NY State Senate Bill 2011-S7666

Senate Bill S7666

2011-2012 Legislative Session

Prohibits a mortgage servicer from obtaining force-placed insurance in certain circumstances

download bill text pdf

Archive: Last Bill Status - In Senate Committee Rules Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jun 12, 2012	referred to rules

2011-S7666 (ACTIVE) - Details

See Assembly Version of this Bill:: A10490
Current Committee:: Senate Rules
Law Section:: Banking Law
Laws Affected:: Add §595-d, Bank L
Versions Introduced in Other Legislative Sessions:: 2013-2014: S4475, A3066
2015-2016: S2358, A4557

2011-S7666 (ACTIVE) - Summary

Prohibits a mortgage servicer from obtaining force-placed insurance in certain circumstances; requires a mortgage servicer to provide written notices prior to obtaining force-placed insurance; regulates the cost of coverage a mortgage servicer may obtain for force-placed insurance.

2011-S7666 (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S7666

TITLE OF BILL:
An act to amend the banking law, in relation to prohibiting a mortgage
servicer from obtaining force-placed insurance in certain
circumstances; in relation to requiring a mortgage servicer to provide
written notices prior to obtaining force-placed insurance; in relation
to regulating the cost of coverage a mortgage servicer may obtain for
force-placed insurance

PURPOSE:
This bill would establish certain guidelines by which a bank or a
mortgage servicer could force insurance coverage on a homeowner or
borrowers. The mortgage servicer would be required to provide written
notices prior to obtaining forced-placed insurance, and the cost of
said insurance would be regulated, to a reasonable rate. The mortgage
servicer shall not split, give or accept referral fees or anything of
value in connection with obtaining forced-placed insurance.

SUMMARY OF PROVISIONS:
Section 1 of this bill amends the banking law to add a new section
595-d.

Subdivision 1 of 595-d defines "force-placed insurance", "mortgage
servicer", and "mortgage loan" as used in 595-d.

Subdivision 2 of 595-d forbids a mortgage servicer from obtaining
force-placed insurance unless there is a reasonable basis to believe
that the borrower has not complied with the mortgage loan requirements
for certain types of insurance. If the borrower's existing insurance
is paid through escrow, the mortgage servicer must advance payments on
the borrower's existing policy unless the borrower cancels that
policy.

Subdivision 3 of 595-d sets forth the conditions which must be met for
a mortgage servicer to claim to have a reasonable basis for obtaining
force-placed insurance.

Subdivision 4 of 595-d sets forth the requirements that written notice
must meet, in order to comply with paragraph (a) of subdivision 3 of
595-d.

Subdivision 5 prohibits a mortgage servicer from obtaining certain
kinds of insurance for a property that are greater than the
outstanding loan balance or that amount to more than the last known
amount of coverage.

Subdivision 6 mandates that the mortgage servicer terminate any
force-placed insurance within 15 days of receipt of evidence of
borrower's insurance coverage. The mortgage servicer must also refund
to the borrower any premiums paid while both insurance coverages were
in effect, and any related fees,

Subdivision 7 prohibits a mortgage servicer from obtaining
force-placed insurance from any affiliated entities or entities in
which the mortgage servicer has an ownership interest.


Subdivision 8 forbids mortgage servicer from splitting fees or giving
or receiving referral fees or anything of value for obtaining
force-placed insurance.

JUSTIFICATION:
This bill amend banking law to establish new guidelines to prevent
homeowners and borrowers from being taken advantage of by banks and
mortgage servicers as it relates to forced placed insurance premiums
that needlessly add hundreds of dollars to a person's mortgage. This
legislation aims to prevent price gouging and unreasonable profits on
the part of the banks and mortgage servicers in New York State.

LEGISLATIVE HISTORY:
New bill.

FISCAL IMPLICATIONS:
To be determined.

EFFECTIVE DATE:
Immediately.

