S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   1688
 
                        2019-2020 Regular Sessions
 
                             I N  S E N A T E
 
                             January 15, 2019
                                ___________
 
 Introduced  by  Sen.  MONTGOMERY  -- read twice and ordered printed, and
   when printed to be committed to the Committee on Judiciary
 
 AN ACT to amend the real property law, the civil practice law and rules,
   and the criminal procedure law, in relation to distressed home loans
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Paragraphs (c) and (e) of subdivision 2 of section 265-a of
 the  real property law, as added by chapter 308 of the laws of 2006, are
 amended to read as follows:
   (c) "Covered contract" means any contract, agreement, or  arrangement,
 or  any  term  thereof,  between  an  equity purchaser and equity seller
 which:
   (i) is incident to the sale of a residence in foreclosure; or
   (ii) is incident to the sale of a residence in foreclosure or  default
 where  such  contract,  agreement or arrangement includes a reconveyance
 arrangement[.]; OR
   (III) IS INCIDENT TO THE SALE OF A RESIDENCE THAT  IS  THE  COLLATERAL
 FOR  A "DISTRESSED HOME LOAN" AS DEFINED IN PARAGRAPH (D) OF SUBDIVISION
 ONE OF SECTION TWO HUNDRED SIXTY-FIVE-B OF THIS ARTICLE.
   For purposes of this section, any reference to the "sale" of  a  resi-
 dence  by an equity seller to an equity purchaser shall include a trans-
 action where an equity seller receives  consideration  from  the  equity
 purchaser, and a transaction involving a transfer of title to the equity
 purchaser where no consideration is provided to the equity seller.
   (e)  "Equity  purchaser" means any person who OR ENTITY WHICH acquires
 title to any residence in foreclosure or, where applicable, default,  or
 [his  or  her] THE representative OF SUCH PERSON OR ENTITY as defined in
 this subdivision, except a person who acquires such title as follows:
   (i) to use, and who uses, such property as his or  her  primary  resi-
 dence;
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD00889-01-9
              

 S. 1688                             2
 
   (ii) by a deed from a referee in a foreclosure sale conducted pursuant
 to article thirteen of the real property actions and proceedings law;
   (iii) at any sale of property authorized by statute;
   (iv) by order or judgment of any court;
   (v) from a spouse, or from a parent, grandparent, child, grandchild or
 sibling of such person or such person's spouse;
   (vi)  as  a not-for-profit housing organization or as a public housing
 agency; or
   (vii) a bona fide purchaser or encumbrancer for value.
   § 2. Paragraph (a) of subdivision 5 of section 265-a of the real prop-
 erty law, as added by chapter 308 of the laws of  2006,  is  amended  to
 read as follows:
   (a)  In  addition  to the right of rescission described in subdivision
 eight of this section, the equity seller has the  right  to  cancel  any
 covered  contract with an equity purchaser until midnight of the [fifth]
 FOURTEENTH business day following the day on which the equity seller and
 equity purchaser  sign  a  covered  contract  that  complies  with  this
 section.
   §  3.  Paragraphs (a) and (d) of subdivision 7 of section 265-a of the
 real property law, as added by chapter 308 of  the  laws  of  2006,  are
 amended to read as follows:
   (a)  Before  midnight of the [fifth] FOURTEENTH business day after the
 date on which the covered contract is  executed,  the  equity  purchaser
 shall not do any of the following:
   (i) accept from any equity seller an execution of, or induce any equi-
 ty  seller  to  execute, any instrument of conveyance of any interest in
 the residence in foreclosure or, where applicable, default;
   (ii) record with the county clerk any  document,  including,  but  not
 limited to, any instrument of conveyance, signed by the equity seller;
   (iii)  transfer  or  encumber  or  purport to transfer or encumber any
 interest in the residence in foreclosure or, where  applicable,  default
 to any third party;
   (iv) pay the equity seller any consideration; or
   (v)  suggest,  encourage,  or provide any form which allows the equity
 seller to waive his or  her  right  to  cancel  or  rescind  under  this
 section.
   (d)  It  is unlawful for any equity purchaser to initiate, enter into,
 negotiate, or consummate any covered contract involving residential real
 property in foreclosure or, where applicable, default if  such  [person]
 EQUITY  PURCHASER,  by the terms of such covered contract, takes [uncon-
 scionable] UNDUE advantage of the equity seller.
   § 4. Paragraph (e) of subdivision 1 of section 265-b of the real prop-
 erty law, as added by chapter 472 of the laws of 2008, subparagraphs (i)
 and (vii) as amended by chapter 507 of the laws of  2009,  subparagraphs
 (iii) and (ix) as further amended by section 104 of part A of chapter 62
 of the laws of 2011, is amended to read as follows:
   (e) "Distressed property consultant" or "consultant" means an individ-
 ual  or  a  corporation, partnership, limited liability company or other
 business entity that, directly or  indirectly,  solicits  or  undertakes
 employment  to  provide  consulting  services to a homeowner for compen-
 sation or promise of compensation with respect to a distressed home loan
 or a potential loss of the home for nonpayment of  taxes.  A  DISTRESSED
 PROPERTY consultant does not include the following:
   (i) an attorney admitted to practice in the state of New York when the
 attorney  is  directly  providing  [consulting services] LEGAL REPRESEN-
 TATION to a homeowner PURSUANT TO A RETAINER AGREEMENT, AND HAS  ENTERED

