A06828 Summary:

BILL NOA06828
 
SAME ASNo same as
 
SPONSORBrennan (MS)
 
COSPNSRMillman, Hoyt, Dinowitz, Maisel, Boyland, Nolan, Colton, Ortiz, Jaffee, Reilly, Gabryszak, Zebrowski, Fields, Jacobs, John, Rivera P, Wright, Gunther
 
MLTSPNSRAlfano, Glick, Gottfried, Jeffries, Koon, Lifton, Markey, Peoples-Stokes, Pheffer, Schimel, Sweeney, Weisenberg
 
Add SS6-n & 590-c, amd S14, Bank L; amd S1302, RPAP L
 
Enacts the "New York sub-prime predatory lending prevention act"; establishes guidelines for sub-prime loans; establishes duties of mortgage bankers and mortgage brokers; relates to the qualifications for licensing and certification of real estate appraisers.
Go to top    

A06828 Actions:

BILL NOA06828
 
03/13/2009referred to banks
01/06/2010referred to banks
Go to top

A06828 Floor Votes:

There are no votes for this bill in this legislative session.
Go to top

A06828 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          6828
 
                               2009-2010 Regular Sessions
 
                   IN ASSEMBLY
 
                                     March 13, 2009
                                       ___________
 
        Introduced  by  M.  of  A.  BRENNAN,  MILLMAN,  HOYT,  DINOWITZ, MAISEL,
          BOYLAND, NOLAN, GREENE,  COLTON,  ORTIZ,  JAFFEE,  REILLY,  GABRYSZAK,
          ZEBROWSKI,  FIELDS, JACOBS, JOHN, P. RIVERA, WRIGHT, GUNTHER -- Multi-
          Sponsored by -- M. of A. ALFANO,  GLICK,  GOTTFRIED,  JEFFRIES,  KOON,
          LIFTON, MARKEY, PEOPLES, PHEFFER, SCHIMEL, SWEENEY, WEISENBERG -- read

          once and referred to the Committee on Banks
 
        AN  ACT  to  amend  the  banking  law  and the real property actions and
          proceedings law, in relation  to  enacting  the  "New  York  sub-prime
          predatory lending prevention act"
 
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
 
     1    Section 1. Short title. This act shall be known as and may be cited as
     2  the "New York sub-prime predatory lending prevention act".
     3    § 2. The banking law is amended by adding a new section 6-n to read as
     4  follows:
     5    § 6-n. Sub-prime home loans. 1. The following  definitions  apply  for
     6  the purposes of this section:
     7    (a)  "Affiliate" means any company that controls, is controlled by, or

     8  is under common control with another company, as set forth in  the  Bank
     9  Holding  Company Act of 1956 (12 U.S.C. § 1841 et seq.), as amended from
    10  time to time.
    11    (b) "Annual percentage rate" means the annual percentage rate for  the
    12  loan  calculated  according  to  the provisions of the Federal Truth-in-
    13  Lending Act (15 U.S.C.  § 1601, et seq.), and the regulations promulgat-
    14  ed thereunder by the federal reserve board (as said act and  regulations
    15  are amended from time to time).
    16    (c)  "Bona fide loan discount points" means loan discount points know-
    17  ingly paid by the borrower funded through any source, for the purpose of
    18  reducing, and which in fact result in a  bona  fide  reduction  of,  the

    19  interest  rate  or  time-price  differential  applicable  to  the  loan,
    20  provided that the amount of the interest rate reduction purchased by the
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD09794-01-9

        A. 6828                             2
 
     1  discount points is reasonably consistent with established industry norms
     2  and practices for secondary mortgage market transactions.  For  purposes
     3  of  this  section, it shall be presumed that a point is a bona fide loan
     4  discount  point  if it reduces the interest rate by a minimum of twenty-

     5  five basis points provided all other terms of the loan remain the same.
     6    (d) A "sub-prime home loan" means a home loan in which  the  terms  of
     7  the  loan   exceed one or more of the thresholds as defined in paragraph
     8  (g) of this subdivision.
     9    (e) "Home loan" means a home loan, including an open-end credit  plan,
    10  other than a reverse mortgage transaction, in which:
    11    (i)  The  principal  amount of the loan does not exceed the lesser of:
    12  (A) conforming loan size limit for a comparable dwelling; or  (B)  three
    13  hundred thousand dollars;
    14    (ii) The borrower is a natural person;
    15    (iii)  The  debt  is  incurred by the borrower primarily for personal,
    16  family, or household purposes;

