-
  sored by -- M. of A. ABBATE, ALESSI, ALFANO, ARROYO, AUBRY, BENEDETTO,
  BENJAMIN, BING,  BROOK-KRASNY,  COLTON,  COOK,  CYMBROWITZ,  DelMONTE,
  DESTITO,  EDDINGTON,  FIELDS,  GABRYSZAK,  GLICK,  GOTTFRIED,  GREENE,
  HEASTIE, HOYT, HYER-SPENCER,  JACOBS,  JAFFEE,  JOHN,  KELLNER,  KOON,
  LENTOL,  LIFTON,  V. LOPEZ,  LUPARDO, MARKEY, McENENY, MILLMAN, NOLAN,
  PEOPLES, PERALTA, PHEFFER, POWELL, PRETLOW, QUINN,  REILLY,  SALADINO,
  SCHIMEL,  SWEENEY,  TITUS, WALKER, WEISENBERG, WRIGHT -- read once and
  referred to the Committee on Judiciary

AN ACT to amend the  real  property  actions  and  proceedings  law,  in
  relation to providing foreclosure relief; 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:

  Section 1. Legislative intent. The legislature declares that a  public
emergency  exists  in  regards  to  real  estate foreclosures due to the
extension of fundamentally unaffordable  mortgage  loans,  fundamentally
unaffordable second mortgages and fundamentally unaffordable home equity
loans.  Many  such  loans  were  extended  under conditions which evince
deception, misrepresentation and fraud on the part of many  lenders  and
agents.  This  is  particularly true of loans which qualify as subprime.
The presence of such subprime loans is distorting  the  New  York  state
real  estate  market.  The problems associated with these subprime loans
are adversely affecting availability of capital, the demand for housing,
and the value of real estate. The financial  problems  created  by  such
subprime  loans  threaten to spill over into the rest of the real estate
market and the general economy. It is in the interest of New York  state
to  ensure the rights of all parties are protected and that all foreclo-

