Enacts the "foreclosure diversion act"; provides for a one-year moratorium on foreclosures; requires a homeowner to attend a counseling session; requires courts to meet with parties at a mandatory settlement conference.
STATE OF NEW YORK
________________________________________________________________________
4109--B
2009-2010 Regular Sessions
IN SENATE
April 9, 2009
___________
Introduced by Sens. KLEIN, ADAMS, DIAZ, HASSELL-THOMPSON, C. JOHNSON,
MONTGOMERY, ONORATO -- read twice and ordered printed, and when print-
ed to be committed to the Committee on Judiciary -- committee
discharged, bill amended, ordered reprinted as amended and recommitted
to said committee -- reported favorably from said committee and
committed to the Committee on Codes -- committee discharged, bill
amended, ordered reprinted as amended and recommitted to said commit-
tee
AN ACT enacting the "foreclosure diversion act of 2009"; to amend the
real property actions and proceedings law, in relation to giving
notice to mortgagors of the availability of foreclosure prevention
counseling; to amend the banking law and the civil practice law and
rules, in relation to settlement conferences; to amend the real prop-
erty actions and proceedings law, in relation to availability of a
settlement conference in pending foreclosure actions; to amend the
real property actions and proceedings law, in relation to providing a
one-year postponement on foreclosures; to amend the judiciary law, in
relation to the assignment of foreclosure actions; to repeal certain
provisions of the civil practice law and rules relating thereto; and
providing for the repeal of such provisions upon expiration thereof
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 and may be cited as
2 the "foreclosure diversion act of 2009".
3 § 2. Statement of legislative purpose and findings. The legislature
4 finds and declares that there is a public emergency; that the extension
5 of unaffordable mortgage loans, unaffordable second mortgages and unaf-
6 fordable home equity loans have resulted in thousands of homeowners
7 losing their homes. The problems associated with these loans adversely
8 affect the availability of capital, the demand for housing, the value of
9 real estate, and more importantly, the ability of homeowners to keep
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD08584-11-9
S. 4109--B 2
1 their homes and communities viable. The pending reset of interest rates
2 in many home mortgages, second mortgages and home equity loans will only
3 exacerbate this situation for many homeowners. The expectation that many
4 such variable rate mortgages will fall into foreclosure upon the reset
5 of the interest rate compels the state to take action. State assistance
6 to homeowners through a counseling program is necessary in order to stem
7 this crisis.
8 § 3. Definitions. As used in this act, the following words and phrases
9 shall have the following meanings:
10 1. "Commissioner" shall mean the commissioner of the state division of
11 housing and community renewal.
12 2. "Department" shall mean the banking department.
13 3. "Division" shall mean the state division of housing and community
14 renewal.
15 4. "Eligible homeowners" shall mean any resident of this state
16 currently residing in a home located in this state subject to a home
17 loan who the commissioner determines, pursuant to the eligibility
18 restrictions set forth in this act, is in need of foreclosure diversion
19 assistance.
20 5. "Home loan" shall mean a residential home mortgage loan, including
21 an open-end credit plan, other than a reverse mortgage transaction, in
22 which:
23 (a) the borrower is a natural person;
24 (b) the debt is incurred by the borrower primarily for personal, fami-
25 ly or household purposes;
26 (c) the loan is secured by a mortgage or deed of trust on real estate
27 upon which there is located a structure or structures intended princi-
28 pally for occupancy of 1 to 4 families which is occupied by the borrower
29 as the borrower's principal dwelling; and
30 (d) the property is located in this state.
31 6. "Lender" shall mean (a) a mortgage banker as defined in paragraph
32 (f) of subdivision 1 of section 590 of the banking law, or (b) an exempt
33 organization as defined in paragraph (e) of subdivision 1 of section 590
34 of the banking law, or (c) a mortgage loan servicer as defined in para-
35 graph (h) of subdivision 1 of section 590 of the banking law.
36 7. "Non-profit assistance provider" shall mean a corporation or group
37 of corporations organized under the provisions of the not-for-profit
38 corporation law, including but not limited to neighborhood preservation
39 companies as defined in section 902 of the private housing finance law,
40 entities that perform housing preservation and community renewal activ-
41 ities pursuant to article 17 of the private housing finance law, common-
42 ly referred to as rural preservation companies, and legal service
43 providers, and municipalities.