    17    (iv) The loan is secured by a mortgage or deed of trust on real estate
    18  upon which  there is located or there is to be located  a  structure  or
    19  structures  intended principally for occupancy of from one to four fami-
    20  lies which is or will be occupied by  the  borrower  as  the  borrower's
    21  principal dwelling; and
    22    (v) The property is located in this state.
    23    (f) "Points and fees" means:
    24    (i)  All  items  listed  in 15 U.S.C. § 1605(a)(1) through (4), except
    25  interest or the time-price differential;
    26    (ii) All charges for items listed under § 226.4(c)(7) of title  12  of
    27  the  code of federal regulations, as amended from time to time, but only
    28  if the lender receives direct or  indirect  compensation  in  connection

    29  with  the  charge  or the charge is paid to an  affiliate of the lender;
    30  otherwise, the charges are not included within the meaning of the phrase
    31  "points and fees";
    32    (iii) All compensation paid  directly  or  indirectly  to  a  mortgage
    33  broker,  including  a broker that originates a loan in its own name in a
    34  table-funded transaction, not otherwise included  in  subparagraphs  (i)
    35  and (ii) of this paragraph;
    36    (iv)  The  cost  of  all  premiums financed by the lender, directly or
    37  indirectly, for any credit life, credit disability, credit unemployment,
    38  or credit property insurance, or any other life or health insurance,  or
    39  any  payments financed by the lender directly or indirectly for any debt

    40  cancellation or suspension agreement or contract, except that  insurance
    41  premiums calculated and paid on a monthly basis shall not be  considered
    42  financed by the lender.
    43    (g) "Thresholds" means:
    44    (i) The loan contains a prepayment penalty due more than thirty months
    45  after closing, or in an amount greater than two percent; or
    46    (ii)  The total points and fees exceed: five percent of the total loan
    47  amount;  provided, the following discount points shall be excluded  from
    48  the calculation of the total points and fees payable by the borrower:
    49    (A)  Up to and including two bona fide loan discount points payable by
    50  the borrower in connection with the loan transaction, but  only  if  the

    51  interest  rate  from  which  the loan's interest rate will be discounted
    52  does not exceed by more than one percentage point the  yield  on  United
    53  States  treasury securities having comparable periods of maturity to the
    54  loan maturity measured as of the fifteenth day of the month  immediately
    55  preceding the month in which the application is received;

        A. 6828                             3
 
     1    (B)  Any  and  all  bona  fide loan discount points funded directly or
     2  indirectly through a grant from a federal,  state  or  local  government
     3  agency or a 501(c)(3) organization.
     4    (h)  "Total  loan  amount" means the principal of the loan minus those
     5  points and fees as defined in paragraph (f) of this subdivision that are

     6  included in the principal amount.
     7    (i) "Lender" means a mortgage banker as defined in  paragraph  (f)  of
     8  subdivision  one  of  section  five hundred ninety of this chapter or an
     9  exempt organization as  defined in paragraph (e) of subdivision  one  of
    10  section five hundred ninety of this  chapter.
    11    (j)  "Conforming  loan size limit" means the limit of conforming loans
    12  based on the mean price of comparable dwellings as established from time
    13  to time by the federal national mortgage association.
    14    2. A sub-prime home loan shall be subject  to  the  following  limita-
    15  tions:
    16    (a) No "loan flipping". No lender or mortgage broker making or arrang-
    17  ing  a  high-cost  home loan may engage in the unfair act or practice of

    18  "loan flipping".  "Loan flipping" is making a home loan  to  a  borrower
    19  that  refinances an existing home loan when the new loan does not have a
    20  tangible net benefit to the borrower  considering  all  of  the  circum-
    21  stances,  including  the terms of both the new and refinanced loans, the
    22  cost of the new loan, and the borrower's situation.
    23    (b) No lending without due regard to repayment ability.  A  lender  or
    24  mortgage  broker shall not make or arrange a high-cost home loan without
    25  due regard to  repayment ability, based upon consideration of the  resi-
    26  dent  borrower  or borrowers' current and expected income, current obli-
    27  gations, employment status, and other financial  resources  (other  than

