S T A T E O F N E W Y O R K
________________________________________________________________________
5105
2011-2012 Regular Sessions
I N A S S E M B L Y
February 11, 2011
___________
Introduced by M. of A. BRENNAN, MILLMAN, HOYT, DINOWITZ, MAISEL,
BOYLAND, COLTON, ORTIZ, JAFFEE, REILLY, GABRYSZAK, ZEBROWSKI, JACOBS,
P. RIVERA, WRIGHT, GUNTHER -- Multi-Sponsored by -- M. of A. GLICK,
GOTTFRIED, JEFFRIES, LIFTON, MARKEY, PEOPLES-STOKES, PHEFFER, SCHIMEL,
SWEENEY, WEISENBERG -- read once and referred to the Committee on
Banks
AN ACT to amend the banking law and the real property actions and
proceedings law, in relation to enacting the "New York sub-prime
predatory lending prevention act"
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Short title. This act shall be known as and may be cited as
the "New York sub-prime predatory lending prevention act".
S 2. The banking law is amended by adding a new section 6-n to read as
follows:
S 6-N. SUB-PRIME HOME LOANS. 1. THE FOLLOWING DEFINITIONS APPLY FOR
THE PURPOSES OF THIS SECTION:
(A) "AFFILIATE" MEANS ANY COMPANY THAT CONTROLS, IS CONTROLLED BY, OR
IS UNDER COMMON CONTROL WITH ANOTHER COMPANY, AS SET FORTH IN THE BANK
HOLDING COMPANY ACT OF 1956 (12 U.S.C. S 1841 ET SEQ.), AS AMENDED FROM
TIME TO TIME.
(B) "ANNUAL PERCENTAGE RATE" MEANS THE ANNUAL PERCENTAGE RATE FOR THE
LOAN CALCULATED ACCORDING TO THE PROVISIONS OF THE FEDERAL
TRUTH-IN-LENDING ACT (15 U.S.C. S 1601, ET SEQ.), AND THE REGULATIONS
PROMULGATED THEREUNDER BY THE FEDERAL RESERVE BOARD (AS SAID ACT AND
REGULATIONS ARE AMENDED FROM TIME TO TIME).
(C) "BONA FIDE LOAN DISCOUNT POINTS" MEANS LOAN DISCOUNT POINTS KNOW-
INGLY PAID BY THE BORROWER FUNDED THROUGH ANY SOURCE, FOR THE PURPOSE OF
REDUCING, AND WHICH IN FACT RESULT IN A BONA FIDE REDUCTION OF, THE
INTEREST RATE OR TIME-PRICE DIFFERENTIAL APPLICABLE TO THE LOAN,
PROVIDED THAT THE AMOUNT OF THE INTEREST RATE REDUCTION PURCHASED BY THE
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD08092-01-1
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DISCOUNT POINTS IS REASONABLY CONSISTENT WITH ESTABLISHED INDUSTRY NORMS
AND PRACTICES FOR SECONDARY MORTGAGE MARKET TRANSACTIONS. FOR PURPOSES
OF THIS SECTION, IT SHALL BE PRESUMED THAT A POINT IS A BONA FIDE LOAN
DISCOUNT POINT IF IT REDUCES THE INTEREST RATE BY A MINIMUM OF
TWENTY-FIVE BASIS POINTS PROVIDED ALL OTHER TERMS OF THE LOAN REMAIN THE
SAME.
(D) A "SUB-PRIME HOME LOAN" MEANS A HOME LOAN IN WHICH THE TERMS OF
THE LOAN EXCEED ONE OR MORE OF THE THRESHOLDS AS DEFINED IN PARAGRAPH
(G) OF THIS SUBDIVISION.
(E) "HOME LOAN" MEANS A HOME LOAN, INCLUDING AN OPEN-END CREDIT PLAN,
OTHER THAN A REVERSE MORTGAGE TRANSACTION, IN WHICH:
(I) THE PRINCIPAL AMOUNT OF THE LOAN DOES NOT EXCEED THE LESSER OF:
(A) CONFORMING LOAN SIZE LIMIT FOR A COMPARABLE DWELLING; OR (B) THREE
HUNDRED THOUSAND DOLLARS;
(II) THE BORROWER IS A NATURAL PERSON;
(III) THE DEBT IS INCURRED BY THE BORROWER PRIMARILY FOR PERSONAL,
FAMILY, OR HOUSEHOLD PURPOSES;
(IV) THE LOAN IS SECURED BY A MORTGAGE OR DEED OF TRUST ON REAL ESTATE
UPON WHICH THERE IS LOCATED OR THERE IS TO BE LOCATED A STRUCTURE OR
STRUCTURES INTENDED PRINCIPALLY FOR OCCUPANCY OF FROM ONE TO FOUR FAMI-
LIES WHICH IS OR WILL BE OCCUPIED BY THE BORROWER AS THE BORROWER'S
PRINCIPAL DWELLING; AND
(V) THE PROPERTY IS LOCATED IN THIS STATE.
