S T A T E   O F   N E W   Y O R K
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                                  3066

                       2013-2014 Regular Sessions

                          I N  A S S E M B L Y

                            January 23, 2013
                               ___________

Introduced  by  M.  of A. CLARK, SCARBOROUGH, COOK, ROBINSON, ZEBROWSKI,
  WEPRIN -- Multi-Sponsored by -- M. of A. GIBSON, SWEENEY -- read  once
  and referred to the Committee on Banks

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.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD06696-01-3
              

A. 3066                             2

  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.
  (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.