senate Bill S7032

2013-2014 Legislative Session

Relates to prohibiting mortgagors from recovering attorney's fees and/or expenses incurred during a foreclosure

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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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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Apr 21, 2014 referred to judiciary

S7032 - Bill Details

Current Committee:
Senate Judiciary
Law Section:
Real Property Law
Laws Affected:
Amd ยง282, RP L

S7032 - Bill Texts

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Relates to prohibiting mortgagors from recovering attorney's fees and/or expenses incurred during a foreclosure.

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BILL NUMBER:S7032

TITLE OF BILL: An act to amend the real property law, in relation to
prohibiting mortgagors from recovering attorney's fees and/or expenses
incurred during a foreclosure

PURPOSE:

To prohibit the required payment of mortgagor's legal fees by, a
mortgagee in a foreclosure proceeding for residential real property.

SUMMARY OF PROVISIONS:

Section 282 of the real property law is amended to prohibit mortgagors
from requiring that a mortgagee in a foreclosure proceeding of a
residential real property be required to pay the legal fees of
mortgagor.

JUSTIFICATION:

As our state and our nation slowly recover from the nation's financial
crisis, many homeowners are still trying to recover from the financial
impact of the crisis. Unemployment and massive foreclosures have
crippled our economy and have made the recovery from the crisis very
slow. While the economy strengthens and employment grows, many
citizens are trying to rebuild their lives.

One way many homeowners have tried to rebuild their lives is to work
to save the largest asset many of them own: their home. As the bottom
dropped out of the economy, many citizens lost their jobs and fell
behind on their mortgages. Many people who had owned their homes for
years or even decades found themselves unable to keep up with their
payments even though they may have never missed a payment before the
crisis.

As the job market has strengthened and people returned to work,
homeowners found themselves in much worse financial positions as many
banks added late fees, interest and exorbitant legal fees to their
mortgage balance. For example, after a 75 year old U.S. Army veteran
in Staten Island fell into hard times, he fell behind on his mortgage
with a $66,000 balance. His daughter and son-in-law tried to assist
the veteran and were shocked to find that the balance, with fees and
legal costs, had ballooned to $190,000.

Many times during the foreclosure process law firms run up legal bills
of tens of thousands of dollars. Many times these legal fees make it
impossible for a homeowner to make their mortgage current and return
to making regular payments. Many of the law firms involved in the
foreclosure process have ongoing relationships with the banks
foreclosing on these properties. There is no incentive for the law
firms to keep the costs of the foreclosure process to a minimum since
their client is not the party paying the legal fees. Most times, when
the mortgagee fails to pay the legal fees and the home is foreclosed,
the law firms settle for much less than their stated fees with the
bank.


Therefore, since it is in the best interest of our economy to allow
homeowners recovering from the financial crisis to make their mortgage
current, it is in the best interest of the economy of our state to
stop law firms from passing exorbitant legal fees to homeowners trying
to prevent their home from being foreclosed. In addition, since the
law firms involved have no incentive to keep their fees to a minimum,
and in many cases their incentive is to run up their fees since they
do not have an ongoing relationship with the fee payer, provisions
requiring mortgagees to pay for legal fees in the foreclosure process
is against public policy.

LEGISLATIVE HISTORY:

New bill.

FISCAL IMPLICATIONS:

No cost.

EFFECTIVE DATE:

This act shall take effect immediately.

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

                                  7032

                            I N  S E N A T E

                             April 21, 2014
                               ___________

Introduced  by  Sen. SANDERS -- 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 prohibiting  mort-
  gagors from recovering attorney's fees and/or expenses incurred during
  a foreclosure

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

  Section 1. Section 282 of the real property law, as added  by  chapter
550 of the laws of 2010, is amended to read as follows:
  S  282.  [Mortgagor's  right  to  recover]  MORTGAGORS PROHIBITED FROM
RECOVERING attorneys' fees in actions  or  proceedings  arising  out  of
foreclosures of residential property. 1.  [Whenever a covenant contained
in  a  mortgage  on  residential real property shall provide that in any
action or proceeding to foreclose the mortgage that  the  mortgagee  may
recover  attorneys'  fees  and/or expenses incurred as the result of the
failure of the mortgagor to perform any covenant or agreement  contained
in  such  mortgage, or that amounts paid by the mortgagee therefor shall
be paid by the mortgagor as additional payment, there shall  be  implied
in such mortgage a covenant by the mortgagee to pay to the mortgagor the
reasonable]  IN  THE  FORECLOSURE OF RESIDENTIAL PROPERTY MORTGAGORS ARE
PROHIBITED FROM RECOVERING  FROM  THE  MORTGAGEES  ANY  attorneys'  fees
and/or  expenses  incurred by the mortgagor as the result of the failure
of the mortgagee to perform any covenant or agreement on its part to  be
performed  under the mortgage or in the successful defense of any action
or proceeding commenced by the mortgagee against the  mortgagor  arising
out of the contract, and an agreement that such fees and expenses may be
recovered [as provided by law in an action commenced against the mortga-
gee  or  by way of counterclaim in any action or proceeding commenced by
the mortgagee against the mortgagor. Any waiver of this section shall be
void as against public policy] IS VOID.
  2. For the purposes of this section, "residential real property" means
real property improved by a one- to four-family residence, a condominium
that is occupied by the mortgagor or a cooperative unit that is occupied
by the mortgagor.
  S 2. This act shall take effect immediately.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD11395-01-3

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