(F) "POINTS AND FEES" MEANS:
(I) ALL ITEMS LISTED IN 15 U.S.C. S 1605(A)(1) THROUGH (4), EXCEPT
INTEREST OR THE TIME-PRICE DIFFERENTIAL;
(II) ALL CHARGES FOR ITEMS LISTED UNDER S 226.4(C)(7) OF TITLE 12 OF
THE CODE OF FEDERAL REGULATIONS, AS AMENDED FROM TIME TO TIME, BUT ONLY
IF THE LENDER RECEIVES DIRECT OR INDIRECT COMPENSATION IN CONNECTION
WITH THE CHARGE OR THE CHARGE IS PAID TO AN AFFILIATE OF THE LENDER;
OTHERWISE, THE CHARGES ARE NOT INCLUDED WITHIN THE MEANING OF THE PHRASE
"POINTS AND FEES";
(III) ALL COMPENSATION PAID DIRECTLY OR INDIRECTLY TO A MORTGAGE
BROKER, INCLUDING A BROKER THAT ORIGINATES A LOAN IN ITS OWN NAME IN A
TABLE-FUNDED TRANSACTION, NOT OTHERWISE INCLUDED IN SUBPARAGRAPHS (I)
AND (II) OF THIS PARAGRAPH;
(IV) THE COST OF ALL PREMIUMS FINANCED BY THE LENDER, DIRECTLY OR
INDIRECTLY, FOR ANY CREDIT LIFE, CREDIT DISABILITY, CREDIT UNEMPLOYMENT,
OR CREDIT PROPERTY INSURANCE, OR ANY OTHER LIFE OR HEALTH INSURANCE, OR
ANY PAYMENTS FINANCED BY THE LENDER DIRECTLY OR INDIRECTLY FOR ANY DEBT
CANCELLATION OR SUSPENSION AGREEMENT OR CONTRACT, EXCEPT THAT INSURANCE
PREMIUMS CALCULATED AND PAID ON A MONTHLY BASIS SHALL NOT BE CONSIDERED
FINANCED BY THE LENDER.
(G) "THRESHOLDS" MEANS:
(I) THE LOAN CONTAINS A PREPAYMENT PENALTY DUE MORE THAN THIRTY MONTHS
AFTER CLOSING, OR IN AN AMOUNT GREATER THAN TWO PERCENT; OR
(II) THE TOTAL POINTS AND FEES EXCEED: FIVE PERCENT OF THE TOTAL LOAN
AMOUNT; PROVIDED, THE FOLLOWING DISCOUNT POINTS SHALL BE EXCLUDED FROM
THE CALCULATION OF THE TOTAL POINTS AND FEES PAYABLE BY THE BORROWER:
(A) UP TO AND INCLUDING TWO BONA FIDE LOAN DISCOUNT POINTS PAYABLE BY
THE BORROWER IN CONNECTION WITH THE LOAN TRANSACTION, BUT ONLY IF THE
INTEREST RATE FROM WHICH THE LOAN'S INTEREST RATE WILL BE DISCOUNTED
DOES NOT EXCEED BY MORE THAN ONE PERCENTAGE POINT THE YIELD ON UNITED
STATES TREASURY SECURITIES HAVING COMPARABLE PERIODS OF MATURITY TO THE
LOAN MATURITY MEASURED AS OF THE FIFTEENTH DAY OF THE MONTH IMMEDIATELY
PRECEDING THE MONTH IN WHICH THE APPLICATION IS RECEIVED;
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(B) ANY AND ALL BONA FIDE LOAN DISCOUNT POINTS FUNDED DIRECTLY OR
INDIRECTLY THROUGH A GRANT FROM A FEDERAL, STATE OR LOCAL GOVERNMENT
AGENCY OR A 501(C)(3) ORGANIZATION.
(H) "TOTAL LOAN AMOUNT" MEANS THE PRINCIPAL OF THE LOAN MINUS THOSE
POINTS AND FEES AS DEFINED IN PARAGRAPH (F) OF THIS SUBDIVISION THAT ARE
INCLUDED IN THE PRINCIPAL AMOUNT.
(I) "LENDER" MEANS A MORTGAGE BANKER AS DEFINED IN PARAGRAPH (F) OF
SUBDIVISION ONE OF SECTION FIVE HUNDRED NINETY OF THIS CHAPTER OR AN
EXEMPT ORGANIZATION AS DEFINED IN PARAGRAPH (E) OF SUBDIVISION ONE OF
SECTION FIVE HUNDRED NINETY OF THIS CHAPTER.
(J) "CONFORMING LOAN SIZE LIMIT" MEANS THE LIMIT OF CONFORMING LOANS
BASED ON THE MEAN PRICE OF COMPARABLE DWELLINGS AS ESTABLISHED FROM TIME
TO TIME BY THE FEDERAL NATIONAL MORTGAGE ASSOCIATION.
2. A SUB-PRIME HOME LOAN SHALL BE SUBJECT TO THE FOLLOWING LIMITA-
TIONS:
(A) NO "LOAN FLIPPING". NO LENDER OR MORTGAGE BROKER MAKING OR ARRANG-
ING A HIGH-COST HOME LOAN MAY ENGAGE IN THE UNFAIR ACT OR PRACTICE OF
"LOAN FLIPPING". "LOAN FLIPPING" IS MAKING A HOME LOAN TO A BORROWER
THAT REFINANCES AN EXISTING HOME LOAN WHEN THE NEW LOAN DOES NOT HAVE A
TANGIBLE NET BENEFIT TO THE BORROWER CONSIDERING ALL OF THE CIRCUM-
STANCES, INCLUDING THE TERMS OF BOTH THE NEW AND REFINANCED LOANS, THE
COST OF THE NEW LOAN, AND THE BORROWER'S SITUATION.
