NY State Senate Bill 2023-S7209

Senate Bill S7209

2023-2024 Legislative Session

Enacts the Home Equity Fraud Act to control improper activities by home improvement contractors and finance companies

download bill text pdf

Current Bill Status - In Senate Committee Banks 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 03, 2024	referred to banks
May 18, 2023	referred to banks

2023-S7209 (ACTIVE) - Details

See Assembly Version of this Bill:: A2063
Current Committee:: Senate Banks
Law Section:: Banking Law
Laws Affected:: Amd §§595-a, 347 & 592-a, Bank L; add §254-e, RP L; add §§1316 & 1317, RPAP L; amd §771, add §771-c, Gen Bus L; add §5-338, Gen Ob L
Versions Introduced in Other Legislative Sessions:: 2011-2012: S7271
2013-2014: S19
2015-2016: S186
2017-2018: S4957, S7232
2019-2020: S5065, A6558
2021-2022: S5646, A6083

2023-S7209 (ACTIVE) - Summary

Enacts the "Home Equity Fraud Act" to control improper activities by home improvement contractors and finance companies; prohibits mortgage brokers or agents from acting as home improvement contractors; provides additional protections for mortgagors and homeowners.

2023-S7209 (ACTIVE) - Sponsor Memo

                                 
BILL NUMBER: S7209

SPONSOR: PARKER
 
TITLE OF BILL:

An act to amend the banking law, the real property law, the real proper-
ty actions and proceedings law, the general business law and the general
obligations law, in relation to enacting the "Home Equity Fraud Act"

 
PURPOSE OR GENERAL IDEA OF BILL:

The purpose of the bill is to end the practice of allowing mortgage,
companies, mortgage brokers and home improvement contractors to join
together to encourage lower or fixed income New Yorkers with substantial
equity in their homes, to obtain mortgages with unaffordable terms which
ultimately result in the loss of their homes.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1. Short Title

Section 2. Legislative findings

Section 3. Amends the Banking Law, section 595-a, subdivision 1 by
adding four new paragraphs (i),(k) and (1). Requires mortgage bankers
and brokers to disclose their affiliation with home improvement contrac-
tors and limits the fees they can charge for their services rendered in
connection with the financing or refinancing of home equity loans. It
also restricts the practice of flipping a mortgage, i.e. refinancing the
same mortgage in order to charge additional fees.

Section 4. Amends the banking law, section 595-a, subdivision 3, para-
graph (d), is relettered paragraph (e) and a new paragraph (d) is added.
Requires bankers and brokers to disclose whether the loan will be sold
and if so to whom it will be sold and thereafter prohibits any sale of
the loan until thirty days after such disclosures are made. It also
requires bankers and brokers to give all borrowers a notice setting
forth their right to designate a third party to receive copies of all
written communications regarding the loan.

Section 5. Amends the banking law, section 347 by adding a new subdivi-
sion (e). Requires that licensed lenders shall not be allowed to accept
any money from home improvement contractors without fully disclosing
their relationship and getting the customer's permission.

Section 6. Amends the banking law, section 592-a by adding a new subdi-
vision 3. Provides that mortgage brokers shall be deemed to be agents of
mortgage bankers making the bankers responsible for their actions.

Section 7. Amends the real property law by adding a new section 254-e.
Prohibits the inclusion of a provision allowing for balloon payments,
negative amortizations and increased interest after default in any mort-
gage which refinances a primary residence.

Section 8. Amends the real property actions and proceedings law by
adding a new section 1308. Requires that all defendants in foreclosure
actions be served with a notice stating clearly that the action may
result in the loss of their home and listing certain defenses that may
be available.
Section 9. Amends the real property actions and proceedings law by
adding a new section 1309. Requires that a plaintiff in a foreclosure
action to affirmatively plead compliance with all the provisions of
section 595-a of the banking law. It also creates certain affirmative
defenses to a mortgage foreclosure action, namely: (1) that at the time
of the origination of the loan the mortgagor did not have the ability to
afford the loan and the financial institution making the loan knew or
should have known this, (2) that the lender violated section 595-a of
the banking law and (3) that the mortgage document contains a provision
prohibited by section 254-e of the real property law. Employment status,
fixed income, receipt of public assistance and payments in excess of
fifty per cent of income are all factors that can be considered by the
court. In addition, the court may award reasonable attorney fees to the
defendant in such foreclosure action.

Section 10. Amends the general business law, of section 771, subdivision
1, paragraph (h). Requires that the buyer shall have 15 days to cancel a
home improvement contract.

Section 11. Amends the general business law by adding a new section
771-b. Makes it illegal for a home improvement contractor to receive
anything of value for placing a home improvement loan with a bank unless
such relation is disclosed to the customer and the customer's approval
is obtained for the transaction. Requires that the buyer shall have 15
days to cancel a home improvement contract and that notice of this right
to cancellation shall be given to the customer at signing or the
contract shall not be enforceable. In addition, a homeowner may waive
the right to cancel a home improvement contract if the home improvement
is needed to meet a bona fide emergency.