 S. 1688                             3
 
 AN  APPEARANCE  ON  BEHALF  OF  A HOMEOWNER, in the course of his or her
 regular legal practice. THIS EXCEPTION SHALL NOT APPLY  TO  NON-ATTORNEY
 INDIVIDUALS  ENGAGED  IN  ACTIVITIES  COVERED BY SUBDIVISION TWO OF THIS
 SECTION  WHO  ARE  EMPLOYED  BY, ASSOCIATED WITH, OR CONSULTANTS FOR LAW
 FIRMS WHEN SUCH LAW FIRMS ARE NOT PROVIDING LEGAL  REPRESENTATION  TO  A
 HOMEOWNER IN A FORECLOSURE ACTION PURSUANT TO A RETAINER AGREEMENT;
   (ii)  a person or entity who holds or is owed an obligation secured by
 a lien on any  property  in  foreclosure  while  the  person  or  entity
 performs services in connection with the obligation or lien;
   (iii)  a  bank,  trust  company, private banker, bank holding company,
 savings bank, savings and  loan  association,  thrift  holding  company,
 credit  union  or  insurance  company  organized  under the laws of this
 state, another state or the United States, or a subsidiary or  affiliate
 of  such  entity or a foreign banking corporation licensed by the super-
 intendent of financial services or the comptroller of the currency;
   (iv) a federal Department of Housing and  Urban  Development  approved
 mortgagee  and  any  subsidiary  or affiliate of such mortgagee, and any
 agent or employee of these persons while engaged in the business of such
 mortgagee;
   (v) a judgment creditor of the homeowner, if the  judgment  creditor's
 claim accrued before the written notice of foreclosure sale is sent;
   (vi)  a  title  insurer authorized to do business in this state, while
 performing title insurance and settlement services;
   (vii) a person licensed as a mortgage banker or registered as a  mort-
 gage  broker  or  registered  as  a mortgage loan servicer as defined in
 article twelve-D of the banking law, provided that no such person  shall
 take  any  upfront  fee  in conjunction with activities constituting the
 business of a distressed property consultant;
   (viii) a bona fide not-for-profit organization that offers  counseling
 or advice to homeowners in foreclosure or loan default; or
   (ix)  a  person  licensed  or registered in the state to engage in the
 practice of other  professions  that  the  superintendent  of  financial
 services has determined should not be subject to this section.
   §  5.  Paragraphs (d) and (e) of subdivision 2 of section 265-b of the
 real property law, as added by chapter 472 of  the  laws  of  2008,  are
 amended  and  nine new paragraphs (f), (g), (h), (i), (j), (k), (l), (m)
 and a closing paragraph are added to read as follows:
   (d) retaining any original loan document or  other  original  document
 related  to the distressed home loan, the property or the potential loss
 of the home for nonpayment of taxes; [or]
   (e) inducing or attempting to induce a homeowner to enter a consulting
 contract that does not fully comply with the provisions  of  this  arti-
 cle[.];
   (F) INDUCING THE TRANSFER OF A DEED TO ANY PERSON OR ENTITY, INCLUDING
 TO THE DISTRESSED PROPERTY CONSULTANT;
   (G)  ACCEPTING  OR TAKING OWNERSHIP OF A DEED FROM A HOMEOWNER FOR ANY
 PERIOD OF TIME WHATSOEVER;
   (H) SIMULATING IN ANY MANNER A LAW ENFORCEMENT OFFICER, OR A REPRESEN-
 TATIVE OF ANY GOVERNMENTAL AGENCY;
   (I) DISCLOSING OR THREATENING TO DISCLOSE  INFORMATION  AFFECTING  THE
 HOMEOWNER'S REPUTATION FOR CREDIT WORTHINESS WITH KNOWLEDGE OR REASON TO
 KNOW THAT THE INFORMATION IS FALSE;
   (J)  COMMUNICATING  WITH  THE HOMEOWNER OR ANY MEMBER OF HIS FAMILY OR
 HOUSEHOLD WITH SUCH FREQUENCY OR AT SUCH UNUSUAL  HOURS  OR  IN  SUCH  A
 MANNER AS CAN REASONABLY BE EXPECTED TO ABUSE OR HARASS THE HOMEOWNER;

