Relates to refinancing of an existing mortgage loan; provides for a separate disclosure which compares monthly payments under the previous mortgage with the combined monthly payments for the new mortgage loan, property tax and insurance.
TITLE OF BILL: An act to amend the banking law, in relation to refinancing of an existing mortgage loan
PURPOSE: To ensure that consumers are appropriately informed when refinancing a mortgage and have the ability to compare the total monthly costs of the previous loan with the total monthly costs of the new loan.
SUMMARY OF PROVISIONS: Section 595-a(3) of the Banking Law is amended to require mortgage brokers, mortgage bankers or exempt organizations to provide a special disclosure for any mortgage refinancing where the mortgagor will no longer be paying property tax or insurance premiums into an escrow account. In those cases, the disclosure must compare the total monthly payments under the previous loan with the combined monthly payments for the new loan, real property taxes and insurance.
JUSTIFICATION: Consumers may refinance a mortgage loan for numerous reasons. An important consideration is the monthly cost of the new loan versus the monthly cost of the previous loan.
Unfortunately, in some cases, this comparison may be misleading or invalid because the homeowner does not realize or understand that the new total does not include property tax or insurance payments, which may have been included in the previous loan. There is concern that Some lenders or mortgage brokers may obscure this information, or may actively mislead the homeowner in order to pressure them into refinance the existing loan. As a result, the new loan may appear to be a better deal, but in reality may be a worse deal.
This bill seeks to ensure that consumers are adequately notified if their new loan will no longer include property tax or insurance payments, and that they are given a clear comparison of the full monthly costs under the previous loan and the full monthly costs under the new loan. This will assist homeowners in making an informed decision.
LEGISLATIVE HISTORY: S.5619 in 2007-2008: Referred to Banks S.4875 in 2009-2010: Referred to Banks
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: On the 180th day after it shall have become a law.
STATE OF NEW YORK ________________________________________________________________________ 3651 2011-2012 Regular Sessions IN SENATE February 28, 2011 ___________Introduced by Sen. SMITH -- read twice and ordered printed, and when printed to be committed to the Committee on Banks AN ACT to amend the banking law, in relation to refinancing of an exist- ing mortgage loan THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Subdivision 3 of section 595-a of the banking law is amended by adding a new paragraph (e) to read as follows: (E) FOR ANY REFINANCING OF AN EXISTING MORTGAGE LOAN, WHERE THE MORT- GAGOR WILL NO LONGER BE PAYING PROPERTY TAX OR INSURANCE PAYMENTS INTO AN ESCROW ACCOUNT, EACH MORTGAGE BROKER, MORTGAGE BANKER AND EXEMPT ORGANIZATION SHALL, PRIOR TO CLOSING, PROVIDE A SEPARATE DISCLOSURE WHICH COMPARES THE TOTAL MONTHLY PAYMENTS UNDER THE PREVIOUS MORTGAGE WITH THE COMBINED MONTHLY PAYMENTS FOR THE NEW MORTGAGE LOAN, REAL PROP- ERTY TAXES AND INSURANCE. THE BANKING BOARD MAY SPECIFY THE FORM, CONTENT AND TIMING OF SUCH DISCLOSURE. S 2. This act shall take effect on the one hundred eightieth day after it shall have become a law.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD09856-01-1