S T A T E O F N E W Y O R K
________________________________________________________________________
7277
2011-2012 Regular Sessions
I N A S S E M B L Y
April 27, 2011
___________
Introduced by M. of A. BRENNAN, SCARBOROUGH, JACOBS, MILLMAN, DINOWITZ,
BENEDETTO, STEVENSON, COLTON, GALEF, JAFFEE, ZEBROWSKI, ROBERTS,
BARRON, ROBINSON, CASTRO, GIBSON, MARKEY, WEPRIN -- Multi-Sponsored by
-- M. of A. GABRYSZAK, GLICK, PHEFFER -- read once and referred to the
Committee on Judiciary
AN ACT to amend the real property actions and proceedings law, the bank-
ing law and the tax law, in relation to providing for mediation in
foreclosure actions; and providing for the repeal of such provisions
upon expiration thereof
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Legislative intent. The legislature declares that a public
emergency exists in regards to real estate foreclosures due to the
extension of fundamentally unaffordable mortgage loans, fundamentally
unaffordable second mortgages and fundamentally unaffordable home equity
loans. Many such loans were extended under conditions which evince
deception, misrepresentation and fraud on the part of many lenders and
agents. It is in the interest of New York state to ensure the rights of
all parties are protected and that all foreclosures which come into the
New York courts during this period are carefully scrutinized.
S 2. Subdivision 3 of section 1303 of the real property actions and
proceedings law, as amended by chapter 507 of the laws of 2009, is
amended to read as follows:
3. The notice to any mortgagor required by paragraph (a) of subdivi-
sion one of this section shall appear as follows:
Help for Homeowners in Foreclosure
New York State Law requires that we send you this notice about the
foreclosure process. Please read it carefully.
Summons and Complaint
You are in danger of losing your home. If you fail to respond to the
summons and complaint in this foreclosure action, you may lose your
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD10250-03-1
A. 7277 2
home. Please read the summons and complaint carefully. You should imme-
diately contact an attorney or your local legal aid office to obtain
advice on how to protect yourself.
RIGHT TO PETITION FOR MEDIATION
YOU HAVE THE RIGHT TO PETITION THE COURT TO ORDER MEDIATION BETWEEN
YOURSELF AND THE MORTGAGEE. THE MORTGAGEE IS REQUIRED TO SUBMIT TO MEDI-
ATION IF SO ORDERED BY THE COURT. SUCH MEDIATION COULD LEAD TO A NEW
MORTGAGE THAT PROTECTS THE INTERESTS OF THE MORTGAGEE WHILE MAKING IT
POSSIBLE FOR YOU TO MAKE PAYMENTS YOU CAN AFFORD. YOU SHOULD DISCUSS
THIS OPTION WITH AN ATTORNEY OR YOUR LOCAL LEGAL AID OFFICE.
Sources of Information and Assistance
The State encourages you to become informed about your options in
foreclosure. In addition to seeking assistance from an attorney or legal
aid office, there are government agencies and non-profit organizations
that you may contact for information about possible options, including
trying to work with your lender during this process.
To locate an entity near you, you may call the toll-free helpline
maintained by the New York State Banking Department at (enter number) or
visit the Department's website at (enter web address).
Foreclosure rescue scams
Be careful of people who approach you with offers to "save" your home.
There are individuals who watch for notices of foreclosure actions in
order to unfairly profit from a homeowner's distress. You should be
extremely careful about any such promises and any suggestions that you
pay them a fee or sign over your deed. State law requires anyone offer-
ing such services for profit to enter into a contract which fully
describes the services they will perform and fees they will charge, and
which prohibits them from taking any money from you until they have
completed all such promised services.
S 3. The real property actions and proceedings law is amended by
adding a new section 1308 to read as follows:
S 1308. FORECLOSURES; COURT RELIEF. 1. VENUE. IN ANY ACTION TO FORE-
CLOSE A MORTGAGE UNDER THIS ARTICLE A MORTGAGOR NAMED IN SUCH ACTION MAY
APPLY FOR RELIEF IN STATE SUPREME COURT PURSUANT TO THIS SECTION.