 S. 1688                             4
 
   (K) CLAIMING, ATTEMPTING, OR THREATENING TO ENFORCE A RIGHT WITH KNOW-
 LEDGE OR REASON TO KNOW THAT THE RIGHT DOES NOT EXIST;
   (L) USING A COMMUNICATION WHICH SIMULATES IN ANY MANNER LEGAL OR JUDI-
 CIAL  PROCESS  OR WHICH GIVES THE APPEARANCE OF BEING AUTHORIZED, ISSUED
 OR APPROVED BY A GOVERNMENT, GOVERNMENTAL AGENCY,  OR  ATTORNEY  AT  LAW
 WHEN IT IS NOT; OR
   (M)  ENCUMBERING  THE  PROPERTY WITH A LIEN WITHOUT ANY CONTRACTUAL OR
 LEGAL BASIS.
   IF ANY PROVISION OF THIS SUBDIVISION OR THE APPLICATION THEREOF TO ANY
 PERSON OR CIRCUMSTANCES IS HELD INVALID, THE  INVALIDITY  THEREOF  SHALL
 NOT  AFFECT  OTHER  PROVISIONS OR APPLICATIONS OF THIS SUBDIVISION WHICH
 CAN BE GIVEN EFFECT WITHOUT THE INVALID PROVISION OR APPLICATION, AND TO
 THIS END THE PROVISIONS OF THIS SUBDIVISION ARE SEVERABLE.
   § 6. The opening paragraph of subdivision (b)  of  rule  6312  of  the
 civil  practice  law  and rules, as amended by chapter 24 of the laws of
 1996, is amended to read as follows:
   Except as provided in  section  2512  AND  IN  ACTIONS  BROUGHT  UNDER
 SECTION  TWO HUNDRED SIXTY-FIVE-A OF THE REAL PROPERTY LAW, prior to the
 granting of a preliminary injunction, the plaintiff shall give an under-
 taking in an amount to be fixed by the court, that the plaintiff, if  it
 is  finally determined that he or she was not entitled to an injunction,
 will pay to the defendant all damages and costs which may  be  sustained
 by reason of the injunction, including:
   §  7.  The  criminal  procedure law is amended by adding a new section
 420.45 to read as follows:
 § 420.45 POST-TRIAL MOTION RELATING  TO  CERTAIN  INSTRUMENTS  AFFECTING
            RESIDENTIAL REAL PROPERTY.
   1. WHEN A DEFENDANT HAS BEEN CONVICTED AFTER A TRIAL OR PLED GUILTY TO
 VIOLATING EITHER SECTION 175.30 OR 175.35 OF THE PENAL LAW IN CONNECTION
 TO  AN  INSTRUMENT THAT IS MATERIAL TO THE TRANSFER OR PURCHASE OF RESI-
 DENTIAL REAL PROPERTY, THE DISTRICT ATTORNEY MAY FILE A  MOTION  IN  THE
 SUPREME  COURT  IN  THE COUNTY WHERE THE PROPERTY THAT IS SUBJECT TO THE
 INSTRUMENT IS LOCATED ON BEHALF OF THE VICTIM  TO  VOID  THE  INSTRUMENT
 THAT  IS  THE  SUBJECT  OF SUCH CRIMINAL INFORMATION OR INDICTMENT. SUCH
 MOTION MUST BE IN WRITING AND PROVIDE REASONABLE NOTICE TO  ALL  PERSONS
 WHO  HAVE  AN INTEREST IN THE PROPERTY AFFECTED BY SUCH INSTRUMENT.  THE
 MOTION PAPERS MUST STATE THE COUNTY OR BOROUGH, IF IN THE  CITY  OF  NEW
 YORK, AND BLOCK, LOT, STREET ADDRESS OF SUCH PROPERTY, AND A DESCRIPTION
 OF  SUCH  PROPERTY.  THE  MOTION  PAPERS  MUST  STATE THE GROUNDS OF THE
 MOTION, MUST CONTAIN SWORN ALLEGATIONS OF FACT SUPPORTING SUCH  GROUNDS,
 AND INCLUDE A COPY OF THE GUILTY DISPOSITION ATTACHED TO THE DOCUMENT.
   2.  WITHIN  TEN DAYS AFTER FILING A MOTION PURSUANT TO SUBDIVISION ONE
 OF THIS SECTION, THE DISTRICT ATTORNEY SHALL RECORD A COPY OF THE NOTICE
 OF MOTION IN THE OFFICE OF THE CLERK OF THE COUNTY IN WHICH THE PROPERTY
 IS SITUATED. THE NOTICE SHALL BE INDEXED BY  THE  CLERK  IN  THE  MANNER
 PRESCRIBED  BY  SUBDIVISION (C) OF RULE SIXTY-FIVE HUNDRED ELEVEN OF THE
 CIVIL PRACTICE LAW AND RULES FOR A NOTICE  OF  PENDENCY  OF  ACTION  AND
 SHALL HAVE THE SAME EFFECT AS SUCH NOTICE.
   3.  THE SUPREME COURT MUST CONDUCT A HEARING AND MAKE FINDINGS OF FACT
 ESSENTIAL  TO  THE  DETERMINATION  WHETHER  TO  DECLARE  THE  INSTRUMENT
 DESCRIBED IN SUBDIVISION ONE OF THIS SECTION VOID AB INITIO. ALL PERSONS
 PROVIDING  FACTUAL  INFORMATION AT SUCH HEARING MUST TESTIFY UNDER OATH.
 THERE WILL BE A REBUTTABLE PRESUMPTION THAT WHERE A PARTY  IS  CONVICTED
 AFTER  A  TRIAL  IN  CRIMINAL  COURT  OR A GUILTY PLEA TO EITHER SECTION
 175.30 OR SECTION 175.35 OF THE PENAL LAW IN CONNECTION WITH AN  INSTRU-