    28  the  borrower's  equity  in  the dwelling which secures repayment of the
    29  loan), as verified by detailed documentation of all  sources  of  income
    30  and corroborated by independent verification. However, a lender making a
    31  high-cost home loan shall benefit from a rebuttable presumption that the
    32  loan was  made with due regard to repayment ability if the lender demon-
    33  strates that at the  time the loan is consummated, the resident borrower
    34  or  borrowers'  total  monthly  debts,  including amounts owed under the
    35  loan, do not exceed fifty percent of the resident borrower or borrowers'
    36  monthly gross income; and the lender follows the residual income  guide-
    37  lines established in 38 C.F.R. § 36.4337(e) and VA Form 26-6393.

    38    (c)  No recommendation of default. No lender or mortgage broker making
    39  or arranging for a  high-cost  home  loan  may  recommend  or  encourage
    40  nonpayment  of an existing loan or other debt prior to and in connection
    41  with the closing or planned closing of a home loan, regardless of wheth-
    42  er the new residential mortgage will refinance any portion of the exist-
    43  ing loan or debt.
    44    (d) No influencing of appraisers. A lender or  mortgage  broker  shall
    45  not  coerce, intimidate or compensate, and shall not in any way contrib-
    46  ute to the coercion, intimidation or compensation of any  real  property
    47  appraiser for the purpose of influencing their independent judgment with
    48  respect  to  the  value of real estate that is covered by a home loan or

    49  that is being offered as security in accordance with an application  for
    50  a home loan.
    51    (e)  Financing  credit  insurance.  No lender or mortgage broker shall
    52  require or allow the advance collection of a premium for any disability,
    53  unemployment, property, life or health insurance in connection with  any
    54  home loan.
    55    (f) Language translation. If the discussions between a lender or mort-
    56  gage broker and a borrower regarding a home loan are conducted primarily

        A. 6828                             4
 
     1  in  a  language other than English, the lender or mortgage broker shall,
     2  at least forty-eight hours prior to closing, provide an additional  copy

     3  of  all  information  required to be disclosed to the borrower under the
     4  Federal  Truth  in  Lending Act, 15 U.S.C. 1601 et seq., translated into
     5  the language in which discussions were primarily conducted.  The  lender
     6  shall  not  charge  a  fee  for any translated document required by this
     7  paragraph.
     8    (g) False information on credit applications. No  lender  or  mortgage
     9  broker,  or  any  loan officer or other employee of a lender or mortgage
    10  broker, may knowingly permit, encourage or assist a consumer  to  submit
    11  false  information  on any application for credit. No lender or mortgage
    12  broker, or any loan officer or other employee of a  lender  or  mortgage
    13  broker  may  knowingly  falsify,  or  in any way permit, cause or enable

    14  falsified information to be included on a consumer's application.
    15    3. (a) Sub-prime home loan mortgages shall include a legend on top  of
    16  the mortgage in twelve-point type stating "This loan is a sub-prime home
    17  loan  and  is  subject  to  the  New  York  sub-prime  predatory lending
    18  prevention act".
    19    (b) The lender shall report both the favorable and unfavorable payment
    20  history of the borrower  to  a  nationally  recognized  consumer  credit
    21  bureau  at  least  annually  during  such  period as the lender holds or
    22  services the sub-prime home loan.
    23    4. The provisions of this section shall apply to any person who in bad
    24  faith attempts to avoid the application of this section by  any  subter-

    25  fuge, including but not limited to splitting or dividing any loan trans-
    26  action into separate parts for the  purpose of evading the provisions of
    27  this section.
    28    5.  A lender of a sub-prime home loan that, when acting in good faith,
    29  fails to comply with the provisions of this section, will not be  deemed
    30  to have violated this section if the lender establishes that either:
    31    (a)  Within  thirty days of the loan closing and prior to the institu-
    32  tion of any action under this section, the borrower is notified  of  the
    33  compliance  failure,  appropriate  restitution  is  made,  and  whatever
    34  adjustments are necessary are made to the loan to either, at the  choice
    35  of  the  borrower, (i) make the sub-prime home loan satisfy the require-