2011-S7666 (ACTIVE) - Bill Text download pdf

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  7666

                            I N  S E N A T E

                              June 12, 2012
                               ___________

Introduced  by  Sen.  SEWARD -- read twice and ordered printed, and when
  printed to be committed to the Committee on Rules

AN ACT to amend the banking law, in relation to prohibiting  a  mortgage
  servicer  from  obtaining  force-placed  insurance  in certain circum-
  stances; in relation to requiring a mortgage servicer to provide writ-
  ten notices prior to obtaining force-placed insurance; in relation  to
  regulating  the  cost  of  coverage a mortgage servicer may obtain for
  force-placed insurance

  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-d to
read as follows:
  S  595-D. REGULATION OF MORTGAGE SERVICERS; FORCE-PLACED INSURANCE. 1.
AS USED IN THIS SECTION, THE FOLLOWING DEFINITIONS SHALL MEAN:
  (A) "FORCE-PLACED INSURANCE" MEANS A POLICY OF HAZARD, FLOOD OR  HOME-
OWNER'S  INSURANCE  THAT IS OBTAINED BY A MORTGAGE SERVICER WITH RESPECT
TO REAL PROPERTY, SECURING A MORTGAGE LOAN  SERVICED  BY  SUCH  MORTGAGE
SERVICER.
  (B)  "MORTGAGE  SERVICER" MEANS A PERSON OR ENTITY REGISTERED PURSUANT
TO SUBDIVISION TWO OF SECTION FIVE HUNDRED NINETY  OF  THIS  ARTICLE  TO
ENGAGE  IN THE BUSINESS OF SERVICING MORTGAGE LOANS FOR PROPERTY LOCATED
IN THIS STATE.
  (C) "MORTGAGE LOAN" MEANS A LOAN TO A NATURAL  PERSON  MADE  PRIMARILY
FOR  PERSONAL,  FAMILY OR HOUSEHOLD USE, SECURED BY EITHER A MORTGAGE OR
DEED OF TRUST ON RESIDENTIAL REAL PROPERTY, ANY CERTIFICATE OF STOCK  OR
OTHER  EVIDENCE  OF  OWNERSHIP  IN, AND PROPRIETARY LEASE FROM, A CORPO-
RATION OR PARTNERSHIP FORMED FOR THE PURPOSE OF COOPERATIVE OWNERSHIP OF
RESIDENTIAL REAL PROPERTY OR, IF DETERMINED  BY  THE  SUPERINTENDENT  BY
REGULATION,  SHALL INCLUDE SUCH A LOAN SECURED BY A SECURITY INTEREST ON
A MANUFACTURED HOME.
  2. (A) A MORTGAGE SERVICER SHALL  NOT  OBTAIN  FORCE-PLACED  INSURANCE
UNLESS THERE IS A REASONABLE BASIS TO BELIEVE THE BORROWER HAS FAILED TO
COMPLY  WITH  THE MORTGAGE LOAN REQUIREMENT TO MAINTAIN HAZARD, FLOOD OR
HOMEOWNER'S INSURANCE.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.