2. RIGHT TO PETITION FOR MEDIATION. UPON RECEIPT BY THE MORTGAGOR OF A
NOTICE FROM THE MORTGAGEE PURSUANT TO SECTION THIRTEEN HUNDRED THREE OF
THIS ARTICLE, THE MORTGAGOR SHALL HAVE THE RIGHT TO PETITION THE COURT
TO REQUIRE MEDIATION BETWEEN THE PARTIES PURSUANT TO SUBDIVISION FIVE OF
THIS SECTION.
3. PROCEDURE. A. IF AN ACTION TO FORECLOSE A MORTGAGE HAS BEEN
COMMENCED PRIOR TO THE EFFECTIVE DATE OF THIS SECTION, A MORTGAGOR MAY
PETITION THE COURT BEFORE WHICH SUCH ACTION IS COMMENCED, PURSUANT TO
SUBDIVISION TWO OF THIS SECTION, TO REQUIRE MEDIATION, PURSUANT TO
SUBDIVISION FIVE OF THIS SECTION, INSTEAD OF CONTINUING THE FORECLOSURE
ACTION.
B. IF A FORECLOSURE ACTION HAS NOT BEEN COMMENCED PRIOR TO THE EFFEC-
TIVE DATE OF THIS SECTION, A MORTGAGEE MUST COMMENCE A FORECLOSURE
ACTION IN STATE SUPREME COURT BY FILING AND SERVING A SUMMONS PURSUANT
TO ARTICLE THREE OF THE CIVIL PRACTICE LAW AND RULES WITH A REQUEST FOR
RELIEF PURSUANT TO THE TERMS OF THIS SECTION. IN SUCH CASE, SUCH FILING
SHALL BE DEEMED TO HAVE BEEN FILED BY A POOR PERSON PURSUANT TO ARTICLE
ELEVEN OF THE CIVIL PRACTICE LAW AND RULES AND ALL FILING AND COURT FEES
OTHERWISE APPLICABLE TO SUCH ACTIONS AND PAYABLE BY A MORTGAGOR IN THE
FORM OF INDEX AND MOTION FEES SHALL BE WAIVED.
A. 7277 3
4. PRIMA FACIE CASE. A MORTGAGOR MUST ESTABLISH A PRIMA FACIE CASE IN
THE MOTION OR PLEADING. AMENDMENTS TO SUCH MOTION OR PLEADING SHALL BE
LIBERALLY GRANTED. SUCH PLEADING MUST ESTABLISH THAT:
A. THE MORTGAGOR IS A NATURAL PERSON; AND
B. THE DEBT IS INCURRED BY THE MORTGAGOR PRIMARILY FOR PERSONAL, FAMI-
LY OR HOUSEHOLD PURPOSES; AND
C. THE LOAN IS SECURED BY A MORTGAGE, SECOND MORTGAGE OR HOME EQUITY
LOAN ON REAL PROPERTY WHICH IS IMPROVED WITH A RESIDENTIAL BUILDING
CONTAINING ONE TO FOUR DWELLING UNITS; AND
D. THE REAL PROPERTY SUBJECT TO FORECLOSURE IS THE PRINCIPAL RESIDENCE
OF THE MORTGAGOR; AND
E. THE MORTGAGOR OWNS NO OTHER REAL PROPERTY; AND
F. THE REAL PROPERTY IS LOCATED IN THIS STATE.
5. MEDIATION AND MONTHLY PAYMENT SCHEDULE. A. UPON RECEIPT OF A PETI-
TION FROM THE MORTGAGOR, THE COURT SHALL ORDER A PERIOD OF TIME, NOT
LESS THAN SIX MONTHS, FOR MEDIATION BETWEEN THE MORTGAGEE AND MORTGAGOR
TO ARRIVE AT A MODIFICATION OF THE LOAN THAT IS EQUITABLE AND JUST TO
BOTH PARTIES. THE MEDIATOR, APPOINTED BY THE COURT, SHALL INQUIRE INTO
THE FINANCES OF BOTH THE MORTGAGEE AND THE MORTGAGOR. THE PURPOSE OF
SUCH INQUIRY SHALL BE TO DETERMINE THE MINIMUM AMOUNT NECESSARY TO MAIN-
TAIN THE MORTGAGEE'S FINANCIAL POSITION AND TO DETERMINE THE AMOUNT
WHICH THE MORTGAGOR WILL BE ABLE TO AFFORD. SUCH MONTHLY PAYMENTS SHALL
BE APPLIED TO THE PRINCIPAL AND INTEREST UPON THE INDEBTEDNESS. IF THE
FINANCIAL CONDITION OF THE MORTGAGOR EXCEEDS THE MINIMUM AMOUNT NECES-
SARY TO MAINTAIN THE FINANCIAL POSITION OF THE MORTGAGEE, SUCH MONTHLY
AMOUNT MAY BE INCREASED BEYOND THE MINIMUM AMOUNT AS DETERMINED WITHIN
THE DISCRETION OF THE MEDIATOR. IT IS WITHIN THE COURT'S DISCRETION TO
DETERMINE WHETHER THE ESTABLISHMENT OF SUCH PAYMENT SCHEDULE IS POSSIBLE
UNDER TERMS WHICH ARE EQUITABLE AND JUST.