Section 12. Amends the general obligations law by adding a new section
5-336. Provides that loans made in violation of section 595-a of the
banking law are unenforceable and no default judgment can be rendered on
a default of such loan unless the court makes an affirmative finding
that the section has been complied with. It also provides that the same
affirmative defenses which would be available in an action for foreclo-
sure are available in an action for default of the underlying note and
allows the court to award reasonable attorney fees.

Section 13. Effective Date.

 
JUSTIFICATION:

Many seniors on fixed incomes who own homes with substantial equity have
been approached by unscrupulous home improvement contractors working in
conjunction with fringe financial companies. The contractor talks them
into minor repairs on their homes which they may or may not need and
then arranges for "easy" financing. The mortgage company or mortgage
broker then offers to refinance the existing mortgage (often increasing
the rate), to finance the repairs and to consolidate all of the existing
credit card debt (converting unsecured debt into secured debt). Before
long the senior is signing documents refinancing their home and incur-
ring the responsibility for paying a mortgage which the senior cannot
afford. By increasing the principal of the loan and by charging high
rates, large fees are earned by the mortgage brokers and mortgage bank-
ers as well as the home improvement contractor. Shortly after the clos-
ing, the finance company sells the mortgage to a bank or combines it for
sale as mortgage securities thus relieving itself of the liability and
providing resources for the cycle to begin again. The senior, meanwhile,
is unable to make the mortgage payments and loses their home to a fore-
closure action.  Often this problem is compounded by the fact that most
victims cannot afford an attorney to defend the foreclosure action.

While the industry rate for foreclosures is about 2.6%, the rate for
some of the lenders in New York City who engage in this sort of scheme
is as high as 13%. A recent New York Times article reported that the New
York City Department of Consumer Affairs has noted that finance compa-
nies working with crooked home improvement contractors have fleeced
thousands of lower income minority New Yorkers out of the equity in
their homes by tricking them into loans for repairs.  The lenders
research homeowners to find out if they have paid off their first mort-
gage and have singled out elderly homeowners with substantial equity in
their homes to make risky loans, knowing that in case of default they
can recoup the loan by taking the home. In many of these cases, the
homeowner is not aware of the fact that he or she is securing the loan
with a mortgage on their home.

Often, finance companies engage the services of brokers, who are paid
large fees by the customer, and do not check the accuracy of the appli-
cation document. One 73 year old woman living on social security was
described in her loan papers as a 66 year old self-employed investor,
earning $7,000 per month. When the loan goes into default the bank
claims to be unaware of this deception. This bill would make them
responsible for verifying the accuracy of information provided by
brokers.

At present, the senior who is a victim of these practices has no legal
recourse. This bill will impose a series of changes that will give
seniors a weapon to fight this scam. Legitimate banking institutions
should have no problem with the requirements of this bill because the
procedures it requires are already followed in the course of good lend-
ing practices. This bill will make it illegal to prey on seniors and
lower income New Yorkers and to take from them their most valuable
possession, their home.

 
PRIOR LEGISLATIVE HISTORY:

2021-22: S5646 - Referred to Banks

2019-20: S.5065 - Referred to Banks

2017-18: S.7232 - REFERRED TO BANKS

2017: S.4957 - REFERRED TO BANKS

2015: S.186 - REFERRED TO BANKS

2014: S.19 - Referred to Banks/A.2852 - Referred to Banks

2013: S.19 - Referred to Banks/A.2852 - Referred to Banks

2012: S.7271 - Referred to Banks/A.2378 - Referred to Banks

2011: A.2378 - Referred to Banks

2010-2009: A.3386 - Referred to Banks
2008-2007: A.6170 - Referred to Banks

2006-2005: A.1667 - Held for Consideration in Banks

2003-2004: A.5057 - Referred to Banks

2016: S.186 - REFERRED TO BANKS

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

Nominal cost to the State.

 
EFFECTIVE DATE:
October 1st after it has become law.

2023-S7209 (ACTIVE) - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   7209
 
                        2023-2024 Regular Sessions
 
                             I N  S E N A T E
 
                               May 18, 2023
                                ___________
 
 Introduced  by  Sen.  PARKER -- read twice and ordered printed, and when
   printed to be committed to the Committee on Banks
 
 AN ACT to amend the banking law, the real property law, the real proper-
   ty actions and proceedings law,  the  general  business  law  and  the
   general  obligations  law,  in  relation  to enacting the "Home Equity
   Fraud Act"

