Following is an abridged summary of the bill from the NY State Assembly;

This bill seeks to address the mortgage foreclosure crisis in the state by:

• providing additional protections and foreclosure prevention opportunities for homeowners at risk of losing their homes;
• strengthening the Banking Law to prevent similar crises from occurring in the future
• establishing standards for lenders and mortgage brokers to prevent borrowers from being placed into unaffordable home loans; 
• registering and regulating mortgage loan servicers to enhance loan servicing standards in the state;
• defining the crime of residential mortgage fraud and establishing strict criminal penalties to deter those who may engage in such activity.

Summary of Bill Provisions:

• Section 1 amends Real Property Actions and Proceedings Law to provide a clear and concise notice detailing instructions and potential options for those homeowners against whom foreclosure proceedings are being commenced.
• Section 2 adds a new Real Property Actions and Proceedings Law  to require lenders and mortgage loan servicers to send a notice to borrowers who took out a subprime or nontraditional loan between January 1, 2003 and September 1. 2008.  This notice must be sent at least 90 days before they may commence legal action against the borrower. The notice would provide the names and telephone numbers of housing counseling agencies approved by the United States Department of Housing and Urban Development ("HUD"), or designated by the Division of Housing and Community Renewal ("DHCR") and serving the borrower`s area.
• Section 3 adds a new CPLR Rule 3408 to require a court, in a residential foreclosure action involving a subprime or a non-traditional home loan made between January 1, 2003 and September 1, 2008, to schedule a settlement conference within 60 days of the date the proof of service that the complaint is filed with the county clerk's office. The plaintiff, or a representative with authority to settle the matter, must appear at the conference. The court may allow the plaintiff`s representative to appear via phone or video-conference. If the homeowner appears and is not represented by counsel, the homeowner is deemed to have made a motion to proceed as a "poor person" under CPLR S 1101.  The judge may relieve the defendant of certain procedural court requirements and appoint counsel under CPLR 1102(a).
• Section 3-a allows those homeowners against whom a foreclosure action has already been commenced to also participate in a settlement conference.
• Sections 4 and 4-a make certain conforming changes to Banking Law S 6-1.
• Section 5 adds a new Banking Law S 6-rn which
  a) defines the term "subprime home loan"
  b) provides consumer protections and minimum underwriting standards for subprime home loans; and
  c) establishes an enforcement mechanism for these provisions, and remedies for violations.  
  It also allows the Superintendent of Banks ("Superintendent") to adjust the definition of subprime home loan under certain circumstances.   In addition, it provides an opportunity to cure a violation to those lenders who, while acting in good faith, violate Banking Law S 6-m.   Either the Attorney General or the Superintendent may enforce the provisions of the new
  Banking Law S 6-m.  A borrower may raise the violation of this section as a defense to foreclosure.
• Section 6 adds a new Banking Law S 590-b to establish certain responsibilities for lenders and mortgage brokers. In particular, this section  establishes:
  a) a duty of care for mortgage brokers in soliciting, placing, processing and arranging home loans; 
  b)  standards for lenders and mortgage brokers in their dealings with appraisers.
• Section 6 also establishes remedies for violations of Banking Law S 590-b, and gives the Attorney General or Superintendent authority to enforce the provisions.
• Sections 7 through 16 amend the Banking Law to require mortgage loan servicers to register with the Superintendent before engaging in the  mortgage loan servicing business in New York state. These sections empower the Banking Board to promulgate regulations and require mortgage loan servicers to comply with them. These provisions also permit the Superintendent to inspect the books and records of registered mortgage loan servicers.
• Section 17 amends RPAPL S 1302 to extend its application to subprime home loans. Plaintiffs who bring legal action brought under Article 13 of the RPAPL are required to affirmatively allege that at the time the proceeding is commenced the plaintiff is the owner and the holder of the mortgage and note, or has been delegated the authority to institute a mortgage foreclosure action by the owner and holder of the mortgage and the note.  In addition, plaintiffs in subprime loan foreclosure actions must make an affirmative allegation of compliance with Banking Law S 6-m and RPAPL S 1304. This section further provides that a violation of Banking Law S 6-m or RPAPL S1304 will be a defense to a subprime foreclosure action.
• Section 18 amends General Obligations Law S 5-501(3)(b) to make a technical amendment related to Banking Law Sections 6-1 and 6-m.
• Section 19 adds new Article 187 to the Penal Law to define the crime of residential mortgage fraud.
• Section 20 amends Criminal Procedure Law S 700.5(8)(b) to add residential mortgage fraud in the first, second, third and fourth degrees as predicate crimes in the crimes of enterprise corruption.
• Section 21  amends Penal Law S 460.10(1)(a) to add violations of the mortgage fraud statute to the predicate crimes of money laundering.
• Sections 22 through 25 amend various sections of the Banking Law that allow the Superintendent to refuse a license or registration to a person for having committed certain named felonies, and to add residential mortgage fraud to the named felonies
• Section 26 adds a new Real Property Law S 265-b.  The purpose of this new section is to prevent certain foreclosure rescue scams.  The section prohibits "distressed property consultants" from performing services without a written and fully executed consulting contract with the homeowner; and from charging or accepting payment for consulting services before completion of services.  In addition, it requires that:
  • such consultants provide the homeowner with an opportunity to review a contract before signing it, 
  • the contract be in the same language that was used in any prior discussions between the consultant and the homeowner, and
  • the contract contain a notice of the homeowner`s right to cancel the contract.
• Section 27 of the bill contains a severability clause.
• Section 28 of the bill provides for the effective date of various provisions of the bill:
• sections 1 and 14 apply to actions that are commenced on or after September 1, 2008.
• sections 2 and 26 take effect September 1, 2008.
• sections 4, 5, 6, 13 and 18 apply to loans that are consumated on or after September 1, 2008.
• section 4a takes effect July 1, 2010.
• sections 7-12 and 14-16 take effect July 1, 2009.
• sections 19-25 take effect on the first day of November next succeeding the date upon which it shall have become a law; and provided however, effective immediately the promulgation of any rules, regulations or actions necessary for timely implementation of the provisions of this act are hereby authorized

To view the full text of the Bill, please click here.

To view the Press Release from the Governor's Office, please click here.

To read local media coverage, please click here.

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