    36  ments of this section, or (ii) change the terms of the loan in a  manner
    37  beneficial  to  the  borrower  so that the loan is no longer a sub-prime
    38  home loan subject to the provisions of this section; or
    39    (b) The compliance failure resulted from a bona  fide  error  notwith-
    40  standing  the maintenance of procedures reasonably adapted to avoid such
    41  errors and, within sixty days after  the  discovery  of  the  compliance
    42  failure and prior to the institution of any action under this section or
    43  the  receipt  of written notice of the compliance  failure, the borrower
    44  is notified of the compliance failure, appropriate restitution is  made,
    45  and  whatever  adjustments are necessary are made to the loan to either,

    46  at the choice of the borrower, (i) make the sub-prime home loan  satisfy
    47  the  requirements  of this section, or (ii) change the terms of the loan
    48  in a manner beneficial to the borrower so that the loan is no  longer  a
    49  sub-prime home loan subject to the  provisions of this section. Examples
    50  of a bona fide error include clerical, calculation, computer malfunction
    51  and  programming,  and  printing errors. An error of legal judgment with
    52  respect to a person's obligations under this section is not a bona  fide
    53  error.
    54    6.  The  attorney  general, the superintendent, or any party to a sub-
    55  prime home loan may enforce the provisions of this section.

        A. 6828                             5
 

     1    7. A private action against the lender or mortgage broker pursuant  to
     2  this  section  must  be commenced within six years of origination of the
     3  sub-prime home loan.
     4    8.  Any  person  found  by  a  preponderance  of  the evidence to have
     5  violated this  section shall be liable to the borrower for  the  follow-
     6  ing:
     7    (a)  actual  damages,  including consequential and incidental damages;
     8  and
     9    (b) statutory damages of five thousand dollars per violation or  twice
    10  the  amount  of  points  and  fees  and closing costs as defined in this
    11  section, whichever is greater.
    12    9. A court may also award reasonable attorneys' fees to  a  prevailing
    13  borrower.

    14    10. In addition, the court shall, as it may consider appropriate:
    15    (a)  issue  an  order  or  injunction  rescinding a home mortgage loan
    16  contract which  violates  this  section,  or  barring  the  lender  from
    17  collecting under any home mortgage loan which violates this section;
    18    (b)  issue  an order or injunction barring any judicial or nonjudicial
    19  foreclosure or other lender action under the mortgage or deed  of  trust
    20  securing any home mortgage loan which violates this section;
    21    (c) issue an order or injunction reforming the terms of the home mort-
    22  gage loan to conform to this section;
    23    (d)  issue  an order or injunction enjoining a lender from engaging in
    24  any prohibited conduct; or

    25    (e) impose such other relief,  including  injunctive  relief,  as  the
    26  court may consider just and equitable.
    27    11.  (a)  Any person found to have knowingly and deliberately violated
    28  any provision of this section may be criminally liable  for  a  fine  of
    29  less than five thousand dollars, community service of not more than five
    30  hundred  hours or imprisonment not exceeding six months, or any combina-
    31  tion thereof.
    32    (b) For any second or subsequent violation he or she may be criminally
    33  liable for a fine of less than ten thousand dollars,  community  service
    34  of not more than one thousand hours or imprisonment not exceeding twelve
    35  months, or any combination thereof.

    36    12. It is a violation of this section for any person to attempt in bad
    37  faith to avoid the provisions of this section by dividing any loan tran-
    38  saction  into  separate parts or structuring a residential mortgage loan
    39  transaction  as  an  open-end  loan  for  the  purpose  of  evading  the
    40  provisions  of  this  section  when the loan would have been a high-rate
    41  mortgage had it been structured as a closed-end loan or by  engaging  in
    42  any  other  subterfuge  with the intent of evading any provision of this
    43  section.
    44    13. Upon a finding by the court of an  intentional  violation  by  the
    45  lender  of this  section, or regulation thereunder, the home loan agree-
    46  ment shall be rendered void, and the  lender  shall  have  no  right  to

    47  collect,  receive  or  retain  any principal, interest, or other charges
    48  whatsoever with respect to the loan, and the borrower  may  recover  any
    49  payments made under the agreement.
    50    14.  Upon  a  judicial finding that a sub-prime home loan violates any
    51  provision of this section, whether such violation is raised as an affir-
    52  mative claim or as a defense, the loan  transaction  may  be  rescinded.
    53  Such  remedy of rescission shall be available  as a defense without time
    54  limitation.
    55    15. The remedies provided in this section are not intended to  be  the
    56  exclusive remedies available to a borrower of a sub-prime home loan.