(B) NO LENDING WITHOUT DUE REGARD TO REPAYMENT ABILITY. A LENDER OR
MORTGAGE BROKER SHALL NOT MAKE OR ARRANGE A HIGH-COST HOME LOAN WITHOUT
DUE REGARD TO REPAYMENT ABILITY, BASED UPON CONSIDERATION OF THE RESI-
DENT BORROWER OR BORROWERS' CURRENT AND EXPECTED INCOME, CURRENT OBLI-
GATIONS, EMPLOYMENT STATUS, AND OTHER FINANCIAL RESOURCES (OTHER THAN
THE BORROWER'S EQUITY IN THE DWELLING WHICH SECURES REPAYMENT OF THE
LOAN), AS VERIFIED BY DETAILED DOCUMENTATION OF ALL SOURCES OF INCOME
AND CORROBORATED BY INDEPENDENT VERIFICATION. HOWEVER, A LENDER MAKING A
HIGH-COST HOME LOAN SHALL BENEFIT FROM A REBUTTABLE PRESUMPTION THAT THE
LOAN WAS MADE WITH DUE REGARD TO REPAYMENT ABILITY IF THE LENDER DEMON-
STRATES THAT AT THE TIME THE LOAN IS CONSUMMATED, THE RESIDENT BORROWER
OR BORROWERS' TOTAL MONTHLY DEBTS, INCLUDING AMOUNTS OWED UNDER THE
LOAN, DO NOT EXCEED FIFTY PERCENT OF THE RESIDENT BORROWER OR BORROWERS'
MONTHLY GROSS INCOME; AND THE LENDER FOLLOWS THE RESIDUAL INCOME GUIDE-
LINES ESTABLISHED IN 38 C.F.R. S 36.4337(E) AND VA FORM 26-6393.
(C) NO RECOMMENDATION OF DEFAULT. NO LENDER OR MORTGAGE BROKER MAKING
OR ARRANGING FOR A HIGH-COST HOME LOAN MAY RECOMMEND OR ENCOURAGE
NONPAYMENT OF AN EXISTING LOAN OR OTHER DEBT PRIOR TO AND IN CONNECTION
WITH THE CLOSING OR PLANNED CLOSING OF A HOME LOAN, REGARDLESS OF WHETH-
ER THE NEW RESIDENTIAL MORTGAGE WILL REFINANCE ANY PORTION OF THE EXIST-
ING LOAN OR DEBT.
(D) NO INFLUENCING OF APPRAISERS. A LENDER OR MORTGAGE BROKER SHALL
NOT COERCE, INTIMIDATE OR COMPENSATE, AND SHALL NOT IN ANY WAY CONTRIB-
UTE TO THE COERCION, INTIMIDATION OR COMPENSATION OF ANY REAL PROPERTY
APPRAISER FOR THE PURPOSE OF INFLUENCING THEIR INDEPENDENT JUDGMENT WITH
RESPECT TO THE VALUE OF REAL ESTATE THAT IS COVERED BY A HOME LOAN OR
THAT IS BEING OFFERED AS SECURITY IN ACCORDANCE WITH AN APPLICATION FOR
A HOME LOAN.
(E) FINANCING CREDIT INSURANCE. NO LENDER OR MORTGAGE BROKER SHALL
REQUIRE OR ALLOW THE ADVANCE COLLECTION OF A PREMIUM FOR ANY DISABILITY,
UNEMPLOYMENT, PROPERTY, LIFE OR HEALTH INSURANCE IN CONNECTION WITH ANY
HOME LOAN.
(F) LANGUAGE TRANSLATION. IF THE DISCUSSIONS BETWEEN A LENDER OR MORT-
GAGE BROKER AND A BORROWER REGARDING A HOME LOAN ARE CONDUCTED PRIMARILY
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IN A LANGUAGE OTHER THAN ENGLISH, THE LENDER OR MORTGAGE BROKER SHALL,
AT LEAST FORTY-EIGHT HOURS PRIOR TO CLOSING, PROVIDE AN ADDITIONAL COPY
OF ALL INFORMATION REQUIRED TO BE DISCLOSED TO THE BORROWER UNDER THE
FEDERAL TRUTH IN LENDING ACT, 15 U.S.C. 1601 ET SEQ., TRANSLATED INTO
THE LANGUAGE IN WHICH DISCUSSIONS WERE PRIMARILY CONDUCTED. THE LENDER
SHALL NOT CHARGE A FEE FOR ANY TRANSLATED DOCUMENT REQUIRED BY THIS
PARAGRAPH.
(G) FALSE INFORMATION ON CREDIT APPLICATIONS. NO LENDER OR MORTGAGE
BROKER, OR ANY LOAN OFFICER OR OTHER EMPLOYEE OF A LENDER OR MORTGAGE
BROKER, MAY KNOWINGLY PERMIT, ENCOURAGE OR ASSIST A CONSUMER TO SUBMIT
FALSE INFORMATION ON ANY APPLICATION FOR CREDIT. NO LENDER OR MORTGAGE
BROKER, OR ANY LOAN OFFICER OR OTHER EMPLOYEE OF A LENDER OR MORTGAGE
BROKER MAY KNOWINGLY FALSIFY, OR IN ANY WAY PERMIT, CAUSE OR ENABLE
FALSIFIED INFORMATION TO BE INCLUDED ON A CONSUMER'S APPLICATION.
3. (A) SUB-PRIME HOME LOAN MORTGAGES SHALL INCLUDE A LEGEND ON TOP OF
THE MORTGAGE IN TWELVE-POINT TYPE STATING "THIS LOAN IS A SUB-PRIME HOME
LOAN AND IS SUBJECT TO THE NEW YORK SUB-PRIME PREDATORY LENDING
PREVENTION ACT".
(B) THE LENDER SHALL REPORT BOTH THE FAVORABLE AND UNFAVORABLE PAYMENT
HISTORY OF THE BORROWER TO A NATIONALLY RECOGNIZED CONSUMER CREDIT
BUREAU AT LEAST ANNUALLY DURING SUCH PERIOD AS THE LENDER HOLDS OR
SERVICES THE SUB-PRIME HOME LOAN.
4. THE PROVISIONS OF THIS SECTION SHALL APPLY TO ANY PERSON WHO IN BAD
FAITH ATTEMPTS TO AVOID THE APPLICATION OF THIS SECTION BY ANY SUBTER-
FUGE, INCLUDING BUT NOT LIMITED TO SPLITTING OR DIVIDING ANY LOAN TRANS-
ACTION INTO SEPARATE PARTS FOR THE PURPOSE OF EVADING THE PROVISIONS OF
THIS SECTION.
