Relates to prohibiting mortgagors from recovering attorney's fees and/or expenses incurred during a foreclosure.
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
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.
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.
This act shall take effect immediately.
STATE OF NEW YORK ________________________________________________________________________ 7032 IN SENATE April 21, 2014 ___________Introduced by Sen. SANDERS -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary AN ACT to amend the real property law, in relation to prohibiting mort- gagors from recovering attorney's fees and/or expenses incurred during a foreclosure THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 282 of the real property law, as added by chapter 550 of the laws of 2010, is amended to read as follows: S 282.
[Mortgagor's right to recover]MORTGAGORS PROHIBITED FROM RECOVERING attorneys' fees in actions or proceedings arising out of foreclosures of residential property. 1. [Whenever a covenant contained in a mortgage on residential real property shall provide that in any action or proceeding to foreclose the mortgage that the mortgagee may recover attorneys' fees and/or expenses incurred as the result of the failure of the mortgagor to perform any covenant or agreement contained in such mortgage, or that amounts paid by the mortgagee therefor shall be paid by the mortgagor as additional payment, there shall be implied in such mortgage a covenant by the mortgagee to pay to the mortgagor the reasonable]IN THE FORECLOSURE OF RESIDENTIAL PROPERTY MORTGAGORS ARE PROHIBITED FROM RECOVERING FROM THE MORTGAGEES ANY attorneys' fees and/or expenses incurred by the mortgagor as the result of the failure of the mortgagee to perform any covenant or agreement on its part to be performed under the mortgage or in the successful defense of any action or proceeding commenced by the mortgagee against the mortgagor arising out of the contract, and an agreement that such fees and expenses may be recovered [as provided by law in an action commenced against the mortga- gee or by way of counterclaim in any action or proceeding commenced by the mortgagee against the mortgagor. Any waiver of this section shall be void as against public policy]IS VOID. 2. For the purposes of this section, "residential real property" means real property improved by a one- to four-family residence, a condominium that is occupied by the mortgagor or a cooperative unit that is occupied by the mortgagor. S 2. This act shall take effect immediately.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD11395-01-3