   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  Short  title. This act shall be known and may be cited as
 the "Home Equity Fraud Act".
   § 2. Legislative findings. The  legislature  hereby  finds  that  many
 senior  citizens  and minority homeowners in New York have been targeted
 by unethical home improvement contractors, mortgage companies,  mortgage
 brokers  and finance companies who induce these homeowners into entering
 into high cost high interest rate mortgage agreements which the homeown-
 er is often unable to afford with the intent of foreclosing on the  home
 and stripping the equity.
   The  legislature  further  finds  that  in order to entice people into
 entering into these agreements they are promised refinancing of  primary
 mortgages,  consolidation  of  loans and outstanding bills and are given
 cash but often are not told or do not understand that they are  securing
 the  loan with a mortgage lien on their home which will lead to foreclo-
 sure in the event of default. Often  these  loans  are  documented  with
 false and misleading documentation provided by brokers which could easi-
 ly  be determined to be false if checked by the lender. Despite prohibi-
 tions contained in federal law many of these loans are based  on  equity
 in  the  home  and  not  on the borrower's ability to pay. Since many of
 these homeowners live on a fixed income, they are  unable  to  make  the
 required  payments  and end up losing their homes. This practice appears
 to be targeted in neighborhoods with a high concentration of senior  and
 minority residents.

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD01117-01-3

 S. 7209                             2
 
   The  legislature  further finds that it is in the best interest of the
 citizens of this state that these unethical practices should be  prohib-
 ited by law and that unscrupulous individuals should be denied the abil-
 ity  to utilize the courts of this state to perpetrate these abuses upon
 senior  citizens and minority residents of this state and does therefore
 enact this Home Equity Fraud Act in order to prevent predatory lending.
   § 3. Subdivision 1 of section 595-a of the banking law is  amended  by
 adding four new paragraphs (i), (j), (k) and (l) to read as follows:
   (I)  ENGAGING  IN  ANY  ACTIVITY, TRANSACTION OR COURSE OF BUSINESS IN
 CONNECTION WITH A HOME IMPROVEMENT  CONTRACT  AS  DESCRIBED  IN  SECTION
 SEVEN HUNDRED SEVENTY OF THE GENERAL BUSINESS LAW OTHER THAN WITH REGARD
 TO  PROVIDING  SERVICES DIRECTLY CONNECTED WITH THE MAKING OF A MORTGAGE
 LOAN PURSUANT TO THE PROVISIONS  OF  THIS  ARTICLE,  AND  ONLY  IF  SUCH
 SERVICES  AND  THE  FEES  PAID OR TO BE PAID IN CONNECTION THEREWITH ARE
