senate Bill S2312

2013-2014 Legislative Session

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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Archive: Last Bill Status - In Committee


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

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jan 08, 2014 referred to judiciary
returned to senate
died in assembly
Jun 11, 2013 referred to judiciary
delivered to assembly
passed senate
Jun 10, 2013 ordered to third reading cal.1179
committee discharged and committed to rules
Jan 15, 2013 referred to judiciary

Votes

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Co-Sponsors

S2312 - Bill Details

Current Committee:
Senate Judiciary
Law Section:
Real Property Law
Laws Affected:
Amd §275, RP L
Versions Introduced in Previous Legislative Sessions:
2011-2012: S2906
2009-2010: S2566

S2312 - Bill Texts

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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 NUMBER:S2312

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 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 LPL § 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,
(231 AD2d 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; 2007-08 -
S.1264/A.10469; 2009-10 - S.2566; 2011-12 -S.2906/A.8300

FISCAL IMPLICATIONS: None

EFFECTIVE DATE: 30 days after it shall become a law.

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

                                  2312

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                            January 15, 2013
                               ___________

Introduced  by  Sens. DeFRANCISCO, 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.
                                                           LBD04622-01-3

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