Relates to the failure of auction and requirements for sale of real estate owned property

This section also requires the secretary of state to post and maintain on its website or otherwise make available a list of registered real estate owned property lawyers, a list of registered real estate owned property agents or brokers and a list of registered real estate owned property maintenance companies along with their contact information. The secretary of state shall also consult with the Division of Minority and Women's Business Development to ensure that businesses certified under article fifteen-A of the executive law are included on these lists.

It also amends the Real Property Actions and Proceedings Law by creating a process by which the New York State Secretary of State shall post a list of the registered real estate owned lawyers, agents, brokers and maintenance companies and denote which individuals or entities are minority- or women-owned, and amends the Real Property Actions and Proceedings Law by requiring that any state-chartered banks under the supervision of the New York State Banking Department choose an attorney, agent, broker or maintenance company to represent them in a transaction involving real estate owned property from the list of registered real estate owned lawyers, agents, brokers and maintenance companies.

Finally, this section amends the Real Property Actions and Proceedings Law to impose penalties incurred for violation of this section, including penalties incurred by repeat offenders.

Section 2. Provides for an effective date 90 days after it shall have become law.

Justification

Real estate owned or REO is a class of property owned by a lender, typically a bank or mortgage company, after an unsuccessful sale at a foreclosure auction. A bank typically sets the opening bid at a foreclosure auction for at least the outstanding loan amount; if there are no bidders that are interested, then the bank will legally repossess the property. As soon as the bank repossesses the property, it is listed on their books as REO - Real Estate Owned - and is categorized as an asset.

Once a property has been repossessed and it becomes classified as REO, the bank will go through the process of trying to sell the property on its own. The bank will attempt to remove some of the liens and other expenses on the home and try to resell it to the public. Generally, bank REO properties are in poor condition in terms of repairs and maintenance, but are nonetheless appealing to real estate investors looking for an attractive deal that compensates for the condition of the property.

When an investor or purchaser contracts to buy a REO property, an attorney is needed to represent the bank in a real estate transaction, an agent or broker is needed to list the property and a maintenance company is needed to maintain the condition of the property under the new foreclosure laws. At the present time, no guidelines exist to dictate the attorney chosen by the bank in these transactions, and they are often funneled to an attorney the bank has a pre-existing relationship with. This bill would create a more transparent and accessible mechanism by which individuals and businesses in New York State could become the contracted or affiliated attorney, agent, broker or maintenance company assigned to real estate transactions involving REO property.

Legislative history

None.

Fiscal implications

To be determined.

Effective date

This act shall take effect ninety days after it shall have become a law.