44 8. "Service area" shall mean the established or stated boundaries of a
45 non-profit assistance provider or, if an assistance provider does not
46 have established boundaries for the geographic area in which it provides
47 services, the geographic area defined in its proposal to the division to
48 be a service provider.
49 9. "Superintendent" shall mean the superintendent of banks.
50 § 4. Education and outreach to homeowners. In coordination with the
51 division and the consumer protection board, the department shall under-
52 take outreach activities directed at any homeowners whose homes are
53 subject to foreclosure. Such outreach activities shall include, but not
54 be limited to:
55 1. the production and broadcast of public service announcements using
56 electronic media to inform the general public of the availability of
S. 4109--B 3
1 counseling through the New York state foreclosure diversion program
2 established by this act. Such public service announcements shall inform
3 the homeowner of the nature and purpose of the counseling and provide a
4 website and phone number for the homeowner to utilize; and
5 2. the inclusion of a description on the internet websites maintained
6 by the division, the banking department and the consumer protection
7 board of the New York state foreclosure diversion program and a listing
8 of those entities that provide counseling with respect to the program.
9 Such listing shall include the address and phone number of each entity.
10 § 5. Subdivisions 1 and 3 of section 1303 of the real property actions
11 and proceedings law, as amended by chapter 472 of the laws of 2008, are
12 amended to read as follows:
13 1. The foreclosing party in a mortgage foreclosure action, which
14 involves residential real property consisting of owner-occupied one-to-
15 four-family dwellings shall provide notice to the mortgagor in accord-
16 ance with the provisions of this section with regard to information and
17 assistance about the foreclosure process. Such notice shall include
18 information about the availability of the foreclosure diversion program
19 and its ability to assist homeowners in avoiding foreclosure and the
20 mandatory counseling required for participation in the foreclosure
21 diversion program. Such notice shall include the hotline established by
22 the banking department and provided by the division of housing and
23 community renewal pursuant to section four of the foreclosure diversion
24 act of 2009 and the names and contact information for all not-for-profit
25 assistance providers authorized by the department to provide housing
26 counseling services to homeowners.
27 3. The notice required by this section shall appear as follows:
28 Help for Homeowners in Foreclosure
29 New York State Law requires that we send you this notice about the
30 foreclosure process. Please read it carefully.
31 BEFORE YOU ATTEND A SETTLEMENT CONFERENCE, YOU ARE STRONGLY URGED TO
32 SCHEDULE AND ATTEND A COUNSELING SESSION BY CALLING THE BANKING DEPART-
33 MENT AT THE FOLLOWING HOTLINE NUMBER: _______________________
34 Summons and Complaint
35 You are in danger of losing your home. If you fail to respond to the
36 summons and complaint in this foreclosure action, you may lose your
37 home. Please read the summons and complaint carefully. You should imme-
38 diately contact an attorney or your local legal aid office to obtain
39 advice on how to protect yourself. You should immediately seek out an
40 approved loan counselor. A list of approved counselors can be obtained
41 by calling the hotline. If you do not attend a counseling session, you
42 will not be eligible to participate in the residential mortgage foreclo-
43 sure diversion program. This will not affect your right to a settlement
44 conference, but will affect your eligibility for a postponement of fore-
45 closure under the residential mortgage foreclosure diversion program.
46 Sources of Information and Assistance
47 The State encourages you to become informed about your options in
48 foreclosure. In addition to seeking assistance from an attorney or legal
49 aid office, there are government agencies and non-profit organizations
50 that you may contact for information about possible options, including
51 trying to work with your lender during this process.
52 To locate an entity near you, you may call the toll-free helpline
53 maintained by the New York State Banking Department at _____________
54 (enter number) or visit the Department's website at _______________
55 (enter web address).