        A. 6828                             6
 

     1    16.  In any action by an assignee to enforce a loan against a borrower
     2  in default more than sixty days or in foreclosure, a borrower may assert
     3  any claims in  recoupment and defenses to payment under  the  provisions
     4  of this section and with  respect to the loan, without time limitations,
     5  that the borrower could assert against the original lender of the loan.
     6    17.  No  lender may make or cause to make, directly or indirectly, any
     7  false, deceptive or misleading statement or representation in connection
     8  with a residential loan transaction including, but  not  limited  to,  a
     9  false, deceptive or misleading statement or representation regarding the
    10  borrower's ability to qualify for any mortgage product.

    11    18.  (a) All lenders and mortgage brokers offering sub-prime home loan
    12  products shall file an electronic report with the  department  detailing
    13  each loan agreement.
    14    (b)  Such  lenders  and  mortgage brokers shall file a report with the
    15  department in instances of loan default  or  foreclosure  within  thirty
    16  days  of  such default or disclosure. The department shall develop rules
    17  and regulations for such reports and make summary tables by  lender  and
    18  broker available on the department's official website.
    19    19.  Lenders and mortgage brokers shall file a report with the depart-
    20  ment that details the number of high-cost home loans they have made over
    21  the past five years and the number of such  loans  that  have  ended  in

    22  default  or foreclosure. This data shall be provided statewide, by coun-
    23  ty, and zip code. The department shall be required to produce  and  post
    24  this data to its official state website in a searchable form.
    25    20. The following information shall be disclosed and provided at least
    26  three business days prior to closing a high-cost home loan:
    27    (a) the annual percentage rate;
    28    (b)  the amount of the regular monthly (or other periodic) payment and
    29  the amount of any balloon payment;
    30    (c) for variable rate loans, a statement that the  interest  rate  and
    31  monthly  payment  may  increase,  and  the amount of the maximum monthly
    32  payment based upon the maximum interest rate;

    33    (d) a copy of the report required  by  subdivision  nineteen  of  this
    34  section, including data for the relevant county and zip code; and
    35    (e)  contact  information  for  the  department including the internet
    36  address to access the department's postings of information on  high-cost
    37  mortgages  pursuant  to  subdivisions  eighteen  and  nineteen  of  this
    38  section; and
    39    (f) a notice that reads as follows: "YOU ARE NOT REQUIRED TO  COMPLETE
    40  THIS  AGREEMENT  MERELY  BECAUSE  YOU HAVE RECEIVED THESE DISCLOSURES OR
    41  HAVE SIGNED A LOAN APPLICATION. IF YOU OBTAIN THIS LOAN, THE LENDER WILL
    42  HAVE A MORTGAGE ON YOUR HOME. YOU COULD LOSE YOUR HOME AND ANY MONEY YOU
    43  HAVE PUT INTO IT IF YOU DO NOT MEET YOUR OBLIGATIONS UNDER THE LOAN."

    44    21. The provisions of this section shall  be  severable,  and  if  any
    45  phrase,  clause, sentence, or provision is declared to be invalid, or is
    46  preempted by federal law or regulation, the validity of the remainder of
    47  this section shall not be affected thereby.   If any provision  of  this
    48  section  is  declared to be inapplicable to any specific category, type,
    49  or kind of points and fees, the provisions of this section  shall  none-
    50  theless continue to apply with respect to all other points and fees.
    51    §  3. Section 1302 of the real property actions and proceedings law is
    52  amended by adding a new subdivision 3 to read as follows:
    53    3. Any complaint served in a proceeding  initiated  pursuant  to  this

    54  article  relating  to a sub-prime home loan, as defined in section six-n
    55  of the banking law, must contain an affirmative allegation, which  alle-
    56  gation  must  be proven to the satisfaction of the court before entry of

        A. 6828                             7
 
     1  judgment by default or otherwise, that the plaintiff mortgage banker  or
     2  exempt  organization  has complied with all of the provisions of section
     3  five hundred ninety-five-a and section six-n of the banking law.
     4    §  4. The banking law is amended by adding a new section 590-c to read
     5  as follows:
     6    § 590-c. Duties of mortgage bankers and mortgage brokers.  1.  In  the
     7  case  of  a mortgage loan, a mortgage banker or mortgage broker shall be