 S. 1688                             5
 
 MENT  THAT IS MATERIAL TO THE TRANSFER OR SALE OF RESIDENTIAL REAL PROP-
 ERTY, THAT SUCH INSTRUMENT IS VOID AB INITIO.
   4. UPON THE DEFENDANT'S CONVICTION OF OR GUILTY PLEA TO SECTION 175.30
 OR  SECTION  175.35  OF THE PENAL LAW AS DESCRIBED IN SUBDIVISION ONE OF
 THIS SECTION, AND AFTER CONDUCTING A  HEARING  PURSUANT  TO  SUBDIVISION
 THREE  OF THIS SECTION, A COURT SHALL MAKE A DETERMINATION AND IF APPRO-
 PRIATE SHALL ORDER THAT THE INSTRUMENT DESCRIBED IN SUBDIVISION  ONE  OF
 THIS  SECTION  BE  DECLARED  VOID  AB  INITIO OR GRANT OTHER APPROPRIATE
 RELIEF TO THE VICTIM. THE ORDER OF THE COURT SHALL DESCRIBE  THE  NATURE
 OF  THE  FALSE  STATEMENT OR FALSE INFORMATION CONTAINED IN SUCH INSTRU-
 MENT. A COPY OF SUCH INSTRUMENT SHALL BE ATTACHED TO THE  ORDER  OF  THE
 COURT.
   5.  IF  THE  ORDER  RELATES TO AN INSTRUMENT THAT HAS BEEN FILED WITH,
 REGISTERED, OR RECORDED IN A PUBLIC OFFICE, THE DISTRICT ATTORNEY  SHALL
 RECORD  A  CERTIFIED  COPY  OF SUCH ORDER IN THE OFFICE OF THE RECORDING
 OFFICER OF THE COUNTY IN WHICH SUCH PROPERTY IS SITUATED,  IN  THE  SAME
 MANNER  AS  A CONVEYANCE DULY ACKNOWLEDGED OR PROVED AND CERTIFIED SO AS
 TO ENTITLE IT TO BE RECORDED. SUCH RECORDING OFFICER  SHALL  RECORD  THE
 SAME IN HIS OR HER SAID OFFICE.
   6.  FOR PURPOSES OF THIS SECTION, "ALL PERSONS WHO HAVE AN INTEREST IN
 THE PROPERTY AFFECTED BY SUCH INSTRUMENT" SHALL  MEAN  ALL  PARTIES  WHO
 HAVE  RECORDED  AN  INSTRUMENT  AFFECTING  THE REAL PROPERTY THAT IS THE
 SUBJECT OF THE INSTRUMENT DESCRIBED IN SUBDIVISION ONE OF THIS  SECTION,
 INCLUDING  ANY  PARTY  OR  ENTITY THAT MAY HAVE LIENS OF INTEREST ON THE
 PROPERTY, AND ANY CURRENT RESIDENTS OF THE PROPERTY, AS OF THE  DATE  OF
 THE FILING OF THE CRIMINAL INFORMATION OR INDICTMENT.
   7.  NOTHING  IN  THIS  SECTION SHALL BE DEEMED TO INHIBIT OR PREVENT A
 PARTY'S RIGHT TO APPEAL SUCH ORDER.
   § 8. This act shall take effect immediately.