B. THE AIM OF MEDIATION PURSUANT TO THIS SUBDIVISION SHALL BE A NEW
MORTGAGE THAT IS NEGOTIATED IN A MANNER TO PROTECT THE INTERESTS OF THE
MORTGAGEE WHILE MAKING IT POSSIBLE FOR THE MORTGAGOR TO MAKE PAYMENTS IN
HIS OR HER CURRENT CIRCUMSTANCE. THESE GOALS MAY BE ACCOMPLISHED BY
REDUCING THE PRINCIPAL OWED, REDUCING THE INTEREST RATE ON THE LOAN,
EXTENDING THE LIFE OF THE LOAN, OR ANY OTHER MODIFICATION OR COMBINATION
OF MODIFICATIONS THAT PROVIDES FOR A SATISFACTORY END RESULT FOR BOTH
PARTIES. THE MORTGAGEE SHALL BARGAIN IN GOOD FAITH.
6. POSTPONEMENT ORDER. ONCE THE COURT DETERMINES THAT AN EQUITABLE AND
JUST PAYMENT SCHEDULE CAN BE ESTABLISHED THROUGH MEDIATION, IT SHALL
ISSUE AN ORDER WHICH SETS FORTH THE TERMS OF SUCH PAYMENT SCHEDULE AND
SERVE IT UPON ALL PARTIES TO THE PROCEEDING. SUCH ORDER SHALL SET FORTH
A RETURN DATE FOR THE REEXAMINATION OF SUCH MATTER AFTER PASSAGE OF THE
POSTPONEMENT TIME PERIOD AT A FORMAL HEARING ON NOTICE TO THE PARTIES.
THE COURT MAY TAILOR RELIEF AS REQUIRED BY THE FACTS OF EACH CASE THAT
FALLS WITHIN THE PURVIEW OF THIS SECTION. HOWEVER, IN NO EVENT SHALL
SUCH ORDER POSTPONE FINAL ACTION BEYOND ONE YEAR WITHOUT A RE-EXAMINA-
TION OF THE PARTIES' FINANCIAL CIRCUMSTANCES AFTER FORMAL HEARING ON
NOTICE TO THE PARTIES. THE TIME PERIOD OF SUCH ORDER SHALL RUN FROM THE
DATE OF THE ENTRY OF SUCH ORDER. SUCH ABEYANCE SHALL NOT BEGIN UNTIL
THE FORECLOSURE PROCESS HAS REACHED THE POINT WHERE A FINAL DETERMI-
NATION IS POSSIBLE BUT SHALL BE WITHHELD UNTIL THE POSTPONEMENT PERIOD
HAS ELAPSED. ENTITLEMENT TO SUCH ABEYANCE MAY BE ESTABLISHED AT ANY TIME
REGARDLESS OF WHETHER FORECLOSURE IS BEING SOUGHT BY THE MORTGAGEE.
MULTIPLE POSTPONEMENTS MAY BE GRANTED IN THE DISCRETION OF THE COURT IF
WARRANTED BY THE FACTS OF A GIVEN CASE AND THE ECONOMIC CONDITIONS
ACROSS THE STATE.
A. 7277 4
7. CONTINUING JURISDICTION. THE COURT SHALL MAINTAIN CONTINUING JURIS-
DICTION OF THE MATTER UNTIL IT REACHES FINAL RESOLUTION. UPON THE APPLI-
CATION OF EITHER PARTY, PRIOR TO THE EXPIRATION OF THE POSTPONEMENT
PERIOD, UPON PRESENTATION OF EVIDENCE THAT THE TERMS FIXED BY THE COURT
ARE NO LONGER JUST AND EQUITABLE, THE COURT MAY REVISE AND ALTER SUCH
TERMS IN SUCH MANNER AS THE CHANGED CIRCUMSTANCES AND CONDITIONS MAY
REQUIRE.
