S T A T E O F N E W Y O R K ________________________________________________________________________ 3538 2011-2012 Regular Sessions I N A S S E M B L Y January 25, 2011 ___________ Introduced by M. of A. CAMARA, CASTRO, SCARBOROUGH -- Multi-Sponsored by -- M. of A. CLARK -- read once and referred to the Committee on Hous- ing AN ACT enacting the "foreclosure prevention act of 2011"; to amend the real property actions and proceedings law, in relation to giving notice to mortgagors of the availability of foreclosure prevention assistance and payments; and to amend the state finance law, in relation to creating the New York state foreclosure prevention fund THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: 1 Section 1. Short title. This act shall be known and may be cited as 2 the "foreclosure prevention act of 2011". 3 S 2. Statement of legislative purpose and findings. The legislature 4 finds and declares that there is a public emergency; that the extension 5 of unaffordable mortgage loans, unaffordable second mortgages and unaf- 6 fordable home equity loans have resulted in thousands of homeowners 7 losing their homes. The problems associated with these loans adversely 8 affect the availability of capital, the demand for housing, the value of 9 real estate, and more importantly, the ability of homeowners to keep 10 their homes and communities viable. The pending reset of interest rates 11 in many home mortgages, second mortgages and home equity loans will only 12 exacerbate this situation for many homeowners. The expectation that many 13 such variable rate mortgages will fall into foreclosure upon the reset 14 of the interest rate compels the state to take action. State assistance 15 to homeowners through a voluntary program is necessary in order to stem 16 this crisis. Accordingly, the legislature hereby creates the New York 17 state foreclosure prevention fund. 18 S 3. Definitions. As used in this act, the following words and phrases 19 shall have the following meanings: 20 1. "Annual percentage rate" means the annual percentage rate for the 21 loan calculated according to the provisions of the Federal Truth in EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD03916-01-1 A. 3538 2 1 Lending Act (15 U.S.C. Sec. 1601, et seq.), and the regulations promul- 2 gated thereunder by the federal reserve board, as amended. 3 2. "Commissioner" shall mean the commissioner of the state division of 4 housing and community renewal. 5 3. "Division" shall mean the state division of housing and community 6 renewal. 7 4. "Eligible homeowners" shall mean any resident of this state 8 currently residing in a home located in this state subject to an eligi- 9 ble subprime or unconventional mortgage who the commissioner determines, 10 pursuant to the eligibility restrictions set forth in this act, is in 11 need of foreclosure prevention assistance. 12 5. "Eligible subprime or unconventional mortgage" means a home loan 13 that: 14 (a)(i) for a first lien loan, has an annual percentage rate of three 15 or more percentage points above the yield on treasury securities of 16 comparable maturity measured as of the fifteenth day of the month imme- 17 diately preceding the month in which the application for the loan is 18 received by the lender; and 19 (ii) for a subordinate lien loan, has an annual percentage rate of 20 five or more percentage points above the yield on treasury securities of 21 comparable maturity measured as of the fifteenth day of the month imme- 22 diately preceding the month in which the application for the loan is 23 received by the lender; or 24 (b) is a nontraditional home loan as such term is described in the 25 "Interagency Guidance on Nontraditional Mortgage Product Risks" issued 26 September 29, 2006, and published in 71 Federal Register, 58609 on Octo- 27 ber 4, 2006, as updated. 28 6. "Home loan" means a residential home mortgage loan, including an 29 open-end credit plan, other than a reverse mortgage transaction, in 30 which: 31 (a) the borrower is a natural person; 32 (b) the debt is incurred by the borrower primarily for personal, fami- 33 ly or household purposes; 34 (c) the loan is secured by a mortgage or deed of trust on real estate 35 upon which there is located a structure or structures intended princi- 36 pally for occupancy of from one to four families which is occupied by 37 the borrower as the borrower's principal dwelling; and 38 (d) the property is located in this state. 