56 Foreclosure rescue scams
S. 4109--B 4
1 Be careful of people who approach you with offers to "save" your home.
2 There are individuals who watch for notices of foreclosure actions in
3 order to unfairly profit from a homeowner's distress. You should be
4 extremely careful about any such promises and any suggestions that you
5 pay them a fee or sign over your deed. State law requires anyone offer-
6 ing such services for profit to enter into a contract which fully
7 describes the services they will perform and fees they will charge, and
8 which prohibits them from taking any money from you until they have
9 completed all such promised services.
10 § 6. The banking law is amended by adding a new section 6-n to read
11 as follows:
12 § 6-n. Counseling of mortgagees. 1. The department shall establish a
13 procedure to counsel homeowners whose property is subject to or about to
14 become subject to foreclosure.
15 2. A counselor from a not-for-profit assistance provider approved by
16 the department shall meet with all homeowners prior to their scheduled
17 settlement conference. The counselor shall also consult with the fore-
18 closing party or such party's representative and attempt to formulate a
19 repayment schedule that is acceptable to both the homeowner and the
20 foreclosing party. If the parties agree, they shall file a certificate
21 of resolution with the court of jurisdiction.
22 3. If the counselor is unable to negotiate an acceptable resolution,
23 the parties shall file a certificate of participation with the court of
24 jurisdiction and the scheduled settlement conference shall proceed.
25 § 7. Rule 3408 of the civil practice law and rules is REPEALED and a
26 new rule 3408 is added to read as follows:
27 Rule 3408. Mandatory settlement conference in residential foreclosure
28 actions. 1. In any residential foreclosure action in which the defendant
29 is a resident of the property subject to foreclosure, the court shall
30 hold a mandatory conference within ninety days after the date when proof
31 of service is filed with the county clerk, or on such adjourned date as
32 has been agreed to by the parties, for the purpose of holding settlement
33 discussions pertaining to the relative rights and obligations of the
34 parties under the mortgage loan documents, including, but not limited to
35 determining whether the parties can reach a mutually agreeable resol-
36 ution to help the defendant avoid losing his or her home, and evaluating
37 the potential for a resolution in which payment schedules or amounts may
38 be modified or other workout options may be agreed to, and for whatever
39 other purposes the court deems appropriate.
40 2. The court shall cause a notice to be sent to the parties by certi-
41 fied mail informing them of the date, time, and location of the confer-
42 ence, and informing the homeowner of his or her option of participation
43 in the residential mortgage foreclosure diversion program established
44 pursuant to the foreclosure diversion act of 2009. The notice shall
45 include the hotline established by the banking department pursuant to
46 the foreclosure diversion act of 2009 and a statement that the homeowner
47 must complete a counseling session prior to his or her scheduled settle-
48 ment conference in order to participate in the residential mortgage
49 foreclosure diversion program.
50 3. If the homeowner completes a counseling session with a counselor
51 from a not-for-profit assistance provider approved by the department,
52 such counselor shall send a loan modification proposal to the foreclos-
53 ing party at least ten days prior to the settlement conference. The
54 foreclosing party shall, prior to the settlement conference, review the
55 modification proposal and make a good faith effort to reach a resolution
56 with the homeowner.
S. 4109--B 5
1 4. At the initial conference held pursuant to this section, any
2 defendant currently appearing pro se, shall be deemed to have made a
3 motion to proceed as a poor person under section eleven hundred one of
4 this chapter. The court shall determine whether such permission shall be
5 granted pursuant to standards set forth in section eleven hundred one of
6 this chapter. If the court appoints defendant counsel pursuant to subdi-
7 vision (a) of section eleven hundred two of this chapter, it shall
8 adjourn the conference to a date certain for appearance of counsel and
9 settlement discussions pursuant to subdivision one of this section, and
10 otherwise shall proceed with the conference.