 FULLY DISCLOSED AND AGREED TO IN WRITING BY ALL PARTIES  TO  THE  TRANS-
 ACTION.
   (J) CHARGING OR PAYING, EITHER DIRECTLY OR INDIRECTLY, A FEE IN EXCESS
 OF  THE GREATER OF FIVE HUNDRED DOLLARS OR THREE PERCENT OF THE MORTGAGE
 LOAN FOR THE SERVICES RENDERED BY THE MORTGAGE BROKER.
   (K) THE FAILURE OF A MORTGAGE BANKER OR EXEMPT ORGANIZATION TO  ASSURE
 THAT  NO  MORE  THAN  A TOTAL OF SIX PERCENT OF THE VALUE OF THE LOAN IS
 CHARGED FOR ALL SERVICES RENDERED IN CONNECTION WITH QUALIFYING FOR  AND
 RECEIVING THE LOAN, PROVIDED THAT ANY FEES WHICH ARE REQUIRED TO BE PAID
 TO  ANY  PUBLIC  OFFICER  FOR  THE FILING, RECORDING OR RELEASING IN ANY
 PUBLIC OFFICE OF A DOCUMENT SECURING THE LOAN AND THE COSTS OF ANY TITLE
 INSURANCE OR THE FEES OF AN ATTORNEY VOLUNTARILY ENGAGED BY  AND  SOLELY
 REPRESENTING  THE INTERESTS OF THE BORROWER SHALL NOT BE INCLUDED WITHIN
 THIS LIMIT.
   (L) CHARGING A FEE OR ANYTHING OF VALUE IN CONNECTION WITH  THE  REFI-
 NANCING OF A MORTGAGE LOAN UNLESS SUCH REFINANCING IS FOR THE PURPOSE OF
 REDUCING  THE  RATE  ON THE MORTGAGE LOAN IN AN AMOUNT WHICH EXCEEDS THE
 COST OF SUCH REFINANCE AND WHICH WILL ALLOW THE MORTGAGOR TO RECOVER THE
 COST OF REFINANCING THE LOAN WITHIN TWO YEARS OF THE DATE OF SUCH  REFI-
 NANCE.  THIS  PROVISION  SHALL  NOT  APPLY TO ANY ADDITIONAL PROCEEDS IN
 EXCESS OF THE ORIGINAL LOAN RECEIVED BY A MORTGAGOR IN  CONNECTION  WITH
 SUCH REFINANCING.
   §  4.  Paragraph  (d) of subdivision 3 of section 595-a of the banking
 law, as relettered by chapter 400 of the laws  of  1993,  is  relettered
 paragraph (e) and a new paragraph (d) is added to read as follows:
   (D)  EACH  MORTGAGE  BROKER,  MORTGAGE  BANKER AND EXEMPT ORGANIZATION
 SHALL PROVIDE TO EACH APPLICANT FOR A MORTGAGE LOAN  AT  OR  BEFORE  THE
 TIME OF APPLICATION, IN WRITING:
   (1) A DISCLOSURE STATING WHETHER THE MORTGAGE LOAN WILL BE RETAINED BY
 THE  ORIGINAL LENDER OR SOLD AFTER CLOSING TO A THIRD PARTY AND IF IT IS
 TO BE SOLD, THE NAME OF SUCH THIRD PARTY; AND
   (2) A NOTICE GIVING THE APPLICANT THE RIGHT TO DESIGNATE A THIRD PARTY
 TO RECEIVE COPIES OF ALL WRITTEN COMMUNICATIONS REGARDING THE  LOAN  AND
 SETTING FORTH THE PROCEDURE FOR THE APPLICANT TO EXERCISE SUCH RIGHT.
   IN  THE EVENT THAT THE DISCLOSURE AND NOTICES REQUIRED BY THIS SECTION
 ARE NOT MADE, THE MORTGAGE LOAN MADE AS A  RESULT  OF  SUCH  APPLICATION
 SHALL  NOT  BE  SOLD  OR TRANSFERRED NOR ANY ACTION TAKEN TO ENFORCE THE
 LENDER'S RIGHTS UNTIL THIRTY DAYS AFTER SUCH DISCLOSURES  ARE  MADE  AND
 ACKNOWLEDGED BY THE BORROWER.
   §  5. Subdivision (d) of section 347 of the banking law, as amended by
 chapter 22 of the laws of 1990, is amended and  a new subdivision (e) is
 added to read as follows:
 S. 7209                             3
 