39 7. "Lender" has the same meaning as set forth in 24 Code of Federal 40 Regulations, Section 3500.2 and also includes a mortgage broker. 41 8. "Non-profit assistance provider" shall mean a corporation or group 42 of corporations organized under the provisions of the not-for-profit 43 corporation law, including but not limited to neighborhood preservation 44 companies as defined in section 902 of the private housing finance law, 45 entities that perform housing preservation and community renewal activ- 46 ities pursuant to article 17 of the private housing finance law, common- 47 ly referred to as rural preservation companies, and legal service 48 providers, and municipalities. 49 9. "Service area" shall mean the established or stated boundaries of a 50 non-profit assistance provider or, if an assistance provider does not 51 have established boundaries for the geographic area in which it provides 52 services, the geographic area defined in its proposal to the division to 53 be a service provider. 54 10. "Foreclosure prevention assistance" shall mean the provision of 55 payments on behalf of an eligible homeowner to mortgagees on an eligible 56 subprime or unconventional mortgage secured by a mortgagor's real A. 3538 3 1 estate, and the training of counselors and other foreclosure prevention 2 providers. 3 S 4. Foreclosure prevention fund contracts. 1. Within the limit of 4 funds available in the New York state foreclosure prevention fund, 5 established pursuant to section 92-h of the state finance law, the 6 commissioner is hereby authorized to enter into contracts with non-pro- 7 fit assistance providers to provide foreclosure prevention assistance. 8 Such contracts shall be entered into after appropriate findings by the 9 commissioner and shall be subject to the limitations as set forth in 10 this section. The division shall give preference to applications 11 involving 2 or more non-profit assistance providers when evaluating 12 contract applications for the provision of foreclosure prevention 13 assistance and shall, to the extent feasible, attempt to award contracts 14 in a manner that ensures that every homeowner in the state resides with- 15 in a geographic area defined in the proposal of at least one non-profit 16 assistance provider. 17 2. Prior to entering into a contract with an existing non-profit 18 assistance provider, the commissioner shall have made a finding that the 19 provider is in good standing and that there is a need for proposed 20 assistance activities based on the documented submission of the provid- 21 er. 22 3. Contracts entered into pursuant to this section with non-profit 23 assistance providers shall be limited in duration to periods of 1 year, 24 but may thereafter be renewed, extended or succeeded by new contracts 25 from year to year in the discretion of the commissioner. 26 4. Prior to renewing or extending a contract or executing a succeeding 27 contract with a non-profit assistance provider the division shall deter- 28 mine that: 29 (a) the provider shall have substantially completed the foreclosure 30 prevention assistance specified in the contract to be renewed or 31 succeeded; 32 (b) the provider shall have received the sums and funds specified in 33 this section; and 34 (c) the assistance carried out by the provider pursuant to its 35 contract shall have resulted in a significant impact on the needs of the 36 at risk existing and potential homeowners in the service area. 37 5. Prior to terminating a contract or making a determination not to 38 renew a contract, the division shall: 39 (a) determine that the provider is in violation of the terms and 40 conditions of the contract or that funds provided pursuant to the 41 contract are being expended in a manner not consistent with the terms or 42 provisions of this act or determine that the significant need in the 43 service area no longer exists or all available funds have been expended; 44 and 45 (b) provide the provider with written notice, at least 45 days in 46 advance, of its intent to terminate or not renew the contract and 47 provide the provider with the opportunity to appear and be heard before 48 the division with respect to the reasons for such proposed termination 49 or non-renewal. 