What's happening
This bill prohibits residential property mortgagors from recovering attorneys' fees or expenses from mortgagees in foreclosure actions.
Why it matters
Reduces financial leverage for homeowners facing foreclosure. By prohibiting mortgagors from recovering attorneys’ fees or related expenses from mortgagees, this bill removes a legal tool that could offset the costs of defending against foreclosure, potentially discouraging some homeowners from mounting legal defenses.
Shifts legal cost-burden dynamics in favor of lenders. Mortgagees (lenders) often have the resources to pursue foreclosure actions, and this amendment ensures they won’t be liable for the mortgagor’s legal fees—even if the mortgagor prevails in court—potentially making foreclosure less risky and less costly for lenders.
May impact settlement negotiations and conduct of foreclosure proceedings. With mortgagors unable to recover legal costs, there’s less financial incentive for mortgagees to settle or correct wrongful actions quickly, which could affect the balance of power in foreclosure disputes and the willingness of homeowners to assert their rights.
Alters longstanding consumer protections. The bill repeals provisions that previously implied a mutual right to recover legal fees when one party (typically the lender) included such rights in the mortgage, thus narrowing consumer protections and aligning New York law more closely with lender interests.
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Who cares
Headline styles
Block Foreclosure Legal Fee Recovery
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to judiciary
- Referred to judiciary
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
2465
2019-2020 Regular Sessions
IN SENATE
January 25, 2019
Introduced by Sen. SANDERS -- 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 prohibiting mortgagors from recovering attorney's fees and/or expenses incurred during a foreclosure
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 282 of the real property law, as added by chapter 550 of the laws of 2010, is amended to read as follows:
§ 282. [Mortgagor's right to recover] Mortgagors prohibited from recovering attorneys' fees in actions or proceedings arising out of foreclosures of residential property. 1. [Whenever a covenant contained in a mortgage on residential real property shall provide that in any action or proceeding to foreclose the mortgage that the mortgagee may recover attorneys' fees and/or expenses incurred as the result of the failure of the mortgagor to perform any covenant or agreement contained in such mortgage, or that amounts paid by the mortgagee therefor shall be paid by the mortgagor as additional payment, there shall be implied in such mortgage a covenant by the mortgagee to pay to the mortgagor the reasonable] In the foreclosure of residential property mortgagors are prohibited from recovering from the mortgagees any attorneys' fees and/or expenses incurred by the mortgagor as the result of the failure of the mortgagee to perform any covenant or agreement on its part to be performed under the mortgage or in the successful defense of any action or proceeding commenced by the mortgagee against the mortgagor arising out of the contract, and an agreement that such fees and expenses may be recovered [as provided by law in an action commenced against the mortgagee or by way of counterclaim in any action or proceeding commenced by the mortgagee against the mortgagor. Any waiver of this section shall be void as against public policy] is void.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD08745-01-9
S. 2465 2
2. For the purposes of this section, "residential real property" means real property improved by a one- to four-family residence, a condominium that is occupied by the mortgagor or a cooperative unit that is occupied by the mortgagor.
§ 2. This act shall take effect immediately.
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 prohibiting mort- gagors from recovering attorney's fees and/or expenses incurred during a foreclosure
Purpose
To prohibit the required payment of mortgagor's legal fees by, a mortga- gee in a foreclosure proceeding for residential real property.
Summary of provisions
Section 282 of the real property law is amended to prohibit mortgagors from requiring that a mortgagee in a foreclosure proceeding of a resi- dential real property be required to pay the legal fees of mortgagor.
Section 4 of the bill provides this act shall take effect immediately.
Existing law
None
Justification
As our state and our nation slowly recover from the nation's financial crisis, many homeowners are still trying to recover from the financial impact of the crisis. Unemployment and massive foreclosures have crip- pled our economy and have made the recovery from the crisis very slow. While the economy strengthens and employment grows, many citizens are trying to rebuild their lives.
One way many homeowners have tried to rebuild their lives is to work to save the largest asset many of them own: their home. As the bottom dropped out of the economy, many citizens lost their jobs and fell behind on their mortgages. Many people who had owned their homes for years or even decades found themselves unable to keep up with their payments even though they may have never missed a payment before the crisis.
As the job market has strengthened and people returned to work, homeown- ers found themselves in much worse financial positions as many banks added late fees, interest and exorbitant legal fees to their mortgage balance. For example, after a 75 year old U.S. Army veteran in Staten Island fell into hard times, he fell behind on his mortgage with a $66,000 balance. His daughter and son-in-law tried to assist the veteran and were shocked to find that the balance, with fees and legal costs, had ballooned to $190,000.
Many times during the foreclosure process law firms run up legal bills of tens of thousands of dollars. Many times these legal fees make it impossible for a homeowner to make their mortgage current and return to making regular payments. Many of the law firms involved in the foreclo- sure process have ongoing relationships with the banks foreclosing on these properties. There is no incentive for the law firms to keep the costs of the foreclosure process to a minimum since their client is not the party paying the legal fees. Most times, when the mortgagee fails to pay the legal fees and the home is foreclosed, the law firms settle for much less than their stated fees with the bank.
Therefore, since it is in the best interest of our economy to allow homeowners recovering from the financial crisis to make their mortgage current, it is in the best interest of the economy of our state to stop law firms from passing exorbitant legal fees to homeowners trying to prevent their home from being foreclosed. In addition, since the law firms involved have no incentive to keep their fees to a minimum, and in many cases their incentive is to run up their fees since they do not have an ongoing relationship with the fee payer, provisions requiring mortgagees to pay for legal fees in the foreclosure process is against public policy.
Legislative history
02/17/15 REFERRED TO JUDICIARY 01/06/16 REFERRED TO JUDICIARY
Fiscal implications
None
Local fiscal implications
None
Effective date
This act shall take effect immediately.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.