   (d) The licensee has engaged in the business of a sales finance compa-
 ny and has done or failed to do any act, except the failure to  pay  the
 fees  required,  which would be grounds for the suspension or revocation
 of its license pursuant to section  four  hundred  ninety-five  of  this
 chapter were it required to obtain such a license[.];
   (E) THE LICENSEE HAS ENGAGED IN ANY ACTIVITY, TRANSACTION OR COURSE OF
 BUSINESS  OR  HAS  PAID OR OBTAINED ANY MONEY OR OTHER THING OF VALUE IN
 CONNECTION WITH A HOME IMPROVEMENT CONTRACT AS DEFINED IN SECTION  SEVEN
 HUNDRED  SEVENTY  OF  THE  GENERAL BUSINESS LAW WITHOUT FULLY DISCLOSING
 SUCH ACTIVITY, TRANSACTION OR COURSE OF BUSINESS AND ANY FEES  OR  THING
 OF  VALUE  PAID OR TO BE PAID IN CONNECTION THEREWITH AND WITHOUT HAVING
 OBTAINED THE AGREEMENT IN WRITING FROM ALL PARTIES TO THE TRANSACTION.
   § 6. Section 592-a of the banking law  is  amended  by  adding  a  new
 subdivision 3 to read as follows:
   3.  ANY  MORTGAGE  BROKER REGISTERED UNDER THIS ARTICLE WHO IN ANY WAY
 PLACES WITH OR OBTAINS A MORTGAGE LOAN FROM A MORTGAGE BANKER OR  EXEMPT
 ORGANIZATION  REGISTERED  UNDER  THIS  ARTICLE SHALL FOR ALL PURPOSES BE
 DEEMED TO BE AN AGENT OF  SUCH  BANKER  OR  EXEMPT  ORGANIZATION.    ANY
 ATTEMPT BY ANY PERSON TO VOID THIS PROVISION BY CONTRACT OR IN ANY OTHER
 WAY SHALL BE VOID AS AGAINST PUBLIC POLICY.
   § 7. The real property law is amended by adding a new section 254-e to
 read as follows:
   § 254-E. CERTAIN MORTGAGE PROVISIONS PROHIBITED. NO MORTGAGE ON A LOAN
 SECURED  PRIMARILY  BY  AN  INTEREST  IN REAL PROPERTY USED AS A PRIMARY
 RESIDENCE BY THE MORTGAGOR AT THE TIME SUCH LOAN IS MADE  SHALL  CONTAIN
 ANY PROVISION WHICH:
   1. ALLOWS FOR A BALLOON PAYMENT; OR
   2.  ALLOWS  FOR A PAYMENT SCHEDULE WITH REGULAR PERIODIC PAYMENTS THAT
 CAUSE THE PRINCIPAL BALANCE TO INCREASE; OR
   3. ALLOWS FOR A PROVISION STATING THAT THE INTEREST RATE OF  THE  LOAN
 UNDERLYING THE MORTGAGE INCREASES AFTER DEFAULT.
   §  8.  The  real  property  actions  and proceedings law is amended by
 adding a new section 1316 to read as follows:
   § 1316. NOTICE TO MORTGAGOR OR OWNER. IN ALL FORECLOSURE  ACTIONS  THE
 MORTGAGEE,  UPON  COMMENCEMENT  OF A FORECLOSURE PROCEEDING, SHALL SERVE
 THE MORTGAGOR AT THE SAME TIME AS SERVICE OF THE SUMMONS AND  COMPLAINT,
 A NOTICE IN THE FOLLOWING FORM:
   "NOTICE TO MORTGAGOR OR OWNER:
   YOU  HAVE BEEN SERVED WITH A SUMMONS AND COMPLAINT IN A MORTGAGE FORE-
 CLOSURE PROCEEDING. IF YOU FAIL TO  RESPOND  TO  THESE  IMPORTANT  LEGAL
 DOCUMENTS, YOU MAY LOSE YOUR HOME.
   READ THIS CAREFULLY:
   YOU  MAY BE ABLE TO PREVENT YOUR HOME FROM BEING LOST IN A FORECLOSURE
 ACTION.
   STATE AND FEDERAL LAWS ALLOW YOU TO DEFEND FORECLOSURE PROCEEDINGS  IN
 CERTAIN CIRCUMSTANCES AND MAY ALLOW YOU TO PREVENT A FORECLOSURE ON YOUR
 HOME.  YOU MAY  BE ABLE TO OFFER DEFENSES IN THIS FORECLOSURE PROCEEDING
 UNDER THE FOLLOWING CIRCUMSTANCES:
   1. IF YOU GAVE A MORTGAGE ON YOUR HOME AS THE RESULT OF A DOOR TO DOOR
 TRANSACTION;
   2. IF YOU GAVE A MORTGAGE ON YOUR HOME IN  ORDER  TO  FINANCE  A  HOME
 IMPROVEMENT CONTRACT;
   3.  IF YOU DID NOT UNDERSTAND THAT YOU WERE SIGNING A MORTGAGE OR WERE
 UNAWARE THAT YOU HAD A MORTGAGE ON YOUR HOME;
 S. 7209                             4
 