8. FINAL MODIFICATION. UPON AGREEMENT BY THE MORTGAGOR AND THE MORTGA-
GEE ON THE TERMS OF A PAYMENT SCHEDULE THAT IS EQUITABLE AND JUST TO
BOTH PARTIES, THE COURT SHALL, AFTER CERTIFYING SUCH AGREEMENT, DISMISS
THE FORECLOSURE ACTION.
S 4. Subdivision 1 of section 14 of the banking law is amended by
adding a new paragraph (ff) to read as follows:
(FF) TO DEFINE THE MORTGAGEE'S DUTY OF BARGAINING IN GOOD FAITH FOR
THE PURPOSES OF MEDIATION PURSUANT TO SUBDIVISION FIVE OF SECTION THIR-
TEEN HUNDRED EIGHT OF THE REAL PROPERTY ACTIONS AND PROCEEDINGS LAW.
SUCH DEFINITION SHALL INCLUDE INCENTIVES, PURSUANT TO SUBSECTION (Y) OF
SECTION FOURTEEN HUNDRED FIFTY-SIX OF THE TAX LAW AND SANCTIONS INCLUD-
ING, BUT NOT LIMITED TO WITHDRAWAL OF STATE DEPOSITS FROM SUCH INSTITU-
TION AND THE DELISTING OF SUCH INSTITUTION FROM STATE BUSINESS.
S 5. Section 1456 of the tax law is amended by adding a new subsection
(y) to read as follows:
(Y) LOAN PRINCIPAL REDUCTION TAX CREDIT. (1) FOR TAXABLE YEARS BEGIN-
NING ON OR AFTER JANUARY FIRST, TWO THOUSAND TWELVE, A TAXPAYER SHALL BE
ALLOWED A CREDIT AGAINST THE TAX IMPOSED BY THIS ARTICLE IF SUCH TAXPAY-
ER AGREES TO MODIFY A LOAN THROUGH MEDIATION PURSUANT TO SECTION THIR-
TEEN HUNDRED EIGHT OF THE REAL PROPERTY ACTIONS AND PROCEEDINGS LAW. THE
AMOUNT OF THE CREDIT SHALL BE EQUAL TO THE REDUCTION IN THE PRINCIPAL OF
SUCH LOAN AND SUCH CREDIT SHALL BE APPLIED OVER TEN YEARS WITH TEN
PERCENT OF SUCH CREDIT ALLOWED EACH YEAR.
(2) THE CREDIT AND CARRYOVERS OF SUCH CREDIT ALLOWED UNDER THIS
SUBSECTION FOR ANY TAXABLE YEAR SHALL NOT, IN THE AGGREGATE, REDUCE THE
TAX DUE FOR SUCH YEAR TO LESS THAN THE MINIMUM TAX FIXED BY SUBSECTION
(B) OF SECTION FOURTEEN HUNDRED FIFTY-FIVE OF THIS ARTICLE. HOWEVER, IF
THE AMOUNT OF CREDIT OR CARRYOVERS OF SUCH CREDIT, OR BOTH, ALLOWED
UNDER THIS SUBSECTION FOR ANY TAXABLE YEAR REDUCES THE TAX TO SUCH
AMOUNT, THEN ANY AMOUNT OF CREDIT OR CARRYOVERS OF SUCH CREDIT THUS NOT
DEDUCTIBLE IN SUCH TAXABLE YEAR MAY BE CARRIED OVER TO THE FOLLOWING
YEAR OR YEARS AND MAY BE DEDUCTED FROM THE TAXPAYER'S TAX FOR SUCH YEAR
OR YEARS; PROVIDED, HOWEVER, THAT ANY TAX CREDIT PURSUANT TO THIS
SUBSECTION SHALL NOT BE APPLIED FOR MORE THAN FIVE TAXABLE YEARS.
S 6. This act shall take effect immediately and shall expire and be
deemed repealed 3 years after such date; provided however that section
four of this act shall take effect on the same date as section 90 of
part A of chapter 62 of the laws of 2011, takes effect.