Relates to the dealings of mortgage brokers and home improvement contractors; exempts from provisions relating to payment of mortgage proceeds to a borrower or third party, rather than directly to a home improvement contractor, those home improvement loans insured by the FHA under the National Housing Act or the Energy Policy Act of 1992.
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:
The purpose of this bill is to clarify that certain Federal Housing Administration (FHA) loans will not be subject to payment restrictions when dealing with home improvement contractors.
EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER:
This bill would amend Subdivision 2 of section 595-c of the Banking Law, as added by Chapter 593 of the Laws of 2011 to exclude home improvement loans insured by the FHA under section 203(k) of the National Housing Act, 12 U.S.C. 1709(k) (Rehabilitation Mortgage Insurance) and section 106 of the Energy Policy Act of 1992 (Energy Efficient Mortgage Pilot Program). Current law prohibits mortgage brokers from directly paying home improvement contractors.
FHA loans are subject to particular requirements that conflict with what is required under current State law. FHA guidelines provide a different payment structure that allows a home improvement contractor to be directly paid by a mortgage broker. This chapter amendment would exclude FHA loans from the provisions of state law that would otherwise prohibit mortgage brokers from directly paying home improvement contractors.
PRIOR LEGISLATIVE HISTORY:
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
This act shall take effect on the same date and in the same manner as Chapter 593 of the Laws of 2011.
STATE OF NEW YORK ________________________________________________________________________ 6124 IN SENATE (PREFILED) January 4, 2012 ___________Introduced by Sen. SAVINO -- 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 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. Subdivision 2 of section 595-c of the banking law, as added by chapter 593 of the laws of 2011, is amended to read as follows: 2. Where a mortgage broker has solicited, processed, placed or negoti- ated a mortgage loan, a home improvement contractor shall not be paid directly but instead 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 accord- ance with the terms established in a written agreement signed by the borrower, the lender and the contractor prior to disbursement. A mort- gage broker shall not offer a homeowner different loan terms contingent on the homeowner executing an agreement for payment through an independ- ent third party as described in the preceding sentence. Any such agree- ment shall contain a clear and conspicuous disclosure: YOU ARE NOT REQUIRED TO EXECUTE THIS AGREEMENT. YOU MAY INSTEAD RECEIVE PAYMENT DIRECTLY. (NAME OF MORTGAGE BROKER) MAY NOT OFFER YOU DIFFERENT TERMS ON YOUR LOAN TO SIGN THIS AGREEMENT. THE PROVISIONS OF THIS SUBDIVISION SHALL NOT APPLY TO A HOME IMPROVEMENT LOAN INSURED BY THE FEDERAL HOUS- ING ADMINISTRATION UNDER SECTION 203(K) OF THE NATIONAL HOUSING ACT, 12 U.S.C. 1709(K), OR TO AMOUNTS ADDED TO A FEDERAL HOUSING ADMINISTRATION INSURED MORTGAGE UNDER THE ENERGY EFFICIENCY MORTGAGE PROGRAM ORIGINALLY ESTABLISHED UNDER SECTION 106 OF THE ENERGY POLICY ACT OF 1992, AS FROM TIME TO TIME AMENDED. S 2. This act shall take effect on the same date and in the same manner as section 1 of chapter 593 of the laws of 2011, takes effect.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD12084-02-2