   4. IF YOU WERE ON PUBLIC ASSISTANCE AT THE TIME YOU GAVE A MORTGAGE ON
 YOUR HOME, OR WERE RETIRED AND COLLECTING SOCIAL SECURITY OR SSI AND THE
 PERSON WHO TOOK THE MORTGAGE ON YOUR HOME KNEW YOU HAD A FIXED INCOME;
   5.  IF  YOU  WERE  ON  A LIMITED FIXED INCOME AT THE TIME YOU GAVE THE
 MORTGAGE ON YOUR HOME.
   ALSO, YOUR MORTGAGE DOCUMENTS MAY CONTAIN LANGUAGE STATING YOUR RIGHTS
 UNDER THE CONTRACT IN CASES WHERE YOU ARE SUBJECT TO FORECLOSURE.
   IF YOU THINK THAT YOU MAY HAVE A DEFENSE TO THIS FORECLOSURE  PROCEED-
 ING  YOU  MUST ACT PROMPTLY - FAILURE TO ANSWER THE ENCLOSED SUMMONS AND
 COMPLAINT WILL ALLOW THE MORTGAGEE'S OR  BANK'S  ATTORNEYS  TO  ENTER  A
 DEFAULT JUDGMENT AGAINST YOU.
   THE  FRONT  OF  THE  SUMMONS  WILL  TELL YOU HOW MANY DAYS YOU HAVE TO
 ANSWER BEFORE THE MORTGAGEE OR BANK MAY ENTER A DEFAULT JUDGMENT AGAINST
 YOU.
   YOU MAY CONSULT AN ATTORNEY, INCLUDING LEGAL AID IF YOU QUALIFY.   THE
 LAW,  (NEW  YORK  REAL  PROPERTY ACTIONS AND PROCEEDINGS LAW ARTICLE 13)
 PROVIDES DEFENSES FOR CERTAIN MORTGAGORS AND HOMEOWNERS.
   THE PHONE NUMBERS AND  OFFICE  ADDRESSES  FOR  YOUR  LOCAL  LEGAL  AID
 OFFICES  ARE  CONTAINED  IN YOUR TELEPHONE DIRECTORY. IF YOUR PHONE BOOK
 HAS GOVERNMENT PAGES, THE PHONE NUMBER  AND  OFFICE  ADDRESSES  OF  YOUR
 LOCAL LEGAL AID OFFICES SHOULD BE LISTED THERE ALSO.
   ONLY  A  QUALIFIED  ATTORNEY  CAN  TELL YOU ALL OF YOUR RIGHTS IN THIS
 PROCEEDING.
   YOU MUST ACT PROMPTLY OR YOU MAY LOSE YOUR HOME."
   § 9. The real property actions  and  proceedings  law  is  amended  by
 adding a new section 1317 to read as follows:
   §  1317.  PLEADING  REQUIRED.  1. ANY COMPLAINT SERVED IN A PROCEEDING
 INITIATED PURSUANT TO THIS ARTICLE RELATING TO A MORTGAGE LOAN WHICH WAS
 INITIATED BY A MORTGAGE BANKER OR EXEMPT ORGANIZATION REGISTERED  PURSU-
 ANT  TO  SECTION FIVE HUNDRED NINETY-ONE OF THE BANKING LAW MUST CONTAIN
 AN AFFIRMATIVE ALLEGATION, WHICH ALLEGATION MUST BE PROVEN TO THE SATIS-
 FACTION OF THE COURT, THAT SUCH MORTGAGE BANKER OR  EXEMPT  ORGANIZATION
 HAS  COMPLIED WITH ALL OF THE PROVISIONS OF SECTION FIVE HUNDRED NINETY-
 FIVE-A OF THE BANKING LAW.
   2.  IN ANY ACTION BROUGHT UNDER THIS ARTICLE IN WHICH THE MORTGAGE  TO
 BE  FORECLOSED  AROSE FROM THE REFINANCING OF A PERSONAL RESIDENCE WHICH
 WAS OWNED BY THE DEFENDANT FOR MORE THAN FIVE YEARS PRIOR TO THE DATE OF
 SUCH MORTGAGE IT SHALL BE AN AFFIRMATIVE DEFENSE THAT: (A) AT  THE  TIME
 OF THE LOAN ORIGINATION THE MORTGAGOR DID NOT HAVE THE FINANCIAL ABILITY
 TO REPAY THE LOAN AND THAT THE FINANCIAL INSTITUTION KNEW OR SHOULD HAVE
 KNOWN  THAT  THE MORTGAGOR WOULD NOT BE ABLE TO REPAY SUCH LOAN; (B) THE
 MORTGAGE BROKER, MORTGAGE BANKER OR EXEMPT ORGANIZATION WHICH ORIGINATED
 THE LOAN VIOLATED ANY PROVISION OF SECTION FIVE HUNDRED NINETY-FIVE-A OF
 THE BANKING LAW; OR (C)  THE  MORTGAGE  DOCUMENT  CONTAINS  A  PROVISION
 PROHIBITED BY SECTION TWO HUNDRED FIFTY-FOUR-E OF THE REAL PROPERTY LAW.
 THE  COURT  MAY  CONSIDER  FACTORS INCLUDING BUT NOT LIMITED TO THE FACT
 THAT THE MORTGAGOR WAS  NOT  EMPLOYED  AND  UNLIKELY  TO  OBTAIN  FUTURE
 EMPLOYMENT,  THE FACT THAT THE MORTGAGOR WAS LIVING ON A FIXED INCOME OR
 WAS THE RECIPIENT OF FEDERAL OR STATE ENTITLEMENT OF  PUBLIC  ASSISTANCE
 OR  THAT  THE PAYMENTS REQUIRED BY SUCH MORTGAGE LOAN, TOGETHER WITH THE
 PAYMENTS REQUIRED BY ANY OTHER LOAN SECURED BY THE PREMISES TO BE  FORE-
 CLOSED, WERE MORE THAN FIFTY PERCENT OF THE MORTGAGOR'S AFTER TAX MONTH-
 LY  INCOME AS OF THE DATE OF THE LOAN. FOR PURPOSES OF THIS SECTION, THE
 TERM FINANCIAL INSTITUTION SHALL INCLUDE ANY BANKING ORGANIZATION, MORT-
 GAGE BROKER, MORTGAGE BANKER OR LICENSED LENDERS INVOLVED IN THE  ORIGI-
 NATION OF THE MORTGAGE BEING FORECLOSED AND ANY ASSIGNEE OR SUCCESSOR OF
 S. 7209                             5
 