11 5. At any conference held pursuant to this section, the plaintiff
12 shall appear in person or by counsel. Any person representing the plain-
13 tiff shall have full settlement authority, including the authority to
14 dispose of the case and to enter into or approve a loan modification or
15 workout agreement. The defendant-mortgagor shall appear in person or by
16 counsel. Such appearance and participation by the defendant-mortgagor
17 shall not constitute an appearance in the action nor shall it be deemed
18 to be a waiver, in whole or in part, of any defenses, jurisdictional or
19 otherwise, that the defendant-mortgagor may have to the action. Any and
20 all statements made, whether oral or written, and any or all information
21 exchanged at the conference, shall be solely for the purposes of resol-
22 ution and settlement and shall not be deemed to be the admissions of any
23 party with respect to the underlying action. If the defendant is appear-
24 ing pro se, the court shall advise the defendant of the nature of the
25 action and his or her rights and responsibilities as a defendant. Where
26 appropriate, the court may permit a plaintiff or the plaintiff's repre-
27 sentative to attend the settlement conference telephonically or by
28 video-conference. Until all the provisions and procedures of the settle-
29 ment conference are concluded, the mortgagee shall be precluded from
30 filing a motion for summary judgment or order of reference or otherwise
31 proceeding with the foreclosure case. The failure of the plaintiff to
32 appear at a scheduled conference without good cause or appearance by a
33 representative without full authority to enter into a settlement,
34 modification or workout agreement shall subject the plaintiff and/or
35 counsel to appropriate remedial action including but not limited to
36 default, non-suit or dismissal with prejudice.
37 6. Both parties must have any supporting documentation with them at
38 the time of the conference. If the homeowner attended a counseling
39 session with an approved counselor, such counselor must have given a
40 loan modification proposal to the foreclosing party at least ten days
41 prior to the settlement conference.
42 7. The court shall preside over the conference in an effort to estab-
43 lish a repayment plan that is acceptable to the lender that allows the
44 homeowner to remain in the home.
45 8. After the settlement conference, the court shall produce a report
46 finalizing and detailing any terms and conditions that have been agreed
47 upon by the parties. Such report shall be made part of the record for
48 the action.
49 § 8. The real property actions and proceedings law is amended by
50 adding a new section 1316 to read as follows:
51 § 1316. The court shall notify the defendant of any foreclosure action
52 on a residential mortgage loan, in which the action was initiated but
53 where the final order of judgment was not issued prior to the effective
54 date of the foreclosure diversion act of 2009, that such defendant may
55 request a settlement conference in accordance with rule thirty-four
56 hundred eight of the civil practice law and rules.
S. 4109--B 6
1 § 9. The real property actions and proceedings law is amended by
2 adding a new section 1305 to read as follows:
3 § 1305. Foreclosures; court relief. 1. Venue. In any action to fore-
4 close a residential mortgage under this article a mortgagor named in
5 such action may apply for relief in state supreme court pursuant to this
6 section.
7 2. Timing of postponement. If a mortgagee has otherwise established
8 its legal right to judgment on an action to foreclose a residential
9 mortgage pursuant to this chapter, then such action shall be held in
10 abeyance by the court before which such action is pending for a period
11 of ninety days. If the mortgagor receives counseling from a not-for-pro-
12 fit assistance provider approved by the division and subsequently
13 participates in a settlement conference, then the court before which
14 such action is pending shall hold such action in abeyance for an addi-
15 tional nine months. Such additional period of time is intended to
16 permit the parties to settle the action outside of court and to fore-
17 stall foreclosure wherever possible.
18 3. Process and fees. If an action to foreclose a residential mortgage
19 has been commenced prior to the effective date of this section, a mort-
20 gagor may ask the court before which such action is commenced to hold
21 such action in abeyance pursuant to subdivision two of this section.
22 Motions on notice in accordance with the civil practice law and rules
23 made by the mortgagor shall be deemed to have been filed by a poor
24 person pursuant to article eleven of the civil practice law and rules
25 and all court fees otherwise applicable to such actions and payable by a
26 mortgagor shall be waived. If a foreclosure action has not been
27 commenced prior to the effective date of this section, a mortgagor must
28 commence an action in state supreme court by filing and serving a
29 summons pursuant to article three of the civil practice law and rules
30 with a request for relief pursuant to the terms of this section. In such
31 case, such filing shall be deemed to have been filed by a poor person
32 pursuant to article eleven of the civil practice law and rules and all
33 filing and court fees otherwise applicable to such actions and payable
34 by a mortgagor in the form of index and motion fees shall be waived.