50 6. The division may temporarily withhold payments and may elect not to 51 enter into a succeeding contract with any non-profit assistance provider 52 if the provider is not in compliance with the contract or has without 53 good cause failed to submit the documentation required under the 54 contract. 55 7. The division shall establish eligibility criteria for use by the 56 non-profit assistance provider in ranking eligible homeowners for the A. 3538 4 1 provision of foreclosure prevention assistance under this act. Such 2 criteria shall, based on the mortgagor's application for assistance, 3 consider: 4 (a) need for assistance, including whether the mortgagor has insuffi- 5 cient household income or net worth to correct the existing delinquency 6 or delinquencies within a reasonable period of time and make full mort- 7 gage payments and whether any other federal, state, local or private 8 sources of assistance exist that would be available to the mortgagor and 9 would provide adequate assistance to the mortgagor to retain ownership 10 of the home; and 11 (b) if there is a reasonable prospect that a negotiated mortgage 12 contract may be reached so that the mortgagor will be able to resume 13 mortgage payments within a reasonable amount of time after the beginning 14 of the period for which assistance payments are provided under this act 15 and pay the mortgage or mortgages in full by its maturity date or by a 16 later date agreed to by the mortgagee or mortgagees for completing mort- 17 gage payments. 18 S 5. Eligibility for assistance. 1. No assistance may be provided 19 under this act unless all of the following are established: 20 (a) the applicant's loan is secured by a mortgage or deed of trust on 21 real estate upon which there is located a structure or structures 22 intended principally for occupancy of from 1 to 4 families which is 23 occupied by the borrower as the borrower's principal dwelling and is 24 located in this state; 25 (b) the non-profit assistance provider has determined that the mortga- 26 gor is in need of mortgage counseling and/or assistance in engaging his 27 or her lender or loan servicer in the development of loan modifications 28 or any other steps taken by a lender or servicer with a borrower to 29 resolve the problem of delinquent loan payments; 30 (c) the mortgagor has applied to the non-profit assistance provider 31 for assistance on an application form prescribed by the division for 32 this use which includes a financial statement disclosing all assets and 33 liabilities of the mortgagor, whether singly or jointly held, and all 34 household income regardless of source. Any applicant who intentionally 35 misrepresents any financial information in conjunction with the filing 36 of an application for assistance under this act may be denied assist- 37 ance; 38 (d) the mortgagee is not prevented by law from foreclosing upon the 39 mortgage; 40 (e) the non-profit assistance provider has determined, based on the 41 mortgagor's financial statement, that the mortgagor has insufficient 42 household income or net worth to correct the delinquency or delinquen- 43 cies within a reasonable period of time and make full mortgage payments; 44 (f) except for the current delinquency, the mortgagor shall have had a 45 reasonably favorable residential mortgage credit history; and 46 (g) the mortgagor meets any other procedural requirements established 47 by the division. 