Relates to prohibiting robosigned documents in foreclosure actions

BILL NUMBER:S3762

Title of bill

An act to amend the real property actions and proceedings law, in relation to foreclosure actions and robosigned documents

Purpose

Would provide that any entity which records a robosigned document or files a robosigned document in any court, relative to a foreclosure proceeding, is liable for a civil penalty of $10,000 per robosigned document.

Summary of provisions

Section 1392 of the real property law added to the Real Property law as follows:

1. Sets forth the definition of a "robosigned document."

2. States that any entity that files a robosigned document in any court relative to a foreclosure proceeding shall be subject to a civil penalty of $10,000 per robosigned document.

3. Allows a borrower to seek an order in any court of competent jurisdiction if the borrower reasonably believes that the foreclosing party used robosigned documents.

4. Following a trustee's sale, a borrower may recover the greater of actual damages or $10,000 plus attorney's fees if the foreclosing party used robosigned documents.

5. A court may award the borrower the greater of $50,000 plus attorney's fees or treble damages if the use of robosigned documents was intentional.

6. A violation of this section shall not affect the validity of any sale of the property without notice.

7. The borrower may not obtain relief under this section if the violation was technical or de minimis.

8. It shall be an affirmative defense for a violation of this section if the entity violating this section is a signatory to the settlement between the attorney generals of several states including New York.

9. A third party encumbrancer shall not be relieved of liability under this section that occurred prior to the sale of the property.

Section 2. This act shall take effect immediately.

Justification

As our nation makes its way through the foreclosure crisis that has beset it for many years, the abuse of many banks and mortgage

servicers have come to light. One of the most egregious abuses by the banks and mortgage servicers has been "robo-signing."

In a foreclosure preceding a bank or mortgage servicer must provide documentation and affidavits to, among other things, prove that the party actually owns the mortgage and that the owner is in default. As the mortgage crisis expanded, banks and mortgage servicers routinely used affidavits signed by employees who did not personally review the documents. These employees also had no basis for believing that the homeowner was in default or that the bank owned the loan.

While several banks have entered into agreements with several states' attorneys general, many banks and mortgage servicers who have not entered into a settlement have committed the same offense. This bill will create a civil penalty for those banks and mortgage servicers.

Legislative history

New bill.

Fiscal implications

No cost but state may receive civil penalties.

Effective date

This act shall take effect immediately.