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD07381-01-9
              

A. 6756                             2

sures which come into the New York courts during this period  are  care-
fully scrutinized.
  S  2.  The  real  property  actions  and proceedings law is amended by
adding a new section 1305 to read as follows:
  S 1305. FORECLOSURES; COURT RELIEF. 1. VENUE. IN ANY ACTION  TO  FORE-
CLOSE A MORTGAGE UNDER THIS ARTICLE A MORTGAGOR NAMED IN SUCH ACTION MAY
APPLY FOR RELIEF IN STATE SUPREME COURT PURSUANT TO THIS SECTION.
  2. TIMING OF YEAR-LONG MORATORIUM. IF A MORTGAGEE HAS OTHERWISE ESTAB-
LISHED  ITS LEGAL RIGHT TO JUDGMENT ON AN ACTION TO FORECLOSE A MORTGAGE
PURSUANT TO THIS CHAPTER, THEN SUCH ACTION SHALL BE HELD IN ABEYANCE  BY
THE  COURT  BEFORE  WHICH SUCH ACTION IS PENDING. SUCH PERIOD OF TIME IS
INTENDED TO PERMIT THE PARTIES TO SETTLE THE ACTION OUTSIDE OF COURT AND
TO FORESTALL FORECLOSURE WITHIN THE CURRENT ECONOMIC CLIMATE.
  3. PROCESS AND FEES. IF AN ACTION TO FORECLOSE  A  MORTGAGE  HAS  BEEN
COMMENCED  PRIOR  TO THE EFFECTIVE DATE OF THIS SECTION, A MORTGAGOR MAY
ASK THE COURT BEFORE WHICH SUCH ACTION IS COMMENCED TO HOLD SUCH  ACTION
IN  ABEYANCE  PURSUANT  TO  SUBDIVISION  TWO OF THIS SECTION. MOTIONS ON
NOTICE IN ACCORDANCE WITH THE CIVIL PRACTICE LAW AND RULES MADE  BY  THE
MORTGAGOR  SHALL  BE DEEMED TO HAVE BEEN FILED BY A POOR PERSON PURSUANT
TO ARTICLE ELEVEN OF THE CIVIL PRACTICE LAW AND RULES AND ALL COURT FEES
OTHERWISE APPLICABLE TO SUCH ACTIONS AND PAYABLE BY A MORTGAGOR SHALL BE
WAIVED.  IF A FORECLOSURE ACTION HAS NOT BEEN  COMMENCED  PRIOR  TO  THE
EFFECTIVE  DATE  OF THIS SECTION, A MORTGAGOR MUST COMMENCE AN ACTION IN
STATE SUPREME COURT BY FILING AND SERVING A SUMMONS PURSUANT TO  ARTICLE
THREE  OF  THE  CIVIL  PRACTICE  LAW AND RULES WITH A REQUEST FOR RELIEF
PURSUANT TO THE TERMS OF THIS SECTION. IN SUCH CASE, SUCH  FILING  SHALL
BE DEEMED TO HAVE BEEN FILED BY A POOR PERSON PURSUANT TO ARTICLE ELEVEN
OF THE CIVIL PRACTICE LAW AND RULES AND ALL FILING AND COURT FEES OTHER-
WISE  APPLICABLE  TO SUCH ACTIONS AND PAYABLE BY A MORTGAGOR IN THE FORM
OF INDEX AND MOTION FEES SHALL BE WAIVED.
  4. PRIMA FACIE CASE. A MORTGAGOR MUST ESTABLISH A PRIMA FACIE CASE  IN
THE  MOTION  OR PLEADING. AMENDMENTS TO SUCH MOTION OR PLEADING SHALL BE
LIBERALLY GRANTED. SUCH PLEADING MUST ESTABLISH THAT:
  A. THE MORTGAGOR IS A NATURAL PERSON; AND
  B. THE DEBT IS INCURRED BY THE MORTGAGOR PRIMARILY FOR PERSONAL, FAMI-
LY OR HOUSEHOLD PURPOSES; AND
  C. THE LOAN IS SECURED BY A MORTGAGE, SECOND MORTGAGE OR  HOME  EQUITY
LOAN  ON  REAL  PROPERTY  WHICH  IS IMPROVED WITH A RESIDENTIAL BUILDING
CONTAINING ONE TO SIX DWELLING UNITS; AND
  D. THE REAL PROPERTY SUBJECT TO FORECLOSURE IS THE PRINCIPAL RESIDENCE
OF THE MORTGAGOR; AND
  E. THE MORTGAGOR OWNS NO OTHER REAL PROPERTY; AND
  F. THE REAL PROPERTY IS LOCATED IN THIS STATE; AND
  G. THE MORTGAGE, SECOND MORTGAGE OR HOME EQUITY LOAN  QUALIFIES  AS  A
SUBPRIME  HOME  LOAN.  A SUBPRIME HOME LOAN FOR A FIRST LIEN LOAN IS ONE
WHICH HAS AN ANNUAL PERCENTAGE RATE OF THREE OR MORE  PERCENTAGE  POINTS
ABOVE  THE  YIELD ON TREASURY SECURITIES OF COMPARABLE MATURITY MEASURED
AS OF THE FIFTEENTH DAY OF THE MONTH PRECEDING THE MONTH  IN  WHICH  THE
APPLICATION FOR THE LOAN IS RECEIVED BY THE LENDER. A SUBPRIME HOME LOAN
FOR  A  SUBORDINATE LIEN LOAN IS ONE WHICH HAS AN ANNUAL PERCENTAGE RATE
OF FIVE OR MORE PERCENTAGE POINTS ABOVE THE YIELD ON TREASURY SECURITIES
OF COMPARABLE MATURITY MEASURED AS OF THE FIFTEENTH  DAY  OF  THE  MONTH
PRECEDING THE MONTH IN WHICH THE APPLICATION FOR THE LOAN IS RECEIVED BY
THE LENDER.
  5.  MONTHLY  PAYMENT  SCHEDULE.  IF A PRIMA FACIE CASE HAS BEEN ESTAB-
LISHED, THE COURT MUST SET FORTH THE TERMS OF A MONTHLY PAYMENT SCHEDULE

