Prohibits home improvement contractors from also acting on behalf of mortgage brokers; prohibits a mortgage broker from paying a home improvement contractor directly unless they perform their own inspection of the completed work.
TITLE OF BILL: An act to amend the banking law, in relation to the dealings of mortgage brokers and home improvement contractors
PURPOSE OR GENERAL IDEA OF BILL: This legislation prohibits home improvement contractors from acting on behalf of mortgage brokers.
JUSTIFICATION: A conflict exists when home improvement contractors act on behalf of mortgage brokers, unscrupulously using high-pressure sales tactics to coerce people to obtain loans for what are often unnecessary repairs. Frequently, these contractors target urban, low-income neighborhoods to solicit high interest second mortgages in order to finance construction work frequently performed in a careless or unprofessional manner. Elderly residents are particularly vulnerable to such schemes and the loss of home ownership often results.
High-pressure sales, the lack of accessible credit and the absence of traditional financial institutions has rendered many low income, urban communities especially susceptible to these deceptive practices. The purpose of this legislation is to stop this unjust activity, shield the buyers, and hold sellers accountable. The foreclosure crisis in New York State and throughout the nation has helped to plunge our economy into the worst economic crisis since the great depression. It is therefore important for the legislature to aggressively mitigate the risk of foreclosure by minimizing unnecessary second mortgages that often result in a loss of home ownership.
PRIOR LEGISLATIVE HISTORY: 2009-10: A.170/S.1502 Referred to Banks 2005-06: A.2152/S.7148 2003-04: A.4980 2001-02: A.5969 1990-00: A.4046 1997-98: A.124/S.256 1995-96: A.3150 1993-94: S.4007
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: Ninety days after it becomes law.
STATE OF NEW YORK ________________________________________________________________________ 4038--A 2011-2012 Regular Sessions IN SENATE March 15, 2011 ___________Introduced by Sen. SAVINO -- read twice and ordered printed, and when printed to be committed to the Committee on Banks -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the banking law, in relation to the dealings of mortgage brokers and home improvement contractors THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The banking law is amended by adding a new section 595-c to read as follows: S 595-C. REGULATION OF DEALINGS OF MORTGAGE BROKERS AND HOME IMPROVE- MENT CONTRACTORS. 1. NO HOME IMPROVEMENT CONTRACTOR NOR ANY AGENTS OR SALESPERSONS THEREOF SHALL REPRESENT, ACT AS AN AGENT FOR, OR ADVERTISE, PROMOTE OR ARRANGE FOR THE SERVICES OF A MORTGAGE BROKER OR ITS AFFIL- IATE WHILE SOLICITING HOME IMPROVEMENT CONTRACTS NOR RECEIVE ANYTHING OF VALUE FROM A MORTGAGE BROKER OR ITS AFFILIATE FOR THE REFERRAL OF A BORROWER TO A MORTGAGE BROKER. THE STAFF OF A HOME IMPROVEMENT CONTRAC- TOR SHALL NOT ACT ON BEHALF OF A MORTGAGE BROKER IN ANY TRANSACTION. 2. A MORTGAGE BROKER SHALL NOT PAY A HOME IMPROVEMENT CONTRACTOR DIRECTLY. A HOME IMPROVEMENT CONTRACTOR MAY RECEIVE PAYMENT FROM THE PROCEEDS OF A HOME IMPROVEMENT LOAN PAYABLE SOLELY TO THE BORROWER OR, AT THE ELECTION OF THE BORROWER, THROUGH AN INDEPENDENT THIRD PARTY ESCROW AGENT IN ACCORDANCE WITH THE TERMS ESTABLISHED IN A WRITTEN AGREEMENT SIGNED BY THE BORROWER, THE LENDER AND THE CONTRACTOR PRIOR TO DISBURSEMENT. A MORTGAGE BROKER SHALL NOT OFFER A HOMEOWNER DIFFERENT LOAN TERMS CONTINGENT ON THE HOMEOWNER EXECUTING AN AGREEMENT FOR PAYMENT THROUGH AN INDEPENDENT THIRD PARTY AS DESCRIBED IN THE PRECEDING SENTENCE. ANY SUCH AGREEMENT SHALL CONTAIN A CLEAR AND CONSPICUOUS DISCLOSURE: YOU ARE NOT REQUIRED TO EXECUTE THIS AGREEMENT. YOU MAY INSTEAD RECEIVE PAYMENT DIRECTLY FROM (NAME OF MORTGAGE BROKER). (NAMEEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD04664-03-1 S. 4038--A 2
OF MORTGAGE BROKER) MAY NOT OFFER YOU DIFFERENT TERMS ON YOUR LOAN TO SIGN THIS AGREEMENT. 3. A MORTGAGE BROKER SHALL NOT PERMIT A HOME IMPROVEMENT CONTRACTOR TO BE A COSIGNER OR TO ACT AS A GUARANTOR FOR A MORTGAGE LOAN FOR HOME IMPROVEMENT. 4. FOR THE PURPOSE OF THIS SECTION, "HOME IMPROVEMENT CONTRACTOR", MEANS, WITH RESPECT TO ANY HOME IMPROVEMENT, A PERSON, FIRM OR CORPO- RATION WHICH OWNS OR OPERATES A HOME IMPROVEMENT BUSINESS OR WHO UNDER- TAKES, OFFERS TO UNDERTAKE OR AGREES TO PERFORM ANY HOME IMPROVEMENT FOR A FEE AND FOR WHOM THE TOTAL PRICE FOR ALL LABOR, MATERIALS AND OTHER ITEMS IS EQUAL TO OR GREATER THAN TWO HUNDRED DOLLARS. HOME IMPROVEMENT CONTRACTOR DOES NOT INCLUDE A PERSON, FIRM, CORPORATION, LANDLORD, COOP- ERATIVE CORPORATION, CONDOMINIUM BOARD OF MANAGERS, JOINT TENANT OR CO-TENANT THAT OWNS, IN WHOLE OR IN PART, THE PROPERTY TO BE IMPROVED. 5. THIS SECTION SHALL NOT ANNUL, ALTER, AFFECT OR EXEMPT ANY PERSON SUBJECT TO THE PROVISIONS OF THIS SECTION FROM COMPLYING WITH THE LAWS, ORDINANCES, RULES OR REGULATIONS OF ANY LOCALITY OR OTHER GOVERNMENTAL BODY, RELATING TO DEBT COLLECTION PRACTICES, EXCEPT TO THE EXTENT THAT SUCH LAWS, ORDINANCES, RULES OR REGULATIONS ARE INCONSISTENT WITH ANY PROVISION OF THIS SECTION, BUT NO SUCH LAW, ORDINANCE, RULE OR REGU- LATION SHALL BE CONSIDERED INCONSISTENT, IF IT AFFORDS GREATER PROTECTION TO THE HOMEOWNER FROM PERSONS SUBJECT TO THIS SECTION. S 2. This act shall take effect on the ninetieth day after it shall have become a law.