NY State Senate Bill 2021-S4056

Senate Bill S4056

2021-2022 Legislative Session

Relates to prohibiting pre-payment penalties for mortgages secured by real property owned in a cooperative form of ownership

download bill text pdf

Archive: Last Bill Status - In Senate Committee Judiciary 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
Jan 05, 2022	referred to judiciary
Feb 02, 2021	referred to judiciary

2021-S4056 (ACTIVE) - Details

See Assembly Version of this Bill:: A1877
Current Committee:: Senate Judiciary
Law Section:: General Obligations Law
Laws Affected:: Amd §5-501, Gen Ob L
Versions Introduced in Other Legislative Sessions:: 2017-2018: A10727
2019-2020: S3347, A2667
2023-2024: S161, A707

2021-S4056 (ACTIVE) - Summary

Prohibits pre-payment penalties for mortgages secured by real property owned in a cooperative form of ownership where over fifty percent of the units are shareholder occupied.

2021-S4056 (ACTIVE) - Sponsor Memo

                                
 
BILL NUMBER: S4056

SPONSOR: HOYLMAN
 
TITLE OF BILL:

An act to amend the general obligations law, in relation to pre-payment
penalties for mortgages secured by real property owned in a cooperative
form of ownership

 
PURPOSE:

This bill will forbid prepayment penalties and fees from being charged
or collected on a loan or forbearance secured by real property owned in
a cooperative form ownership where over fifty percent of the units are
shareholder occupied and will make such prepayment penalties unenforcea-
ble.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 amends paragraph b of subdivision 3 of section 5-501 of the
general obligations law, as amended by chapter 472 of the laws of 2008.

 
JUSTIFICATION:

The Consumer Financial Protection Bureau has rules restricting the abil-
ity to impose prepayment penalties on most new mortgages for individuals
and not commercial properties. The CFPB has limited prepayment penalties
to fixed-mortgages that are considered to be "qualified mortgages". This
rule applies to single family units, including those that are part of
co-ops; therefore if an individual owns a single unit in a 200-unit
building, the protections would apply. However these protections exclude
the 200-unit building as a whole, due to it being considered a commer-
cial property.

Currently in New York State, there are provisions that limit the ability
of a lender to impose a prepayment penalty on loans with an interest
rate that exceeds six percent per annum and which are secured primarily
by a one-to-six family owner-occupied residence or certificates of stock
or other evidence of owner in a corporation or other entity formed for
the purpose of cooperative ownership of real estate. A lender may not
impose a prepayment penalty on such loans on or after one year from the
date the loan was made and, in the case of loans that are not fixed rate
the interest rate must remain fixed for a period of at least five years
for a prepayment penalty to be legally permissible. In all cases, the
mortgage note must expressly provide for a prepayment penalty.

Prepayment penalties and fees can trap families and leave them in situ-
ations with the only option being foreclosure. With similar legislation
passed in Colorado, this elimination, of prepayment penalties would be a
step in the right direction for lowering the increasing number of fore-
closures.

 
LEGISLATIVE HISTORY:

S.3347 of 2019-2020 (Hoylman): Died in Judiciary
A.2667 of 2019-2020 (Dinowitz): Passed Assembly

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.

2021-S4056 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   4056
 
                        2021-2022 Regular Sessions
 
                             I N  S E N A T E
 
                             February 2, 2021
                                ___________
 
 Introduced  by  Sen. HOYLMAN -- read twice and ordered printed, and when
   printed to be committed to the Committee on Judiciary
 
 AN ACT to amend the general obligations law, in relation to  pre-payment
   penalties  for  mortgages  secured by real property owned in a cooper-
   ative form of ownership

   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Paragraph b of subdivision 3 of section 5-501 of the gener-
 al  obligations  law,  as amended by chapter 472 of the laws of 2008, is
 amended to read as follows:
   b. notwithstanding any other provision of law, the unpaid  balance  of
 the  loan  or  forbearance  may  be prepaid, in whole or in part, at any
 time. If prepayment is made on or after one year from the date the  loan
 or forbearance is made, no penalty may be imposed. If prepayment is made
 prior  to such time, no penalty may be imposed unless provision therefor
 is expressly made in the loan contract, provided that no penalty may  be
 imposed if prohibited by sections six-l and six-m of the banking law. NO
 PREPAYMENT  PENALTY  OR  FEE  SHALL BE CHARGED OR COLLECTED ON A LOAN OR
 FORBEARANCE SECURED BY REAL PROPERTY OWNED  IN  A  COOPERATIVE  FORM  OF
 OWNERSHIP  WHERE  OVER  FIFTY PERCENT OF THE UNITS ARE SHAREHOLDER OCCU-
 PIED. SUCH PREPAYMENT PENALTY SHALL BE UNENFORCEABLE. In all cases,  the
 right  of  prepayment  shall  be stated in the instrument evidencing the
 loan or forbearance, provided, however,  that  the  provisions  of  this
 subdivision shall not apply to the extent such provisions are inconsist-
 ent with any federal law or regulation.
   § 2. This act shall take effect immediately.
 
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD05326-01-1

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