5. A LENDER OF A SUB-PRIME HOME LOAN THAT, WHEN ACTING IN GOOD FAITH,
FAILS TO COMPLY WITH THE PROVISIONS OF THIS SECTION, WILL NOT BE DEEMED
TO HAVE VIOLATED THIS SECTION IF THE LENDER ESTABLISHES THAT EITHER:
(A) WITHIN THIRTY DAYS OF THE LOAN CLOSING AND PRIOR TO THE INSTITU-
TION OF ANY ACTION UNDER THIS SECTION, THE BORROWER IS NOTIFIED OF THE
COMPLIANCE FAILURE, APPROPRIATE RESTITUTION IS MADE, AND WHATEVER
ADJUSTMENTS ARE NECESSARY ARE MADE TO THE LOAN TO EITHER, AT THE CHOICE
OF THE BORROWER, (I) MAKE THE SUB-PRIME HOME LOAN SATISFY THE REQUIRE-
MENTS OF THIS SECTION, OR (II) CHANGE THE TERMS OF THE LOAN IN A MANNER
BENEFICIAL TO THE BORROWER SO THAT THE LOAN IS NO LONGER A SUB-PRIME
HOME LOAN SUBJECT TO THE PROVISIONS OF THIS SECTION; OR
(B) THE COMPLIANCE FAILURE RESULTED FROM A BONA FIDE ERROR NOTWITH-
STANDING THE MAINTENANCE OF PROCEDURES REASONABLY ADAPTED TO AVOID SUCH
ERRORS AND, WITHIN SIXTY DAYS AFTER THE DISCOVERY OF THE COMPLIANCE
FAILURE AND PRIOR TO THE INSTITUTION OF ANY ACTION UNDER THIS SECTION OR
THE RECEIPT OF WRITTEN NOTICE OF THE COMPLIANCE FAILURE, THE BORROWER
IS NOTIFIED OF THE COMPLIANCE FAILURE, APPROPRIATE RESTITUTION IS MADE,
AND WHATEVER ADJUSTMENTS ARE NECESSARY ARE MADE TO THE LOAN TO EITHER,
AT THE CHOICE OF THE BORROWER, (I) MAKE THE SUB-PRIME HOME LOAN SATISFY
THE REQUIREMENTS OF THIS SECTION, OR (II) CHANGE THE TERMS OF THE LOAN
IN A MANNER BENEFICIAL TO THE BORROWER SO THAT THE LOAN IS NO LONGER A
SUB-PRIME HOME LOAN SUBJECT TO THE PROVISIONS OF THIS SECTION. EXAMPLES
OF A BONA FIDE ERROR INCLUDE CLERICAL, CALCULATION, COMPUTER MALFUNCTION
AND PROGRAMMING, AND PRINTING ERRORS. AN ERROR OF LEGAL JUDGMENT WITH
RESPECT TO A PERSON'S OBLIGATIONS UNDER THIS SECTION IS NOT A BONA FIDE
ERROR.
6. THE ATTORNEY GENERAL, THE SUPERINTENDENT, OR ANY PARTY TO A
SUB-PRIME HOME LOAN MAY ENFORCE THE PROVISIONS OF THIS SECTION.
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7. A PRIVATE ACTION AGAINST THE LENDER OR MORTGAGE BROKER PURSUANT TO
THIS SECTION MUST BE COMMENCED WITHIN SIX YEARS OF ORIGINATION OF THE
SUB-PRIME HOME LOAN.
8. ANY PERSON FOUND BY A PREPONDERANCE OF THE EVIDENCE TO HAVE
VIOLATED THIS SECTION SHALL BE LIABLE TO THE BORROWER FOR THE FOLLOW-
ING:
(A) ACTUAL DAMAGES, INCLUDING CONSEQUENTIAL AND INCIDENTAL DAMAGES;
AND
(B) STATUTORY DAMAGES OF FIVE THOUSAND DOLLARS PER VIOLATION OR TWICE
THE AMOUNT OF POINTS AND FEES AND CLOSING COSTS AS DEFINED IN THIS
SECTION, WHICHEVER IS GREATER.
9. A COURT MAY ALSO AWARD REASONABLE ATTORNEYS' FEES TO A PREVAILING
BORROWER.
10. IN ADDITION, THE COURT SHALL, AS IT MAY CONSIDER APPROPRIATE:
(A) ISSUE AN ORDER OR INJUNCTION RESCINDING A HOME MORTGAGE LOAN
CONTRACT WHICH VIOLATES THIS SECTION, OR BARRING THE LENDER FROM
COLLECTING UNDER ANY HOME MORTGAGE LOAN WHICH VIOLATES THIS SECTION;
(B) ISSUE AN ORDER OR INJUNCTION BARRING ANY JUDICIAL OR NONJUDICIAL
FORECLOSURE OR OTHER LENDER ACTION UNDER THE MORTGAGE OR DEED OF TRUST
SECURING ANY HOME MORTGAGE LOAN WHICH VIOLATES THIS SECTION;
(C) ISSUE AN ORDER OR INJUNCTION REFORMING THE TERMS OF THE HOME MORT-
GAGE LOAN TO CONFORM TO THIS SECTION;
(D) ISSUE AN ORDER OR INJUNCTION ENJOINING A LENDER FROM ENGAGING IN
ANY PROHIBITED CONDUCT; OR
(E) IMPOSE SUCH OTHER RELIEF, INCLUDING INJUNCTIVE RELIEF, AS THE
COURT MAY CONSIDER JUST AND EQUITABLE.