35 4. Prima facie case. A mortgagor must establish a prima facie case in
36 the motion or pleading. Amendments to such motion or pleading shall be
37 liberally granted. Such pleading must establish that:
38 a. the mortgagor is a natural person; and
39 b. the debt is incurred by the mortgagor primarily for personal, fami-
40 ly or household purposes; and
41 c. the loan is secured by a mortgage, second mortgage or home equity
42 loan on real property which is improved with a residential building
43 containing one to four dwelling units; and
44 d. the real property subject to foreclosure is the principal residence
45 of the mortgagor; and
46 e. the mortgagor owns no other real property; and
47 f. the real property is located in this state.
48 5. Monthly payment schedule. If a prima facie case has been estab-
49 lished, the court officer or mediator presiding over the settlement
50 conference set forth in rule 3408 of the civil practice law and rules
51 shall work with the parties to establish the terms of a monthly payment
52 schedule which will preserve the relative financial interests of both
53 parties under terms which are equitable and just. Towards that end, the
54 court officer or mediator shall inquire into the finances of both the
55 mortgagee and the mortgagor. The purpose of such inquiry shall be to
56 determine the minimum amount necessary to maintain the mortgagee's
S. 4109--B 7
1 financial position and to determine the amount which the mortgagor will
2 be able to afford. Such monthly payments shall be applied to the prin-
3 cipal and interest upon the indebtedness. If the financial condition of
4 the mortgagor exceeds the minimum amount necessary to maintain the
5 financial position of the mortgagee, such monthly amount may be
6 increased beyond the minimum amount as determined within the discretion
7 of the court officer or mediator. It is within the court officer's or
8 mediator's discretion to determine whether the establishment of such
9 payment schedule is possible under terms which are equitable and just.
10 The purpose of such monthly payments is to preserve the relative finan-
11 cial interests of both parties until a settlement can be reached but in
12 no event shall such order govern for more than one year. Failure to
13 adhere to the terms of such schedule may also result in foreclosure or
14 lifting of the abeyance.
15 6. Postponement order. Once the court determines that an equitable and
16 just payment schedule can be established, it shall issue an order which
17 sets forth the terms of such payment schedule and serve it upon all
18 parties to the proceeding. Such order shall set forth a return date for
19 the re-examination of such matter after passage of the postponement time
20 period at a formal hearing on notice to the parties. The court may
21 tailor relief as required by the facts of each case that falls within
22 the purview of this section. However, in no event shall such order post-
23 pone final action beyond one year without a re-examination of the
24 parties' financial circumstances after formal hearing on notice to the
25 parties. The time period of such order shall run from the date of the
26 entry of such order. Such abeyance shall not begin until the foreclo-
27 sure process has reached the point where a final determination is possi-
28 ble but shall be withheld until the postponement period has elapsed.
29 Entitlement to such abeyance may be established at any time regardless
30 of whether foreclosure is being sought by the mortgagee. Multiple post-
31 ponements may be granted in the discretion of the court if warranted by
32 the facts of a given case and the economic conditions across the state.
33 7. Continuing jurisdiction. The court shall maintain continuing juris-
34 diction of the matter until it reaches final resolution. Upon the appli-
35 cation of either party, prior to the expiration of the postponement
36 period, upon presentation of evidence that the terms fixed by the court
37 are no longer just and equitable, the court may revise and alter such
38 terms in such manner as the changed circumstances and conditions may
39 require.
40 § 10. The judiciary law is amended by adding a new section 2-c to read
41 as follows:
42 § 2-c. Individual assignments. The unified court system, in accordance
43 with their individual assignment system, shall ensure that all causes of
44 action to foreclose on real property shall be assigned to the same judge
45 or judges, to the extent practicable.
46 § 11. Notwithstanding the ninety day provision in subdivision 1 of
47 rule 3408 of the civil practice law and rules, a judge shall schedule
48 settlement conferences pursuant to such section for any foreclosure
49 proceeding currently on their calendar.
50 § 12. This act shall take effect on the sixtieth day after it shall
51 have become a law and shall expire 3 years after such effective date
52 when upon such date the provisions of this act shall be deemed repealed.
53 Effective immediately, the superintendent of banks may promulgate any
54 rule or regulation necessary for the timely implementation of this act
55 on its effective date.