     8  deemed to have a fiduciary relationship with the consumer and he or  she
     9  shall  be subject to all requirements for fiduciaries otherwise applica-
    10  ble under state or federal law.
    11    2. Each mortgage banker or mortgage broker shall with respect to  each
    12  mortgage loan in which he or she is involved:
    13    (a) act with reasonable skill, care and diligence; and
    14    (b)  act in good faith and with fair dealing in any transaction, prac-
    15  tice or course of business associated with the mortgage loan.
    16    3. (a) Each mortgage banker or mortgage broker shall, before  entering
    17  into  or otherwise facilitating any mortgage loan, verify the reasonable
    18  ability of the borrower to  pay the principal and interest on  the  loan

    19  and any real estate taxes and homeowners insurance fees and premiums.
    20    (b)  In the case of a mortgage loan with respect to which the applica-
    21  ble rate of interest may vary, for purposes of  paragraph  (a)  of  this
    22  subdivision, the ability to pay shall be determined based on the maximum
    23  possible  monthly payment that could be due from the borrower during the
    24  first seven years of the loan term, which shall be calculated by:
    25    (i) using the maximum interest rate allowable under the loan; and
    26    (ii) assuming no default by the borrower, a repayment  schedule  which
    27  achieves full amortization over the life of the loan.
    28    (c)  For  purposes  of  paragraph  (a) of this subdivision, a mortgage

    29  banker or  mortgage broker shall base a determination of the ability  to
    30  pay on:
    31    (i) documentation of the income and financial resources of the borrow-
    32  er,  including  tax  returns,  payroll  receipts, bank records, or other
    33  similarly reliable documents; and
    34    (ii) the debt-to-income ratio and residual income of the borrower,  as
    35  determined    under  section  36.4337 of title 38 of the Code of Federal
    36  Regulations, or any successor thereto.
    37    (d) A statement provided by the borrower of the income  and  financial
    38  resources  of  the  borrower, without other documentation referred to in
    39  paragraph (c) of this subdivision, is not  sufficient  verification  for
    40  purposes of assessing the ability of the  consumer to pay.

    41    4.  (a) In the case of a rate spread mortgage transaction, the obligor
    42  shall be   required to make monthly  payments  into  an  escrow  account
    43  established  by  the  mortgage   banker for the purpose of paying taxes,
    44  hazard insurance premiums, and, if applicable, flood insurance premiums.
    45    (b) This subdivision does not apply in any case in which the  mortgage
    46  banker reasonably believes that, following the loan closing, the obligor
    47  shall  be  required,  or  shall  continue to be required, to make escrow
    48  payments described in paragraph (a) of this subdivision on the  property
    49  securing  the  loan  in connection with another loan secured by the same
    50  property.
    51    (c) In any case in which a mortgage broker sells or  delivers  a  rate

    52  spread    mortgage  loan to a lender, the lender shall be liable for the
    53  acts, omissions and representations  made  by  the  mortgage  broker  in
    54  connection with such mortgage loan.
    55    (d)  For the purposes of this subdivision, the term "rate spread mort-
    56  gage transaction" means a home mortgage loan that has an annual percent-

        A. 6828                             8
 
     1  age rate of interest that equals or exceeds the rate that would  require
     2  reporting  under  the  Home Mortgage   Disclosure Act (12 U.S.C. 2801 et
     3  seq.) as a rate spread loan, without regard  to  whether  such  loan  is
     4  otherwise subject to the Home Mortgage Disclosure Act.
     5    5.  (a) In connection with a mortgage loan, a mortgage banker or mort-

     6  gage broker  may not steer, counsel, or  direct  a  consumer  to  rates,
     7  charges,  principal  amount, or prepayment terms that are not reasonably
     8  advantageous to the consumer, in light of all of the circumstances asso-
     9  ciated with the transaction, including the characteristics of the  prop-
    10  erty  that  secures  or will secure the extension of credit and the loan
    11  terms for which the consumer qualifies.
    12    (b) If unable to suggest, offer, or recommend to a consumer a  reason-
    13  ably advantageous home loan, a mortgage banker or mortgage broker shall:
    14    (i) based on the information reasonably available and using the skill,
    15  care,  and  diligence reasonably expected for a mortgage banker or mort-