48 2. Upon a determination that the conditions of eligibility described 49 in subdivision one of this section have been met by a mortgagor and 50 money is available in the New York state foreclosure prevention fund 51 established by section 92-h of the state finance law, the mortgagor 52 shall become eligible for the assistance described in this act. 53 S 6. Foreclosure prevention assistance. The division shall establish a 54 system by which it shall make, upon the recommendation of a participat- 55 ing non-profit assistance provider, payments to mortgagees who hold a 56 mortgage secured by an eligible homeowner's real estate on behalf of the A. 3538 5 1 mortgagor when such payments are in support of a negotiated settlement 2 that allow a homeowner to remain in his or her home and when the mortga- 3 gor has in concessions matched the amount of the authorized payments. In 4 no instance shall payments to mortgagees exceed the total amount of the 5 3 monthly payments owed by the homeowner before the date the homeowner 6 applied for assistance under this act. The division shall establish 7 regional assistance limits based on regional disparities in the cost of 8 housing in this state and restrict the total amount of payments to 9 eligible homeowners to the limit set for the region in which the real 10 estate is located. 11 S 7. Payment to non-profit assistance providers for foreclosure 12 prevention fund contracts. 1. Each contract entered into with a non-pro- 13 fit assistance provider shall provide payment to the non-profit assist- 14 ance provider for foreclosure prevention assistance which the provider 15 has provided. 16 2. Payments shall be made by the division to the non-profit assistance 17 provider, not less frequently than semiannually at or prior to the 18 commencement of the contract, to compensate the provider for the fore- 19 closure prevention assistance which it shall undertake to provide; 20 provided that with respect to contracts entered on or after June 30, the 21 first such payment shall be made by the division beginning on or after 22 July 1 of the fiscal year for which an appropriation in support of such 23 payment is made and provided further that the final such payment to the 24 non-profit assistance provider shall be made no later than March 31 of 25 such fiscal year. 26 S 8. Annual report to the legislature. The commissioner shall submit a 27 report to the legislature on or before December 31, 2011, and annually 28 thereafter, on the implementation of this act. Such report shall 29 include, but not be limited to, for each provider receiving funds under 30 this act, a description of such provider's contract amount, the specific 31 foreclosure prevention assistance provided by such provider and the 32 number of persons and households served by each provider. 33 S 9. Education and outreach to homeowners. In coordination with the 34 banking department and the consumer protection board, the division shall 35 undertake outreach activities directed at eligible homeowners as defined 36 in this act. Such outreach activities shall include, but not be limited 37 to: 38 1. the production and broadcast of public service announcements using 39 electronic media to inform the general public of the availability of 40 financial assistance through the New York state foreclosure prevention 41 fund established by section 92-h of the state finance law. Such public 42 service announcements shall state the amount of financial assistance 43 that may be available, who qualifies, and where such financial assist- 44 ance may be obtained; 45 2. the establishment and maintenance at the division of a toll-free 46 telephone number to provide information on the New York state foreclo- 47 sure prevention fund and respond to consumers' questions regarding such 48 fund; and 49 3. the inclusion of a description on the internet websites maintained 50 by the division, the banking department and the consumer protection 51 board of the New York state foreclosure prevention fund and a listing of 52 all not-for-profit contractors providing financial assistance through 53 the fund. Such listing shall include the address and phone number of 54 each not-for-profit contractor. A. 3538 6 1 S 10. Subdivisions 1 and 3 of section 1303 of the real property 2 actions and proceedings law, as amended by chapter 507 of the laws of 3 2009, are amended to read as follows: 4 1. The foreclosing party in a mortgage foreclosure action, involving 5 residential real property shall provide notice to: 6 (a) any mortgagor if the action relates to an owner-occupied one-to- 7 four family dwelling; and 8 (b) any tenant of a dwelling unit in accordance with the provisions of 9 this section. SUCH NOTICE SHALL INCLUDE INFORMATION ABOUT THE AVAILABIL- 10 ITY OF FORECLOSURE PREVENTION ASSISTANCE FROM THE STATE TO PREVENT FORE- 11 CLOSURE. 