What's happening
This bill bans prepayment penalties on mortgages for co-ops where over 50% of units are owner-occupied in New York.
Why it matters
Protects co-op owners from costly mortgage prepayment penalties. By banning these penalties in buildings where most units are owner-occupied, the bill makes it easier and less expensive for residents to refinance, sell, or pay off their loans early.
Supports housing stability and affordability for co-op shareholders. Removing prepayment barriers can help owners take advantage of lower interest rates, reducing monthly costs and making it more feasible for residents to stay in their homes or transition out without extra financial burden.
Targets buildings with community investment. The restriction applies only where over 50% of units are owner-occupied, focusing relief on co-ops with a strong resident-owner presence and potentially greater community stability.
Limits lender leverage in co-op mortgage agreements. By making prepayment penalties unenforceable in these situations, the bill shifts some negotiating power away from lenders and toward co-op residents, aligning mortgage practices more closely with those for other forms of homeownership.
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Who cares
Headline styles
End Co-op Mortgage Penalties
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Committed to rules
- Advanced to third reading
- 2nd report cal.
- 1st report cal.184
- 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.
Ban Mortgage Prepayment Penalties
In Assembly Committee · Judiciary · Sponsor Jeffrey Dinowitz
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
1323
2025-2026 Regular Sessions
IN SENATE
January 9, 2025
Introduced by Sen. HOYLMAN-SIGAL -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary
AN ACT to amend the general obligations law, in relation to pre-payment penalties for mortgages secured by real property owned in a cooperative form of ownership
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Paragraph b of subdivision 3 of section 5-501 of the general obligations law, as amended by chapter 472 of the laws of 2008, is amended to read as follows:
b. notwithstanding any other provision of law, the unpaid balance of the loan or forbearance may be prepaid, in whole or in part, at any time. If prepayment is made on or after one year from the date the loan or forbearance is made, no penalty may be imposed. If prepayment is made prior to such time, no penalty may be imposed unless provision therefor is expressly made in the loan contract, provided that no penalty may be imposed if prohibited by sections six-l and six-m of the banking law. No prepayment penalty or fee shall be charged or collected on a loan or forbearance secured by real property owned in a cooperative form of ownership where over fifty percent of the units are shareholder occupied. Such prepayment penalty shall be unenforceable. In all cases, the right of prepayment shall be stated in the instrument evidencing the loan or forbearance, provided, however, that the provisions of this subdivision shall not apply to the extent such provisions are inconsistent with any federal law or regulation.
§ 2. This act shall take effect immediately.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD00908-01-5
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the general obligations law, in relation to pre-payment penalties for mortgages secured by real property owned in a cooperative form of ownership
PURPOSE::
This bill will forbid prepayment penalties and fees from being charged or collected on a loan or forbearance secured by real property owned in a cooperative form ownership where over fifty percent of the units are shareholder occupied and will make such prepayment penalties unenforcea- ble.
SUMMARY OF SPECIFIC PROVISIONS::
Section 1 amends paragraph b of subdivision 3 of section 5-501 of the general obligations law, as amended by chapter 472 of the laws of 2008.
JUSTIFICATION::
The Consumer Financial Protection Bureau has rules restricting the abil- ity to impose prepayment penalties on most new mortgages for individuals and not commercial properties. The CFPB has limited prepayment penalties to fixed-mortgages that are considered to be "qualified mortgages". This rule applies to single family units, including those that are part of co-ops; therefore if an individual owns a single unit in a 200-unit building, the protections would apply. However these protections exclude the 200-unit building as a whole, due to it being considered a commer- cial property.
Currently in New York State, there are provisions that limit the ability of a lender to impose a prepayment penalty on loans with an interest rate that exceeds six percent per annum and which are secured primarily by a one-to-six family owner-occupied residence or certificates of stock or other evidence of owner in a corporation or other entity formed for the purpose of cooperative ownership of real estate. A lender may not impose a prepayment penalty on such loans on or after one year from the date the loan was made and, in the case of loans that are not fixed rate the interest rate must remain fixed for a period of at least five years for a prepayment penalty to be legally permissible. In all cases, the mortgage note must expressly provide for a prepayment penalty.
Prepayment penalties and fees can trap families and leave them in situ- ations with the only option being foreclosure. With similar legislation passed in Colorado, this elimination, of prepayment penalties would be a step in the right direction for lowering the increasing number of fore- closures.
LEGISLATIVE HISTORY::
S.161 of 2023-2024 (Hoylman-Sigal): Died in Rules
A.707 of 2023-2024 (Dinowitz): Died in Judiciary
S.4056 of 2021-2022 (Hoylman): Died in Judiciary A.1877 of 2021-2022 (Dinowitz): Passed Assembly
S.3347 of 2019-2020 (Hoylman): Died in Judiciary
A.2667 of 2019-2020 (Dinowitz): Passed Assembly
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.