Requires banks and financial institutions entering into negotiations to modify a mortgage on real property to be responsible for the continuation of the modification

BILL NUMBER:S5496

Title of bill

An act to amend the banking law, in relation to requiring banks and financial institutions entering into negotiations to modify a mortgage on real property located in this state to be responsible for the continuation of the modification process until its completion regardless of whether the mortgage is sold

Purpose or general idea of bill

This bill will amend the banking law to require that a bank or financial institution entering into negotiation to modify a mortgage shall be responsible for the continuation of the modification process until its completion.

Summary of specific provisions

This bill amends the banking law by adding a new section 6-n to require that a bank or financial institution entering into negotiations to modify a mortgage on real property in this state shall be responsible for the continuation of the modification process until its completion regardless of whether the mortgage is sold, transferred or bundled into a security package for provision to a third party during the modification process.

Additionally, if a mortgage is in the process of negotiation or application for modification of the mortgage terms and is sold, transferred or bundled into a security package for provision to a third party during the modification process, such mortgage shall be automatically deemed to have been modified and the purchaser of such mortgage must accept any decision rendered and be bound by the terms of the modification agreement, including the interest rate in effect at the time of processing. The purchaser also assumes ail rights and responsibilities necessary to comply with this modified loan.

Justification

This legislation is necessary in light of the growing loan modification crisis sweeping across New York State. It will helm stabilize the housing industry and provide much needed protection for homeowners. The modification process is difficult enough, so we must provide a mechanism to ensure that banks and financial institutions deal with homeowners in a fair and equitable manner during the course of this grueling process.

In many instances, homeowners have complained of having sent documentation, as requested and later being told that such documents were missing or not received or that certain page(s) had not been signed, contrary to the homeowner's assertions. Additionally, many homeowners complained of having been notified that their loan had been sold to another lender, while the modification was pending, yet they were notified after the fact.

This legislation will address situations such as these by requiring that negotiations to modify a mortgage will continue to its completion, whether it is sold, transferred or bundled for provision to a third party. Furthermore, this mortgage will be deemed to have been modified as specified in the modification application and the purchaser of said mortgage is determined to have accepted the interest rate in effect at the time of processing and all other rights and responsibilities accompanying the loan as modified.

Prior legislative history

2011-2012 A.7954

Fiscal implications

NONE.

Effective date

The act shall take effect on the 90th day after it shall have become law.