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- Referred to banks
- Referred to banks
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Sponsor's memo
BILL NUMBER:S2358
Title of bill
An act to amend the banking law, in relation to prohibiting a mortgage servicer from obtaining force-placed insurance in certain circumstances; in relation to requiring a mortgage servicer to provide written notices prior to obtaining force-placed insurance; in relation to regulating the cost of coverage a mortgage servicer may obtain for force-placed insurance
Purpose
This bill would establish certain guidelines by which a bank or a mortgage servicer could force insurance coverage on a homeowner or borrowers The mortgage servicer would be required to provide written notices prior to obtaining forced-placed insurance, and the cost of said insurance would be regulated, to a reasonable rate. The mortgage servicer shall not split, give or accept referral fees or anything of value in connection with obtaining forced-placed insurance.
Summary of provisions
Section 1 of this bill amends the banking law to add a new section 595-d.
Subdivision 1 of 595-d defines "force-placed insurance", "mortgage servicer", and "mortgage loan" as used in 595d.
Subdivision 2 of 595-d forbids a mortgage servicer from obtaining force-placed insurance unless there is a reasonable basis to believe that the borrower has not complied with the mortgage loan requirements for certain types of insurance. If the borrower's existing insurance is paid through escrow, the mortgage servicer must advance payments on the borrower's existing policy unless the borrower cancels that policy.
Subdivision 3 of 595-d sets forth the conditions which must be met for a mortgage servicer to claim to have a reasonable basis for obtaining force-placed insurance.
Subdivision 4 of 595-d sets forth the requirements that written notice must meet, in order to comply with paragraph (a) of subdivision 3 of 595-d.
Subdivision 5 prohibits a mortgage servicer from obtaining certain kinds of insurance for a property that are greater than the outstanding loan balance or that amount to more than the last known amount of coverage.
Subdivision 6 mandates that the mortgage servicer terminate any force-placed insurance within 15 days of receipt of evidence cif borrower's insurance coverage. The mortgage servicer must also refund to the borrower any premiums paid while both insurance coverages were in effect, and any related fees.
Subdivision 7 prohibits a mortgage servicer from obtaining force-placed insurance from any affiliated entities or entities in which the mortgage servicer has an ownership interest.
Subdivision 8 forbids mortgage servicer from splitting fees or giving or receiving referral fees or anything of value for obtaining force-placed insurance.
Justification
This bill amend banking law to establish new guidelines to prevent homeowners and borrowers from being taken advantage of by banks and mortgage servicers as it relates to forced placed insurance premiums that needlessly add hundreds of dollars to a person's mortgage. This legislation aims to prevent price gouging and unreasonable profits on the part of the banks and mortgage servicers in New York State.
Legislative history
S.4475 of 2013-14; S.7666 of 2012
Fiscal implications
To be determined.
Effective date
Immediately.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.