11. (A) ANY PERSON FOUND TO HAVE KNOWINGLY AND DELIBERATELY VIOLATED
ANY PROVISION OF THIS SECTION MAY BE CRIMINALLY LIABLE FOR A FINE OF
LESS THAN FIVE THOUSAND DOLLARS, COMMUNITY SERVICE OF NOT MORE THAN FIVE
HUNDRED HOURS OR IMPRISONMENT NOT EXCEEDING SIX MONTHS, OR ANY COMBINA-
TION THEREOF.
(B) FOR ANY SECOND OR SUBSEQUENT VIOLATION HE OR SHE MAY BE CRIMINALLY
LIABLE FOR A FINE OF LESS THAN TEN THOUSAND DOLLARS, COMMUNITY SERVICE
OF NOT MORE THAN ONE THOUSAND HOURS OR IMPRISONMENT NOT EXCEEDING TWELVE
MONTHS, OR ANY COMBINATION THEREOF.
12. IT IS A VIOLATION OF THIS SECTION FOR ANY PERSON TO ATTEMPT IN BAD
FAITH TO AVOID THE PROVISIONS OF THIS SECTION BY DIVIDING ANY LOAN TRAN-
SACTION INTO SEPARATE PARTS OR STRUCTURING A RESIDENTIAL MORTGAGE LOAN
TRANSACTION AS AN OPEN-END LOAN FOR THE PURPOSE OF EVADING THE
PROVISIONS OF THIS SECTION WHEN THE LOAN WOULD HAVE BEEN A HIGH-RATE
MORTGAGE HAD IT BEEN STRUCTURED AS A CLOSED-END LOAN OR BY ENGAGING IN
ANY OTHER SUBTERFUGE WITH THE INTENT OF EVADING ANY PROVISION OF THIS
SECTION.
13. UPON A FINDING BY THE COURT OF AN INTENTIONAL VIOLATION BY THE
LENDER OF THIS SECTION, OR REGULATION THEREUNDER, THE HOME LOAN AGREE-
MENT SHALL BE RENDERED VOID, AND THE LENDER SHALL HAVE NO RIGHT TO
COLLECT, RECEIVE OR RETAIN ANY PRINCIPAL, INTEREST, OR OTHER CHARGES
WHATSOEVER WITH RESPECT TO THE LOAN, AND THE BORROWER MAY RECOVER ANY
PAYMENTS MADE UNDER THE AGREEMENT.
14. UPON A JUDICIAL FINDING THAT A SUB-PRIME HOME LOAN VIOLATES ANY
PROVISION OF THIS SECTION, WHETHER SUCH VIOLATION IS RAISED AS AN AFFIR-
MATIVE CLAIM OR AS A DEFENSE, THE LOAN TRANSACTION MAY BE RESCINDED.
SUCH REMEDY OF RESCISSION SHALL BE AVAILABLE AS A DEFENSE WITHOUT TIME
LIMITATION.
15. THE REMEDIES PROVIDED IN THIS SECTION ARE NOT INTENDED TO BE THE
EXCLUSIVE REMEDIES AVAILABLE TO A BORROWER OF A SUB-PRIME HOME LOAN.
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16. IN ANY ACTION BY AN ASSIGNEE TO ENFORCE A LOAN AGAINST A BORROWER
IN DEFAULT MORE THAN SIXTY DAYS OR IN FORECLOSURE, A BORROWER MAY ASSERT
ANY CLAIMS IN RECOUPMENT AND DEFENSES TO PAYMENT UNDER THE PROVISIONS
OF THIS SECTION AND WITH RESPECT TO THE LOAN, WITHOUT TIME LIMITATIONS,
THAT THE BORROWER COULD ASSERT AGAINST THE ORIGINAL LENDER OF THE LOAN.
17. NO LENDER MAY MAKE OR CAUSE TO MAKE, DIRECTLY OR INDIRECTLY, ANY
FALSE, DECEPTIVE OR MISLEADING STATEMENT OR REPRESENTATION IN CONNECTION
WITH A RESIDENTIAL LOAN TRANSACTION INCLUDING, BUT NOT LIMITED TO, A
FALSE, DECEPTIVE OR MISLEADING STATEMENT OR REPRESENTATION REGARDING THE
BORROWER'S ABILITY TO QUALIFY FOR ANY MORTGAGE PRODUCT.
18. (A) ALL LENDERS AND MORTGAGE BROKERS OFFERING SUB-PRIME HOME LOAN
PRODUCTS SHALL FILE AN ELECTRONIC REPORT WITH THE DEPARTMENT DETAILING
EACH LOAN AGREEMENT.
(B) SUCH LENDERS AND MORTGAGE BROKERS SHALL FILE A REPORT WITH THE
DEPARTMENT IN INSTANCES OF LOAN DEFAULT OR FORECLOSURE WITHIN THIRTY
DAYS OF SUCH DEFAULT OR DISCLOSURE. THE DEPARTMENT SHALL DEVELOP RULES
AND REGULATIONS FOR SUCH REPORTS AND MAKE SUMMARY TABLES BY LENDER AND
BROKER AVAILABLE ON THE DEPARTMENT'S OFFICIAL WEBSITE.
19. LENDERS AND MORTGAGE BROKERS SHALL FILE A REPORT WITH THE DEPART-
MENT THAT DETAILS THE NUMBER OF HIGH-COST HOME LOANS THEY HAVE MADE OVER
THE PAST FIVE YEARS AND THE NUMBER OF SUCH LOANS THAT HAVE ENDED IN
DEFAULT OR FORECLOSURE. THIS DATA SHALL BE PROVIDED STATEWIDE, BY COUN-
TY, AND ZIP CODE. THE DEPARTMENT SHALL BE REQUIRED TO PRODUCE AND POST
THIS DATA TO ITS OFFICIAL STATE WEBSITE IN A SEARCHABLE FORM.
