Senate Bill S5750A

                                BILL NUMBER:S5750

TITLE OF BILL:  An act to amend the real property actions and
proceedings law, in relation to reports of the sales of foreclosed
real property

PURPOSE OF THE BILL: Currently, there is no mechanism in state law
which requires notification to a homeowner whose property was sold due
to a judgment of foreclosure and sale to be notified if there are any
surplus funds available after such sale. Also there is no requirement.
for the county clerk, who the surplus funds are deposited with, to
give updates to the courts of deposited amounts.  This lack of
coordinated communication has led to instances where funds which are
due to the homeowner are never deposited and/or the homeowner is never
notified of the existence of these surplus funds.  This legislation
will rectify both situations by formalizing a process of notification
of surplus funds (or the lack thereof) to homeowners as well as to the
courts.

SUMMARY OF SPECIFIC PROVISIONS:

Section 1: Amends Section 1354 of the Real Property Actions and
Proceedings Law by adding a new section subdivision five requiring on
a quarterly basis, each county clerk to submit to the Office of Court
Administration (OCA) a list of all surplus moneys deposited due to a
judgment. of foreclosure and sales of real property.
              

Section 2: Amends Section 1355 of the Real Property Actions and
Proceedings Law to require that thirty days after completing the sale,
the officer making the sale must notify the former homeowner and their
attorney of record, in clear and plain language, of any and all
surplus monies that may be available to the homeowner after the
foreclosure sale is finalized.

JUSTIFICATION:  Too often, homeowners who are struggling to pay their
mortgage have every available cent tied up in their house. When forced
to sell this house due to a judgment of foreclosure and sale, at times
there is some equity available after the house has been sold. For many
homeowners this is all they have to live on or use to find other
housing. In essence, this home was their "savings account". This
available money after all tax liens, bills due and fees owing are paid
is known as "surplus funds".

Normally, these surplus funds are deposited with the county clerk.  In
recent published news reports, however, there have been reports of
referees failing to deposit the correct amount of surplus funds from a
foreclosure sale in the custody of county clerks where it should have
been be deposited. What this fraud however revealed is that there is
no system in place by which the courts, homeowners and the county
clerk can ensure that all monies due and owed to a the former
homeowner are available for their use. In fact there is no mechanism
by which the homeowner owed the surplus funds is notified in a clear
concise manner that these funds are available. Therefore, not only is
the opportunity for fraud ripe but also the possibility that
homeowners who have just faced the loss of their home, are missing out
on access to funds which may help them start a new chapter in their
life.


This legislation should address these glaring gaps in the law by
requiring two simple notification procedures. First it will require
reporting by the county clerk to the courts. Although some courts in
New York have started investigating surplus funds issues on their own,
this legislation hopes to ensure that all information regarding what
has been deposited in the custody of the county clerk is delivered to
the courts in a timely and consistent manner in order to avoid any
failure of ensuring that the records of the courts match the records
of the county clerks.

The second notification will require the officer making the final sale
of the property notify the homeowner in a clear and concise manner of
any surplus funds resulting from the sale and informing them of their
possible availability to the homeowner. Currently no rules set forth
by the courts or New York state law ensures this process is done.

PRIOR LEGISLATIVE HISTORY: None. This is new legislation

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: This law shall take effect on the first of January
next succeeding the date on which it shall have become law.