Establishes the New York state mortgage settlement fund to consist of monies obtained by the state as a result of settlement with mortgage servicers

2 Co-sponsors

• Shirley L. Huntley
• Suzi Oppenheimer

BILL NUMBER:S6459

Title of bill

An act to amend the state finance law, in relation to establishing the New York state mortgage settlement fund

Purpose

To authorize the New York State Comptroller to establish a special fund to be known as the New York state mortgage settlement fund.

Justification

In the fall of 2008 New York State and the entire country was reeling from an onslaught of residential foreclosures which from the beginning of 2007 to early 2012 saw roughly four million families lose their homes to foreclosure. The devastating toll this epidemic took on the country left families shaken and America's financial system on the brink of collapse. The foreclosure situation was further exacerbated by evidenced emerging that the foreclosure process was possibly corrupted by careless recordkeeping, cut corners and potential fraud, typified by high-profile cases of "robo-signing" - cases in which foreclosures took place based on forged or unreviewed documents.

These series of events led to state attorneys general from across the country bringing mortgage lenders to the negotiating table to address all of the concerns raised from the process and, amongst other things, how affected homeowners can receive restitution. It is estimated that families lost upward of $7,000 dollars due to foreclosure. In addition, foreclosures caused widespread displacement and housing instability, financial insecurity and economic hardship, including damaged credit ratings, reductions in net worth, severe imbalances in Debt vs. Assets for individuals, personal and family stress, and in some cases ill health. New York State was disproportionately affected by this epidemic.

The goal of this legislation is to provide alternative methods of distribution to effected homeowners from state settlement recovery. Nominal amounts of recovery fall short of bringing homeowners to as close to a position as they were in before the devastating lending and foreclosure practices were implemented by lending institutions. Homeowners need real restitution in order to help set their lives back in order.

Summary of provisions

Subsection 5. Under this legislation Homebuyers may elect to receive:

(a) the full amount of the down payment paid on his or her qualifying residential real property, in addition to the amount of all monthly mortgage associated with such property, up to and including the later of the date of the foreclosure action or discovery of the wrong;

(b) twenty percent of the original appraised value of the qualifying residential real property;

(c) if the eligible homeowner has been foreclosed upon and is no longer residing in the qualifying residential real property, the full amount of a down payment on new residential real property;

(d) if the eligible homeowner has been foreclosed upon and is no longer residing in the qualifying residential real property and has not chosen to purchase new residential real property, up to six months of rental payments;

Subsection 6. In addition to the compensation authorized by subdivision five of this section, the commissioner of the division of housing and community renewal shall determine, upon request by an eligible homeowner and after evaluating the facts surrounding a participating mortgage servicer's handling of the mortgage on the qualifying residential real property of the requesting homeowner, if such homeowner is also entitled to receive treble damages in an amount not to exceed three times the amount elected by such homeowner pursuant to subdivision five of this section, as a result of the egregious nature of such mortgage servicer's conduct.

Legislative history

New Bill.

Fiscal implications

Proceeds to the state to be determined by settlement agreement.

Effective date

Immediately.