20. THE FOLLOWING INFORMATION SHALL BE DISCLOSED AND PROVIDED AT LEAST
THREE BUSINESS DAYS PRIOR TO CLOSING A HIGH-COST HOME LOAN:
(A) THE ANNUAL PERCENTAGE RATE;
(B) THE AMOUNT OF THE REGULAR MONTHLY (OR OTHER PERIODIC) PAYMENT AND
THE AMOUNT OF ANY BALLOON PAYMENT;
(C) FOR VARIABLE RATE LOANS, A STATEMENT THAT THE INTEREST RATE AND
MONTHLY PAYMENT MAY INCREASE, AND THE AMOUNT OF THE MAXIMUM MONTHLY
PAYMENT BASED UPON THE MAXIMUM INTEREST RATE;
(D) A COPY OF THE REPORT REQUIRED BY SUBDIVISION NINETEEN OF THIS
SECTION, INCLUDING DATA FOR THE RELEVANT COUNTY AND ZIP CODE; AND
(E) CONTACT INFORMATION FOR THE DEPARTMENT INCLUDING THE INTERNET
ADDRESS TO ACCESS THE DEPARTMENT'S POSTINGS OF INFORMATION ON HIGH-COST
MORTGAGES PURSUANT TO SUBDIVISIONS EIGHTEEN AND NINETEEN OF THIS
SECTION; AND
(F) A NOTICE THAT READS AS FOLLOWS: "YOU ARE NOT REQUIRED TO COMPLETE
THIS AGREEMENT MERELY BECAUSE YOU HAVE RECEIVED THESE DISCLOSURES OR
HAVE SIGNED A LOAN APPLICATION. IF YOU OBTAIN THIS LOAN, THE LENDER WILL
HAVE A MORTGAGE ON YOUR HOME. YOU COULD LOSE YOUR HOME AND ANY MONEY YOU
HAVE PUT INTO IT IF YOU DO NOT MEET YOUR OBLIGATIONS UNDER THE LOAN."
21. THE PROVISIONS OF THIS SECTION SHALL BE SEVERABLE, AND IF ANY
PHRASE, CLAUSE, SENTENCE, OR PROVISION IS DECLARED TO BE INVALID, OR IS
PREEMPTED BY FEDERAL LAW OR REGULATION, THE VALIDITY OF THE REMAINDER OF
THIS SECTION SHALL NOT BE AFFECTED THEREBY. IF ANY PROVISION OF THIS
SECTION IS DECLARED TO BE INAPPLICABLE TO ANY SPECIFIC CATEGORY, TYPE,
OR KIND OF POINTS AND FEES, THE PROVISIONS OF THIS SECTION SHALL NONE-
THELESS CONTINUE TO APPLY WITH RESPECT TO ALL OTHER POINTS AND FEES.
S 3. Section 1302 of the real property actions and proceedings law is
amended by adding a new subdivision 3 to read as follows:
3. ANY COMPLAINT SERVED IN A PROCEEDING INITIATED PURSUANT TO THIS
ARTICLE RELATING TO A SUB-PRIME HOME LOAN, AS DEFINED IN SECTION SIX-N
OF THE BANKING LAW, MUST CONTAIN AN AFFIRMATIVE ALLEGATION, WHICH ALLE-
GATION MUST BE PROVEN TO THE SATISFACTION OF THE COURT BEFORE ENTRY OF
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JUDGMENT BY DEFAULT OR OTHERWISE, THAT THE PLAINTIFF MORTGAGE BANKER OR
EXEMPT ORGANIZATION HAS COMPLIED WITH ALL OF THE PROVISIONS OF SECTION
FIVE HUNDRED NINETY-FIVE-A AND SECTION SIX-N OF THE BANKING LAW.
S 4. The banking law is amended by adding a new section 590-c to read
as follows:
S 590-C. DUTIES OF MORTGAGE BANKERS AND MORTGAGE BROKERS. 1. IN THE
CASE OF A MORTGAGE LOAN, A MORTGAGE BANKER OR MORTGAGE BROKER SHALL BE
DEEMED TO HAVE A FIDUCIARY RELATIONSHIP WITH THE CONSUMER AND HE OR SHE
SHALL BE SUBJECT TO ALL REQUIREMENTS FOR FIDUCIARIES OTHERWISE APPLICA-
BLE UNDER STATE OR FEDERAL LAW.
2. EACH MORTGAGE BANKER OR MORTGAGE BROKER SHALL WITH RESPECT TO EACH
MORTGAGE LOAN IN WHICH HE OR SHE IS INVOLVED:
(A) ACT WITH REASONABLE SKILL, CARE AND DILIGENCE; AND
(B) ACT IN GOOD FAITH AND WITH FAIR DEALING IN ANY TRANSACTION, PRAC-
TICE OR COURSE OF BUSINESS ASSOCIATED WITH THE MORTGAGE LOAN.
3. (A) EACH MORTGAGE BANKER OR MORTGAGE BROKER SHALL, BEFORE ENTERING
INTO OR OTHERWISE FACILITATING ANY MORTGAGE LOAN, VERIFY THE REASONABLE
ABILITY OF THE BORROWER TO PAY THE PRINCIPAL AND INTEREST ON THE LOAN
AND ANY REAL ESTATE TAXES AND HOMEOWNERS INSURANCE FEES AND PREMIUMS.