 SUCH  PERSON  OR  ENTITY.    IN ANY ACTION BROUGHT UNDER THIS ARTICLE IN
 WHICH ANY SUCH AFFIRMATIVE DEFENSE IS PROVEN TO THE SATISFACTION OF  THE
 FINDER  OF  FACT,  THE  COURT  MAY AWARD REASONABLE ATTORNEY FEES TO THE
 DEFENDANT.
   §  10.  Paragraph  (h)  of subdivision 1 of section 771 of the general
 business law, as amended by chapter 32 of the laws of 1989,  is  amended
 to read as follows:
   (h)  A notice to the owner that, in addition to any right otherwise to
 revoke an offer, the owner may  cancel  the  home  improvement  contract
 until  midnight  of  the [third] FIFTEENTH business day after the day on
 which the owner has signed an agreement or offer to purchase relating to
 such contract.  Cancellation occurs when written notice of  cancellation
 is  given to the home improvement contractor. Notice of cancellation, if
 given by mail, shall be deemed given when deposited in a mailbox proper-
 ly addressed and postage prepaid. Notice of cancellation shall be suffi-
 cient if it indicates the intention  of  the  owner  not  to  be  bound.
 Notwithstanding the foregoing, this paragraph shall not apply to a tran-
 saction  in  which  the  owner  has  initiated  the contact and the home
 improvement is needed to meet a bona fide emergency of  the  owner,  and
 the  owner  furnishes  the  home  improvement contractor with a separate
 dated and signed personal statement in the owner's handwriting  describ-
 ing the situation requiring immediate remedy and expressly acknowledging
 and  waiving  the  right  to cancel the home improvement contract within
 [three] FIFTEEN business days. For the purposes of  this  paragraph  the
 term "owner" shall mean an owner or any representative of an owner.
   §  11.  The  general  business  law is amended by adding a new section
 771-c to read as follows:
   § 771-C.  RESPONSIBILITIES OF HOME IMPROVEMENT CONTRACTORS. 1. NO HOME
 IMPROVEMENT CONTRACTOR SHALL ENGAGE  IN  ANY  ACTIVITY,  TRANSACTION  OR
 COURSE  OF  BUSINESS  OR PAY OR RECEIVE ANY FEE, PAYMENT, MONEY OR OTHER
 THING OF VALUE IN CONNECTION WITH THE FINANCING OF  A  HOME  IMPROVEMENT
 CONTRACT  WITHOUT  FULLY DISCLOSING SUCH ACTIVITY, TRANSACTION OR COURSE
 OF BUSINESS AND ANY FEES, PAYMENT OR OTHER THING OF VALUE PAID OR TO  BE
 PAID  IN  CONNECTION THEREWITH AND WITHOUT HAVING OBTAINED THE AGREEMENT
 IN WRITING FROM ALL PARTIES TO THE TRANSACTION TO SUCH ACTIVITY AND  THE
 PAYMENT THEREFOR.
   2.  IN  ADDITION  TO  ANY RIGHT OTHERWISE TO REVOKE A HOME IMPROVEMENT
 CONTRACT, THE BUYER MAY CANCEL  SUCH  CONTRACT  UNTIL  MIDNIGHT  OF  THE
 FIFTEENTH  DAY  AFTER  THE  HOME IMPROVEMENT CONTRACT WAS SIGNED BY BOTH
 PARTIES. CANCELLATION SHALL OCCUR WHEN WRITTEN NOTICE OF CANCELLATION IS
 GIVEN TO THE HOME IMPROVEMENT CONTRACTOR.  NOTICE  OF  CANCELLATION,  IF
 GIVEN BY MAIL, SHALL BE DEEMED GIVEN WHEN DEPOSITED IN A MAILBOX PROPER-
 LY  ADDRESSED  AND POSTAGE PREPAID. NOTICE OF CANCELLATION NEED NOT TAKE
 ANY PRESCRIBED FORM AND SHALL BE SUFFICIENT IF IT INDICATES  THE  INTEN-
 TION  OF  THE SIGNATORY NOT TO BE BOUND.  NOTWITHSTANDING THE FOREGOING,
 THIS SUBDIVISION SHALL NOT APPLY TO A TRANSACTION IN WHICH THE OWNER HAS
 INITIATED THE CONTACT AND THE HOME IMPROVEMENT IS NEEDED TO MEET A  BONA
 FIDE  EMERGENCY  OF THE OWNER, AND THE OWNER FURNISHES THE HOME IMPROVE-
 MENT CONTRACTOR WITH A SEPARATE DATED AND SIGNED PERSONAL  STATEMENT  IN
 THE  OWNER'S  HANDWRITING  DESCRIBING  THE SITUATION REQUIRING IMMEDIATE
 REMEDY AND EXPRESSLY ACKNOWLEDGING AND WAIVING THE RIGHT TO  CANCEL  THE
 HOME IMPROVEMENT CONTRACT WITHIN FIFTEEN BUSINESS DAYS. FOR THE PURPOSES
 OF  THIS  SUBDIVISION THE TERM "OWNER" SHALL MEAN AN OWNER OR ANY REPRE-
 SENTATIVE OF AN OWNER.
   3. NO HOME IMPROVEMENT CONTRACT SHALL BE  ENFORCEABLE  UNLESS  AT  THE
 TIME  IT  IS  SIGNED  BY  THE HOMEOWNER, THE HOME IMPROVEMENT CONTRACTOR
 S. 7209                             6
 