                                                           LBD16045-01-2

S. 7666                             2

  (B) IF THE BORROWER'S EXISTING HAZARD, FLOOD OR HOMEOWNER'S  INSURANCE
POLICY  IS  PAID  THROUGH  AN ESCROW ACCOUNT, THEN THE MORTGAGE SERVICER
SHALL ADVANCE PAYMENTS  TO  CONTINUE  THE  BORROWER'S  EXISTING  POLICY,
UNLESS THE BORROWER OR INSURANCE COMPANY CANCELS THE EXISTING POLICY.
  3.  A MORTGAGE SERVICER SHALL NOT BE DEEMED TO HAVE A REASONABLE BASIS
FOR OBTAINING FORCE-PLACED INSURANCE UNLESS THE FOLLOWING IS MET:
  (A) THE MORTGAGE SERVICER HAS SENT, BY FIRST-CLASS MAIL, A COPY  OF  A
WRITTEN  NOTICE  DESCRIBED  IN  SUBDIVISION  FOUR OF THIS SECTION TO THE
BORROWER.
  (B) IF THE MORTGAGE SERVICER HAS NOT RECEIVED FROM THE BORROWER  WRIT-
TEN  CONFIRMATION OF HAZARD, FLOOD OR HOMEOWNER'S INSURANCE COVERAGE FOR
THE PROPERTY SECURING THE MORTGAGE LOAN, THE MORTGAGE SERVICER HAS SENT,
BY FIRST-CLASS MAIL, A SECOND COPY OF THE WRITTEN  NOTICE  DESCRIBED  IN
SUBDIVISION FOUR OF THIS SECTION, AT LEAST THIRTY DAYS AFTER THE MAILING
OF THE FIRST NOTICE.
  (C)  THE  MORTGAGE SERVICER HAS NOT RECEIVED FROM THE BORROWER WRITTEN
CONFIRMATION OF HAZARD, FLOOD OR HOMEOWNER'S INSURANCE COVERAGE FOR  THE
PROPERTY  SECURING  THE  MORTGAGE LOAN WITHIN FIFTEEN DAYS FROM THE DATE
THAT THE SECOND NOTICE WAS SENT BY THE MORTGAGE SERVICER.
  4. WRITTEN NOTICE, AS REQUIRED BY PARAGRAPH (A) OF  SUBDIVISION  THREE
OF THIS SECTION, SHALL CONTAIN ALL OF THE FOLLOWING:
  (A)  A REMINDER OF THE BORROWER'S OBLIGATION TO MAINTAIN HAZARD, FLOOD
OR HOMEOWNER'S INSURANCE ON THE PROPERTY SECURING THE MORTGAGE LOAN.
  (B) A STATEMENT THAT THE MORTGAGE SERVICER DOES NOT HAVE  EVIDENCE  OF
INSURANCE COVERAGE FOR THE PROPERTY.
  (C)  A  CLEAR AND CONSPICUOUS STATEMENT OF THE PROCEDURES BY WHICH THE
BORROWER MAY DEMONSTRATE THAT THE BORROWER HAS EXISTING INSURANCE COVER-
AGE FOR THE PROPERTY.
  (D) A STATEMENT THAT THE MORTGAGE SERVICER MAY OBTAIN INSURANCE COVER-
AGE FOR THE PROPERTY AT THE BORROWER'S EXPENSE IF THE BORROWER DOES  NOT
PROVIDE  A DEMONSTRATION OF THE BORROWER'S EXISTING COVERAGE IN A TIMELY
MANNER.
  5. A MORTGAGE SERVICER SHALL NOT OBTAIN HAZARD, FLOOD  OR  HOMEOWNER'S
INSURANCE  FOR  A MORTGAGED PROPERTY, OR REQUIRE A BORROWER TO OBTAIN OR
MAINTAIN THAT INSURANCE, IN EXCESS OF THE  GREATER  OF  THE  LAST  KNOWN
AMOUNT OF THE COVERAGE OR THE OUTSTANDING LOAN BALANCE.
  6.  WITHIN  FIFTEEN  DAYS  OF  THE  RECEIPT  BY A MORTGAGE SERVICER OF
EVIDENCE OF A BORROWER'S INSURANCE COVERAGE, THE MORTGAGE SERVICER SHALL
TERMINATE ANY FORCE-PLACED INSURANCE AND  REFUND  TO  THE  BORROWER  ALL
FORCE-PLACED  INSURANCE  PREMIUMS PAID BY THE BORROWER DURING ANY PERIOD
DURING WHICH THE BORROWER'S INSURANCE COVERAGE WERE BOTH IN EFFECT,  AND
ANY  RELATED  FEES CHARGED TO THE BORROWER'S ACCOUNT WITH RESPECT TO THE
FORCE-PLACED INSURANCE DURING THAT PERIOD.
  7. A MORTGAGE SERVICER SHALL NOT OBTAIN FORCE-PLACED INSURANCE FROM AN
AFFILIATED ENTITY OR ENTITY IN WHICH THE MORTGAGE SERVICER HAS AN OWNER-
SHIP INTEREST.
  8. A MORTGAGE SERVICER SHALL NOT SPLIT FEES, OR  GIVE  OR  ACCEPT  ANY
REFERRAL  FEES OR ANYTHING OF VALUE, IN CONNECTION WITH OBTAINING FORCE-
PLACED INSURANCE.
  S 2. This act shall take effect immediately.

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