(B) IN THE CASE OF A MORTGAGE LOAN WITH RESPECT TO WHICH THE APPLICA-
BLE RATE OF INTEREST MAY VARY, FOR PURPOSES OF PARAGRAPH (A) OF THIS
SUBDIVISION, THE ABILITY TO PAY SHALL BE DETERMINED BASED ON THE MAXIMUM
POSSIBLE MONTHLY PAYMENT THAT COULD BE DUE FROM THE BORROWER DURING THE
FIRST SEVEN YEARS OF THE LOAN TERM, WHICH SHALL BE CALCULATED BY:
(I) USING THE MAXIMUM INTEREST RATE ALLOWABLE UNDER THE LOAN; AND
(II) ASSUMING NO DEFAULT BY THE BORROWER, A REPAYMENT SCHEDULE WHICH
ACHIEVES FULL AMORTIZATION OVER THE LIFE OF THE LOAN.
(C) FOR PURPOSES OF PARAGRAPH (A) OF THIS SUBDIVISION, A MORTGAGE
BANKER OR MORTGAGE BROKER SHALL BASE A DETERMINATION OF THE ABILITY TO
PAY ON:
(I) DOCUMENTATION OF THE INCOME AND FINANCIAL RESOURCES OF THE BORROW-
ER, INCLUDING TAX RETURNS, PAYROLL RECEIPTS, BANK RECORDS, OR OTHER
SIMILARLY RELIABLE DOCUMENTS; AND
(II) THE DEBT-TO-INCOME RATIO AND RESIDUAL INCOME OF THE BORROWER, AS
DETERMINED UNDER SECTION 36.4337 OF TITLE 38 OF THE CODE OF FEDERAL
REGULATIONS, OR ANY SUCCESSOR THERETO.
(D) A STATEMENT PROVIDED BY THE BORROWER OF THE INCOME AND FINANCIAL
RESOURCES OF THE BORROWER, WITHOUT OTHER DOCUMENTATION REFERRED TO IN
PARAGRAPH (C) OF THIS SUBDIVISION, IS NOT SUFFICIENT VERIFICATION FOR
PURPOSES OF ASSESSING THE ABILITY OF THE CONSUMER TO PAY.
4. (A) IN THE CASE OF A RATE SPREAD MORTGAGE TRANSACTION, THE OBLIGOR
SHALL BE REQUIRED TO MAKE MONTHLY PAYMENTS INTO AN ESCROW ACCOUNT
ESTABLISHED BY THE MORTGAGE BANKER FOR THE PURPOSE OF PAYING TAXES,
HAZARD INSURANCE PREMIUMS, AND, IF APPLICABLE, FLOOD INSURANCE PREMIUMS.
(B) THIS SUBDIVISION DOES NOT APPLY IN ANY CASE IN WHICH THE MORTGAGE
BANKER REASONABLY BELIEVES THAT, FOLLOWING THE LOAN CLOSING, THE OBLIGOR
SHALL BE REQUIRED, OR SHALL CONTINUE TO BE REQUIRED, TO MAKE ESCROW
PAYMENTS DESCRIBED IN PARAGRAPH (A) OF THIS SUBDIVISION ON THE PROPERTY
SECURING THE LOAN IN CONNECTION WITH ANOTHER LOAN SECURED BY THE SAME
PROPERTY.
(C) IN ANY CASE IN WHICH A MORTGAGE BROKER SELLS OR DELIVERS A RATE
SPREAD MORTGAGE LOAN TO A LENDER, THE LENDER SHALL BE LIABLE FOR THE
ACTS, OMISSIONS AND REPRESENTATIONS MADE BY THE MORTGAGE BROKER IN
CONNECTION WITH SUCH MORTGAGE LOAN.
(D) FOR THE PURPOSES OF THIS SUBDIVISION, THE TERM "RATE SPREAD MORT-
GAGE TRANSACTION" MEANS A HOME MORTGAGE LOAN THAT HAS AN ANNUAL PERCENT-
A. 5105 8
AGE RATE OF INTEREST THAT EQUALS OR EXCEEDS THE RATE THAT WOULD REQUIRE
REPORTING UNDER THE HOME MORTGAGE DISCLOSURE ACT (12 U.S.C. 2801 ET
SEQ.) AS A RATE SPREAD LOAN, WITHOUT REGARD TO WHETHER SUCH LOAN IS
OTHERWISE SUBJECT TO THE HOME MORTGAGE DISCLOSURE ACT.
5. (A) IN CONNECTION WITH A MORTGAGE LOAN, A MORTGAGE BANKER OR MORT-
GAGE BROKER MAY NOT STEER, COUNSEL, OR DIRECT A CONSUMER TO RATES,
CHARGES, PRINCIPAL AMOUNT, OR PREPAYMENT TERMS THAT ARE NOT REASONABLY
ADVANTAGEOUS TO THE CONSUMER, IN LIGHT OF ALL OF THE CIRCUMSTANCES ASSO-
CIATED WITH THE TRANSACTION, INCLUDING THE CHARACTERISTICS OF THE PROP-
ERTY THAT SECURES OR WILL SECURE THE EXTENSION OF CREDIT AND THE LOAN
TERMS FOR WHICH THE CONSUMER QUALIFIES.
(B) IF UNABLE TO SUGGEST, OFFER, OR RECOMMEND TO A CONSUMER A REASON-
ABLY ADVANTAGEOUS HOME LOAN, A MORTGAGE BANKER OR MORTGAGE BROKER SHALL:
(I) BASED ON THE INFORMATION REASONABLY AVAILABLE AND USING THE SKILL,
CARE, AND DILIGENCE REASONABLY EXPECTED FOR A MORTGAGE BANKER OR MORT-
GAGE BROKER, ORIGINATE OR OTHERWISE FACILITATE A REASONABLY ADVANTAGEOUS
HOME MORTGAGE LOAN BY ANOTHER CREDITOR TO A CONSUMER, IF PERMITTED BY
AND IN ACCORDANCE WITH ALL OTHERWISE APPLICABLE LAW; OR
(II) DISCLOSE TO A CONSUMER:
(A) THAT THE CREDITOR DOES NOT OFFER A MORTGAGE LOAN THAT WOULD BE
REASONABLY ADVANTAGEOUS TO A CONSUMER, BUT THAT OTHER CREDITORS MAY
OFFER SUCH A LOAN; AND
(B) THE REASONS THAT THE PRODUCTS AND SERVICES OFFERED BY THE MORTGAGE
BANKER OR MORTGAGE BROKER ARE NOT AVAILABLE TO OR REASONABLY ADVANTA-
GEOUS FOR THE CONSUMER.