 SHALL FURNISH TO THE  HOMEOWNER  A  NOTICE  CONTAINING  A  STATEMENT  IN
 SUBSTANTIALLY THE FOLLOWING FORM:
   YOU  THE  HOMEOWNER,  MAY  CANCEL  THIS  CONTRACT AT ANY TIME PRIOR TO
 MIDNIGHT OF THE FIFTEENTH BUSINESS DAY AFTER THE DATE OF THIS  CONTRACT.
 SEE THE ATTACHED NOTICE OF CANCELLATION FORM FOR AN EXPLANATION.
   §  12.  The general obligations law is amended by adding a new section
 5-338 to read as follows:
   § 5-338. CERTAIN HOME EQUITY LOAN CONTRACTS; ENFORCEABILITY. 1.    ANY
 LOAN  MADE  IN  VIOLATION  OF  SECTION FIVE HUNDRED NINETY-FIVE-A OF THE
 BANKING LAW SHALL BE UNENFORCEABLE AND  NO  DEFAULT  JUDGMENT  SHALL  BE
 ENTERED  IN ANY ACTION AS A RESULT OF THE ALLEGED DEFAULT OF THE DEFEND-
 ANT TO MAKE PAYMENTS PURSUANT TO A LOAN AGREEMENT  WHICH  AROSE  AS  THE
 RESULT  OF  THE REFINANCE OF A PERSONAL RESIDENCE OWNED BY THE DEFENDANT
 WHETHER OR NOT SECURED BY A MORTGAGE UNLESS THE COURT MAKES AN  AFFIRMA-
 TIVE  FINDING  OF  FACT  IN  WRITING THAT THE PROVISIONS OF SECTION FIVE
 HUNDRED NINETY-FIVE-A OF THE BANKING LAW HAVE NOT BEEN VIOLATED.
   2. IN ANY ACTION BROUGHT SEEKING ENFORCEMENT OF A LOAN AGREEMENT WHICH
 AROSE FROM THE REFINANCING OF A PERSONAL RESIDENCE WHICH  WAS  OWNED  BY
 THE DEFENDANT FOR MORE THAN FIVE YEARS PRIOR TO THE DATE OF SUCH LOAN IT
 SHALL BE AN AFFIRMATIVE DEFENSE THAT: (A) AT THE TIME OF THE LOAN ORIGI-
 NATION THE BORROWER DID NOT HAVE THE FINANCIAL ABILITY TO REPAY THE LOAN
 AND  THAT  THE  FINANCIAL INSTITUTION KNEW OR SHOULD HAVE KNOWN THAT THE
 BORROWER WOULD NOT BE ABLE TO REPAY SUCH LOAN; (B) THE MORTGAGE  BROKER,
 MORTGAGE  BANKER  OR  EXEMPT  ORGANIZATION  WHICH  ORIGINATED  THE  LOAN
 VIOLATED ANY PROVISION OF SECTION  FIVE  HUNDRED  NINETY-FIVE-A  OF  THE
 BANKING  LAW; OR (C) ANY MORTGAGE DOCUMENT SIGNED CONTEMPORANEOUSLY WITH
 THE LOAN CONTAINS A PROVISION PROHIBITED BY SECTION TWO  HUNDRED  FIFTY-
 FOUR-E  OF THE REAL PROPERTY LAW. THE COURT MAY CONSIDER FACTORS INCLUD-
 ING BUT NOT LIMITED TO THE FACT THAT THE MORTGAGOR WAS NOT EMPLOYED  AND
 UNLIKELY  TO  OBTAIN  FUTURE EMPLOYMENT, THE FACT THAT THE MORTGAGOR WAS
 LIVING ON A FIXED INCOME OR WAS THE RECIPIENT OF FEDERAL OR STATE  ENTI-
 TLEMENT OF PUBLIC ASSISTANCE OR THAT THE PAYMENTS REQUIRED BY SUCH LOAN,
 TOGETHER  WITH  THE  PAYMENTS  REQUIRED BY ANY OTHER LOAN SECURED BY THE
 PREMISES SECURING SUCH LOAN, WERE MORE THAN FIFTY PERCENT OF THE BORROW-
 ER'S AFTER TAX MONTHLY INCOME AS OF THE DATE OF THE LOAN.  FOR  PURPOSES
 OF  THIS SECTION, THE TERM FINANCIAL INSTITUTION SHALL INCLUDE ANY BANK-
 ING ORGANIZATION, MORTGAGE BROKER, MORTGAGE BANKER  OR  LICENSED  LENDER
 INVOLVED  IN THE ORIGINATION OF THE LOAN FOR WHICH ENFORCEMENT IS SOUGHT
 AND ANY ASSIGNEE OR SUCCESSOR OF SUCH PERSON OR ENTITY.    IN  ANY  SUCH
 ACTION  IN  WHICH SUCH AFFIRMATIVE DEFENSE IS PROVEN TO THE SATISFACTION
 OF THE FINDER OF FACT, THE COURT MAY AWARD REASONABLE ATTORNEY  FEES  TO
 THE DEFENDANT.
   § 13. This act shall take effect on the first of October next succeed-
 ing  the date on which it shall have become a law.  Effective immediate-
 ly, the addition, amendment and/or repeal  of  any  rule  or  regulation
 necessary  for  the implementation of this act on its effective date are
 authorized to be made on or before such effective date.

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