    16  gage broker, originate or otherwise facilitate a reasonably advantageous
    17  home mortgage loan by another creditor to  a consumer, if  permitted  by
    18  and in accordance with all otherwise applicable law; or
    19    (ii) disclose to a consumer:
    20    (A)  that  the  creditor  does not offer a mortgage loan that would be
    21  reasonably  advantageous to a consumer, but  that  other  creditors  may
    22  offer such a loan; and
    23    (B) the reasons that the products and services offered by the mortgage
    24  banker  or   mortgage broker are not available to or reasonably advanta-
    25  geous for the consumer.
    26    (c) In connection with a mortgage loan, a mortgage banker or  mortgage
    27  broker may not:

    28    (i) mischaracterize the credit history of a consumer or the home loans
    29  available to  a consumer;
    30    (ii)  mischaracterize  or  suborn mischaracterization of the appraised
    31  value of the  property securing the extension of credit; or
    32    (iii) if unable to suggest,  offer,  or  recommend  to  a  consumer  a
    33  reasonably  advantageous mortgage loan, discourage a consumer from seek-
    34  ing a home mortgage loan from another creditor or with another  mortgage
    35  banker or mortgage broker.
    36    (d) Nothing in this subdivision shall be deemed to prohibit a mortgage
    37  banker  or    mortgage  broker  from providing a consumer with accurate,
    38  unbiased, general information about home  mortgage  loans,  underwriting

    39  standards,  ways to improve credit history, or any other matter relevant
    40  to a consumer.
    41    6. (a) No mortgage banker or mortgage broker may enter into a mortgage
    42  loan with respect to which the mortgage banker or  mortgage  broker  has
    43  reason  to  believe that,  with respect to the appraisal of the value of
    44  the property securing the loan:
    45    (i) the appraiser failed to act in good faith and  fair  dealing  with
    46  respect to the consumer in connection with the appraisal;
    47    (ii)  the  appraisal  was  conducted other than in accordance with all
    48  applicable  state    and  federal  standards   required   of   certified
    49  appraisers, or was otherwise not accurate and  reasonable;

    50    (iii)  the appraiser had a direct or indirect interest in the property
    51  or the transaction;
    52    (iv) the appraiser charged, sought, or received compensation  for  the
    53  appraisal, and the appraisal was not covered by a qualifying bond; or
    54    (v)  the  appraisal  order  or  any  other  communication  in any form
    55  includes the  requested loan amount or any estimate  of  value  for  the
    56  property to serve as collateral, either expressed or implied.

        A. 6828                             9
 
     1    (b)  No mortgage banker or mortgage broker may, with respect to a home
     2  mortgage loan, in any way:
     3    (i) seek to influence an appraiser or otherwise to encourage a target-

     4  ed  value  in  order to facilitate the making or pricing of the mortgage
     5  loan; or
     6    (ii) select an appraiser on the basis  of  an  expectation  that  such
     7  appraiser  would  provide  a  targeted  value in order to facilitate the
     8  making or pricing of the mortgage loan.
     9    (c) It shall not be a defense to enforcement of  the  requirements  of
    10  this subdivision that the mortgage banker or mortgage broker used anoth-
    11  er person in the appraisal process  or to review the appraisal process.
    12    (d)  In any case in which an appraisal is performed in connection with
    13  a mortgage loan, the mortgage originator shall provide  a  copy  of  the
    14  appraisal report to an applicant  for a mortgage loan, whether credit is

    15  granted, denied, or the application was withdrawn.
    16    §  5.  Subdivision  1  of  section 14 of the banking law is amended by
    17  adding a new paragraph (r) to read as follows:
    18    (r) To create and maintain a list disclosing borrower's rights on  the
    19  department's website.
    20    § 6. This act shall take effect on the one hundred eightieth day after
    21  it  shall  have  become  a  law  and shall apply only to loans for which
    22  application is made on or after such effective date; provided,  however,
    23  that the superintendent of banks is authorized to promulgate any and all
    24  rules and regulations and take any other measures necessary to implement
    25  this act on its effective date on or before such date.
Go to top