A. 6756                             3

WHICH WILL PRESERVE THE RELATIVE FINANCIAL  INTERESTS  OF  BOTH  PARTIES
UNDER  TERMS  WHICH  ARE EQUITABLE AND JUST. TOWARDS THAT END, THE COURT
SHALL INQUIRE INTO THE FINANCES OF BOTH THE MORTGAGEE AND THE MORTGAGOR.
THE  PURPOSE  OF  SUCH  INQUIRY SHALL BE TO DETERMINE THE MINIMUM AMOUNT
NECESSARY TO MAINTAIN THE MORTGAGEE'S FINANCIAL POSITION AND  TO  DETER-
MINE THE AMOUNT WHICH THE MORTGAGOR WILL BE ABLE TO AFFORD.  SUCH MONTH-
LY  PAYMENTS  SHALL  BE  APPLIED  TO THE PRINCIPAL AND INTEREST UPON THE
INDEBTEDNESS.  IF THE FINANCIAL CONDITION OF THE MORTGAGOR  EXCEEDS  THE
MINIMUM AMOUNT NECESSARY TO MAINTAIN THE FINANCIAL POSITION OF THE MORT-
GAGEE, SUCH MONTHLY AMOUNT MAY BE INCREASED BEYOND THE MINIMUM AMOUNT AS
DETERMINED  WITHIN THE DISCRETION OF THE COURT. IT IS WITHIN THE COURT'S
DISCRETION TO DETERMINE WHETHER THE ESTABLISHMENT OF SUCH PAYMENT SCHED-
ULE IS POSSIBLE UNDER TERMS WHICH ARE EQUITABLE AND JUST. THE PURPOSE OF
SUCH MONTHLY PAYMENTS ARE TO PRESERVE THE RELATIVE  FINANCIAL  INTERESTS
OF  BOTH PARTIES UNTIL A SETTLEMENT CAN BE REACHED BUT IN NO EVENT SHALL
SUCH ORDER GOVERN FOR MORE THAN ONE YEAR. FAILURE TO ADHERE TO THE TERMS
OF SUCH SCHEDULE MAY ALSO RESULT IN FORECLOSURE OR LIFTING OF THE  ABEY-
ANCE.    MORE THAN ONE SINGLE YEAR LONG MORATORIUM MAY BE GRANTED IN THE
DISCRETION OF THE COURT SUBJECT TO  THE  FACTS  ESTABLISHED  DURING  THE
PROCEEDINGS.
  6. POSTPONEMENT ORDER. ONCE THE COURT DETERMINES THAT AN EQUITABLE AND
JUST  PAYMENT SCHEDULE CAN BE ESTABLISHED, IT SHALL ISSUE AN ORDER WHICH
SETS FORTH THE TERMS OF SUCH PAYMENT SCHEDULE  AND  SERVE  IT  UPON  ALL
PARTIES  TO THE PROCEEDING. SUCH ORDER SHALL SET FORTH A RETURN DATE FOR
THE REEXAMINATION OF SUCH MATTER AFTER PASSAGE OF THE POSTPONEMENT  TIME
PERIOD  AT  A  FORMAL  HEARING  ON  NOTICE TO THE PARTIES. THE COURT MAY
TAILOR RELIEF AS REQUIRED BY THE FACTS OF EACH CASE  THAT  FALLS  WITHIN
THE PURVIEW OF THIS SECTION. HOWEVER, IN NO EVENT SHALL SUCH ORDER POST-
PONE  FINAL  ACTION  BEYOND  ONE  YEAR  WITHOUT  A RE-EXAMINATION OF THE
PARTIES' FINANCIAL CIRCUMSTANCES AFTER FORMAL HEARING ON NOTICE  TO  THE
PARTIES.  THE  TIME  PERIOD OF SUCH ORDER SHALL RUN FROM THE DATE OF THE
ENTRY OF SUCH ORDER.  SUCH ABEYANCE SHALL NOT BEGIN UNTIL  THE  FORECLO-
SURE PROCESS HAS REACHED THE POINT WHERE A FINAL DETERMINATION IS POSSI-
BLE  BUT  SHALL  BE  WITHHELD UNTIL THE POSTPONEMENT PERIOD HAS ELAPSED.
ENTITLEMENT TO SUCH ABEYANCE MAY BE ESTABLISHED AT ANY  TIME  REGARDLESS
OF  WHETHER FORECLOSURE IS BEING SOUGHT BY THE MORTGAGEE. MULTIPLE POST-
PONEMENTS MAY BE GRANTED IN THE DISCRETION OF THE COURT IF WARRANTED  BY
THE FACTS OF A GIVEN CASE AND THE ECONOMIC CONDITIONS ACROSS THE STATE.
  7. CONTINUING JURISDICTION. THE COURT SHALL MAINTAIN CONTINUING JURIS-
DICTION OF THE MATTER UNTIL IT REACHES FINAL RESOLUTION. UPON THE APPLI-
CATION  OF  EITHER  PARTY,  PRIOR  TO THE EXPIRATION OF THE POSTPONEMENT
PERIOD, UPON PRESENTATION OF EVIDENCE THAT THE TERMS FIXED BY THE  COURT
ARE  NO  LONGER  JUST AND EQUITABLE, THE COURT MAY REVISE AND ALTER SUCH
TERMS IN SUCH MANNER AS THE CHANGED  CIRCUMSTANCES  AND  CONDITIONS  MAY
REQUIRE.
  S  3.  This  act shall take effect immediately and shall expire and be
deemed repealed 3 years after such date.