BILL NUMBER:  S4679

 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.

Section 4 of the bill provides this act shall take effect immediately.

 EXISTING LAW :

None

 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 :

02/17/15 REFERRED TO JUDICIARY
01/06/16 REFERRED TO JUDICIARY

 FISCAL IMPLICATIONS :

None

 LOCAL FISCAL IMPLICATIONS :

None

 EFFECTIVE DATE :
This act shall take effect immediately.