12 3. The notice to any mortgagor required by paragraph (a) of subdivi- 13 sion one of this section shall appear as follows: 14 Help for Homeowners in Foreclosure 15 New York State Law requires that we send you this notice about the 16 foreclosure process. Please read it carefully. 17 Summons and Complaint 18 You are in danger of losing your home. If you fail to respond to the 19 summons and complaint in this foreclosure action, you may lose your 20 home. Please read the summons and complaint carefully. You should imme- 21 diately contact an attorney or your local legal aid office to obtain 22 advice on how to protect yourself. TEMPORARY FINANCIAL ASSISTANCE TO 23 MAKE MORTGAGE PAYMENTS TO PREVENT FORECLOSURE IS AVAILABLE TO ELIGIBLE 24 HOMEOWNERS THROUGH A LOCAL NON-PROFIT ASSISTANCE PROVIDER. 25 Sources of Information and Assistance 26 The State encourages you to become informed about your options in 27 foreclosure. In addition to seeking assistance from an attorney or legal 28 aid office, there are government agencies and non-profit organizations 29 that you may contact for information about possible options, including 30 trying to work with your lender during this process. 31 To locate an entity near you, you may call the toll-free helpline 32 maintained by the New York State Banking Department at (enter number) or 33 visit the Department's website at (enter web address). 34 Foreclosure rescue scams 35 Be careful of people who approach you with offers to "save" your home. 36 There are individuals who watch for notices of foreclosure actions in 37 order to unfairly profit from a homeowner's distress. You should be 38 extremely careful about any such promises and any suggestions that you 39 pay them a fee or sign over your deed. State law requires anyone offer- 40 ing such services for profit to enter into a contract which fully 41 describes the services they will perform and fees they will charge, and 42 which prohibits them from taking any money from you until they have 43 completed all such promised services. 44 ADDITIONALLY, THE STATE OF NEW YORK HAS DETERMINED THAT THERE EXISTS A 45 SERIOUS NEED FOR FINANCIAL RESOURCES TO ASSIST HOMEOWNERS FACING FORE- 46 CLOSURE. TOWARDS THAT END, IT HAS ESTABLISHED THE NEW YORK STATE FORE- 47 CLOSURE PREVENTION FUND. TO BE ELIGIBLE, A HOMEOWNER MUST LIVE IN THEIR 48 HOME, OWN NO OTHER REAL PROPERTY AND FILL OUT AN APPLICATION FOR ASSIST- 49 ANCE WITH A LOCAL NON-PROFIT ASSISTANCE PROVIDER WHO WILL DETERMINE WHO 50 SHALL RECEIVE AID WITHIN THE FUNDS APPROPRIATED. FOR INFORMATION ON 51 WHICH NON-PROFIT ASSISTANCE PROVIDER IS SERVING YOUR GEOGRAPHICAL AREA, 52 PLEASE CONTACT THE NEW YORK STATE BANKING DEPARTMENT AT THE NUMBER 53 AND/OR WEBSITE PROVIDED ON THIS NOTICE. 54 SUCH ASSISTANCE IS IN THE FORM OF MORTGAGE PAYMENTS ON BEHALF OF AN 55 ELIGIBLE HOMEOWNER TO THE LENDER FOR THE PURPOSE OF PREVENTING FORECLO- 56 SURE. A. 3538 7 1 S 11. The state finance law is amended by adding a new section 92-h to 2 read as follows: 3 S 92-H. NEW YORK STATE FORECLOSURE PREVENTION FUND. 1. THERE IS HEREBY 4 ESTABLISHED IN THE JOINT CUSTODY OF THE STATE COMPTROLLER AND THE 5 COMMISSIONER OF TAXATION AND FINANCE A SPECIAL FUND TO BE KNOWN AS THE 6 "NEW YORK STATE FORECLOSURE PREVENTION FUND". 7 2. THE NEW YORK STATE FORECLOSURE PREVENTION FUND SHALL CONSIST OF 8 MONEYS APPROPRIATED TO IT FROM THE GENERAL FUND AND ALLOCATED PURSUANT 9 TO A CERTIFICATE OF APPROVAL OF AVAILABILITY ISSUED BY THE DIRECTOR OF 10 THE BUDGET AND ALL OTHER MONEYS CREDITED, APPROPRIATED OR TRANSFERRED 11 THERETO FROM ANY OTHER FUND OR SOURCES. 12 3. MONEYS OF THE FUND, FOLLOWING APPROPRIATION BY THE LEGISLATURE, MAY 13 BE EXPENDED IN ACCORDANCE WITH THE FORECLOSURE PREVENTION ACT OF TWO 14 THOUSAND NINE AND THE REGULATIONS PROMULGATED THEREUNDER, PURSUANT TO A 15 CERTIFICATE OF APPROVAL OF AVAILABILITY ISSUED BY THE DIRECTOR OF THE 16 BUDGET. 17 S 12. This act shall take effect on the ninetieth day after it shall 18 have become a law; provided, however, that effective immediately, the 19 addition, amendment and/or repeal of any rule or regulation necessary 20 for the implementation of this act on its effective date is authorized 21 and directed to be made and completed on or before such effective date.