What's happening
This bill creates a rebuttable presumption affecting the rights of purchasers of mortgaged property unless certain documents are recorded, with exceptions for associated parties.
Why it matters
Increases protection for buyers of mortgaged property. by requiring that either a statement of mortgage assumption or satisfaction be officially recorded, making it harder for sellers to hide outstanding debts or obligations.
Creates a legal incentive for transparency. in property transactions between unrelated parties, potentially reducing fraud and confusion about who is responsible for the mortgage on a property after a sale.
Carves out exceptions for “associated parties”. (such as family members or entities closely tied to the homeowner), acknowledging that these transactions are often less risky but still leaving them subject to other legal requirements.
May impact real estate practices and closing processes. by adding an extra documentation step, possibly making closings more secure but also slightly more complex or time-consuming for some buyers and sellers.
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Who cares
Headline styles
Protect Mortgage Transfers
Plain English, a few words. Used as the page title.
Sponsors
1 Co-sponsor
History
- Referred to judiciary
- Referred to judiciary
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Protect Mortgage Title Rights
Assembly Floor Calendar · Sponsor Walter T. Mosley
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
4663
2017-2018 Regular Sessions
IN SENATE
February 23, 2017
Introduced by Sen. AVELLA -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary
AN ACT to amend the real property law, in relation to rebuttal of the right of an incumbrancer
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 266 of the real property law is amended to read as follows:
§ 266. Rights of purchaser or incumbrancer for valuable consideration protected. This article does not in any manner affect or impair the title of a purchaser or incumbrancer for a valuable consideration, unless it appears that he had previous notice of the fraudulent intent of his immediate grantor, or of the fraud rendering void the title of such grantor. There shall be a rebuttable presumption that this section shall not apply in the case of a transfer of mortgaged real property, between a purchaser and seller who are not associated parties, that is not accompanied by the recording with the clerk of the county or with the commissioner of deeds in which the property is located, of a statement, executed by the mortgagee, and duly acknowledged, stating, substantially, that (1) a party is assuming the seller's indebtedness secured by the mortgage; or (2) that the indebtedness secured by the mortgage has been satisfied.
For the purposes of this section, "associated parties" means spouses, ex-spouses, parents and children, siblings, a homeowner and that homeowner's family trust, or a homeowner and that homeowner's wholly-owned limited liability company.
§ 2. This act shall take effect immediately.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD04039-01-7
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the real property law, in relation to rebuttal of the right of an incumbrancer
Purpose
To limit the application of the legal presumption that a bona fide purchaser for value has acted in good faith to situations where the purchaser had neither actual nor constructive notice of a fraudulent transfer.
Summary of provisions
Section 1 of the bill amends section 266 of the real property law to provide that the presumption of good faith which is afforded to bona fide purchasers shall be unavailable if the purchaser of real property had constructive notice of a fraudulent transfer.
Justification
The problem of deed theft has reached epidemic proportions, and savvy scammers are using the existing "bona fide purchaser for value" defense to their advantage. Real property law 266 provides that the property interest acquired by a purchaser of real property for valuable consideration has a priority title claim as long as the purchaser did not have "previous notice of the fraudulent intent of his immediate grantor." Deed scammers take advantage of this presumption through the use of an intermediate "straw buyer" who may themselves be unaware that they are participating in an ongoing fraud.
In practice, when a mortgaged property is transferred, the mortgagee (lender) will file either an assumption of mortgage or a satisfaction of mortgage with the county clerk. Deed fraud scams often involve a homeowner unknowingly transferring title to their property through the execution of a document of conveyance (such as a deed) without notifying the mortgagee. It therefore follows that any filing of a document of conveyance of mortgaged property that is not accompanied by a satisfaction or assumption of mortgage, is a red flag for potential fraud. This bill eliminates the favorable presumption of good faith in such limited circumstances.
Legislative history
New Bill
Fiscal implications
None
Effective date
Immediately after the bill has become law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.