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S00886 Summary:

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S00886 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                           886
 
                               2011-2012 Regular Sessions
 
                    IN SENATE
 
                                       (Prefiled)
 
                                     January 5, 2011
                                       ___________
 
        Introduced  by  Sen. KRUEGER -- read twice and ordered printed, and when
          printed to be committed to the Committee on Banks
 
        AN ACT to amend the banking law, in relation to prohibiting compensation
          based on the terms of a home loan by  mortgage  brokers  and  mortgage
          lenders
 

          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
 
     1    Section 1. Section 590-b of the banking law is amended by adding a new
     2  subdivision 3-a to read as follows:
     3    3-a. In connection with the making or brokering of  a  home  loan,  no
     4  person  may  provide,  and  no  mortgage  broker  or mortgage lender may
     5  receive, directly or indirectly, any compensation that is based  on,  or
     6  varies  with,  the  terms  of  any home loan. This subdivision shall not
     7  prohibit compensation based on the principal balance of the loan.
     8    § 2. Paragraph (s) of subdivision 2 of section 6-l of the banking law,
     9  as amended by chapter 507 of the laws of 2009, is  amended  to  read  as
    10  follows:

    11    (s) No [abusive] yield spread premiums. [In arranging a high-cost home
    12  loan,  the  mortgage broker shall, within three days after receipt of an
    13  application, disclose the exact amount and methodology of total  compen-
    14  sation  that  the broker will receive. Such amount may be paid as direct
    15  compensation from the lender, direct compensation from the borrower,  or
    16  a combination of the two if permitted by applicable law.  The provisions
    17  of  this  paragraph  shall  not  restrict  the  ability of a borrower to
    18  utilize a yield spread premium in order to offset any up front costs  by
    19  accepting  a higher interest rate if permitted by applicable law. If the
    20  borrower chooses this option, any  compensation  from  the  lender  that

    21  exceeds  the  amount  of  total  compensation owed to the broker must be
    22  credited to the borrower. The superintendent shall  prescribe  the  form
    23  that  such  disclosure  shall  take. This provision shall not restrict a

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD03866-01-1
        S. 886                              2

     1  broker from accepting a lesser amount of  compensation.]  In  connection
     2  with  the making or brokering of a home loan, no person may provide, and
     3  no mortgage broker or mortgage lender may receive, directly or indirect-

     4  ly,  any compensation that is based on, or varies with, the terms of any
     5  home loan. This paragraph shall not prohibit compensation based  on  the
     6  principal balance of the loan.
     7    § 3. Paragraph (n) of subdivision 2 of section 6-m of the banking law,
     8  as  amended  by  chapter  507 of the laws of 2009, is amended to read as
     9  follows:
    10    (n) No [abusive] yield spread premiums. [In arranging a subprime  home
    11  loan,  the  mortgage broker shall, within three days after receipt of an
    12  application, disclose the exact amount and methodology  for  determining
    13  the  total compensation that the broker will receive. Such amount may be
    14  paid as direct compensation from the lender,  direct  compensation  from

    15  the  borrower,  or  a  combination of the two if permitted by applicable
    16  law. The provisions of this paragraph shall not restrict the ability  of
    17  a  borrower  to  utilize  a  yield spread premium in order to offset any
    18  upfront costs by accepting a higher interest rate if permitted by appli-
    19  cable law. If the borrower chooses this option,  any  compensation  from
    20  the  lender  that exceeds the exact amount of total compensation owed to
    21  the broker must be credited to the borrower.  The  superintendent  shall
    22  prescribe the form that such disclosure shall take. This paragraph shall
    23  not  restrict  a broker from accepting a lesser amount of compensation.]
    24  In connection with the making or brokering of a home loan, no person may

    25  provide, and no mortgage broker or mortgage lender may receive, directly
    26  or indirectly, any compensation that is based on, or  varies  with,  the
    27  terms  of  any home loan. This paragraph shall not prohibit compensation
    28  based on the principal balance of the loan.
    29    § 4. This act shall take effect immediately.