(C) IN CONNECTION WITH A MORTGAGE LOAN, A MORTGAGE BANKER OR MORTGAGE
BROKER MAY NOT:
(I) MISCHARACTERIZE THE CREDIT HISTORY OF A CONSUMER OR THE HOME LOANS
AVAILABLE TO A CONSUMER;
(II) MISCHARACTERIZE OR SUBORN MISCHARACTERIZATION OF THE APPRAISED
VALUE OF THE PROPERTY SECURING THE EXTENSION OF CREDIT; OR
(III) IF UNABLE TO SUGGEST, OFFER, OR RECOMMEND TO A CONSUMER A
REASONABLY ADVANTAGEOUS MORTGAGE LOAN, DISCOURAGE A CONSUMER FROM SEEK-
ING A HOME MORTGAGE LOAN FROM ANOTHER CREDITOR OR WITH ANOTHER MORTGAGE
BANKER OR MORTGAGE BROKER.
(D) NOTHING IN THIS SUBDIVISION SHALL BE DEEMED TO PROHIBIT A MORTGAGE
BANKER OR MORTGAGE BROKER FROM PROVIDING A CONSUMER WITH ACCURATE,
UNBIASED, GENERAL INFORMATION ABOUT HOME MORTGAGE LOANS, UNDERWRITING
STANDARDS, WAYS TO IMPROVE CREDIT HISTORY, OR ANY OTHER MATTER RELEVANT
TO A CONSUMER.
6. (A) NO MORTGAGE BANKER OR MORTGAGE BROKER MAY ENTER INTO A MORTGAGE
LOAN WITH RESPECT TO WHICH THE MORTGAGE BANKER OR MORTGAGE BROKER HAS
REASON TO BELIEVE THAT, WITH RESPECT TO THE APPRAISAL OF THE VALUE OF
THE PROPERTY SECURING THE LOAN:
(I) THE APPRAISER FAILED TO ACT IN GOOD FAITH AND FAIR DEALING WITH
RESPECT TO THE CONSUMER IN CONNECTION WITH THE APPRAISAL;
(II) THE APPRAISAL WAS CONDUCTED OTHER THAN IN ACCORDANCE WITH ALL
APPLICABLE STATE AND FEDERAL STANDARDS REQUIRED OF CERTIFIED
APPRAISERS, OR WAS OTHERWISE NOT ACCURATE AND REASONABLE;
(III) THE APPRAISER HAD A DIRECT OR INDIRECT INTEREST IN THE PROPERTY
OR THE TRANSACTION;
(IV) THE APPRAISER CHARGED, SOUGHT, OR RECEIVED COMPENSATION FOR THE
APPRAISAL, AND THE APPRAISAL WAS NOT COVERED BY A QUALIFYING BOND; OR
(V) THE APPRAISAL ORDER OR ANY OTHER COMMUNICATION IN ANY FORM
INCLUDES THE REQUESTED LOAN AMOUNT OR ANY ESTIMATE OF VALUE FOR THE
PROPERTY TO SERVE AS COLLATERAL, EITHER EXPRESSED OR IMPLIED.
A. 5105 9
(B) NO MORTGAGE BANKER OR MORTGAGE BROKER MAY, WITH RESPECT TO A HOME
MORTGAGE LOAN, IN ANY WAY:
(I) SEEK TO INFLUENCE AN APPRAISER OR OTHERWISE TO ENCOURAGE A TARGET-
ED VALUE IN ORDER TO FACILITATE THE MAKING OR PRICING OF THE MORTGAGE
LOAN; OR
(II) SELECT AN APPRAISER ON THE BASIS OF AN EXPECTATION THAT SUCH
APPRAISER WOULD PROVIDE A TARGETED VALUE IN ORDER TO FACILITATE THE
MAKING OR PRICING OF THE MORTGAGE LOAN.
(C) IT SHALL NOT BE A DEFENSE TO ENFORCEMENT OF THE REQUIREMENTS OF
THIS SUBDIVISION THAT THE MORTGAGE BANKER OR MORTGAGE BROKER USED ANOTH-
ER PERSON IN THE APPRAISAL PROCESS OR TO REVIEW THE APPRAISAL PROCESS.
(D) IN ANY CASE IN WHICH AN APPRAISAL IS PERFORMED IN CONNECTION WITH
A MORTGAGE LOAN, THE MORTGAGE ORIGINATOR SHALL PROVIDE A COPY OF THE
APPRAISAL REPORT TO AN APPLICANT FOR A MORTGAGE LOAN, WHETHER CREDIT IS
GRANTED, DENIED, OR THE APPLICATION WAS WITHDRAWN.
S 5. Subdivision 1 of section 14 of the banking law is amended by
adding a new paragraph (r) to read as follows:
(R) TO CREATE AND MAINTAIN A LIST DISCLOSING BORROWER'S RIGHTS ON THE
DEPARTMENT'S WEBSITE.
S 6. This act shall take effect on the one hundred eightieth day after
it shall have become a law and shall apply only to loans for which
application is made on or after such effective date; provided, however,
that the superintendent of banks is authorized to promulgate any and all
rules and regulations and take any other measures necessary to implement
this act on its effective date on or before such date.