Provides that any person who has been injured by reason of any violation of any such rules, regulations or policies as the superintendent may promulgate may bring an action in his or her own name; assert a counterclaim; or, if an action is commenced by the mortgagee or anyone acting on its behalf, bring a third party claim, against either the mortgagee and/or the mortgage servicer to enjoin any violations thereof; authorizes damages; makes related provisions.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A2131A
SPONSOR: Dinowitz (MS) TITLE OF BILL:
An act to amend the banking law, in relation to mortgage loan servicers
SUMMARY OF SPECIFIC PROVISIONS:
Section one of the bill adds subdivisions 3 and 4 to § 595-b of the
banking law. Subdivision 3 outlines a private right of action for those
who are personally injured by mortgage loan servicers or mortgagees.
Injured parties may receive statutory damages, treble damages, and in
cases where injunctive relief is issued, attorneys' fees. Mortgage
servicers and mortgagees shall be jointly and severally liable.
Subdivision 4 makes compliance with this section a condition precedent
to commencing an action to foreclose upon a mortgage subject to this
article and makes non-compliance a defense in a foreclosure proceeding.
Section two of the bill sets forth the effective date.
JUSTIFICATION:
New York has been in a leader in establishing mortgage servicing regu-
lations, codified in NYRR Part 419, promulgated pursuant to Article 12-D
of the Banking law. They include strict regulations around the loss
mitigation process and a duty of good faith and fair dealing. However,
in contrast to equivalent provisions under federal law (RESPA), these
provisions do not support a private right of action. Even before the
current financial and public health crisis brought on by COVID-19,
struggling homeowners would have been helped immeasurably by a private
right of action, rather than relying on the Department of Financial
Services to enforce these provisions against the mortgage originators
and servicers it regulates. Now with moratoriums ending and forbearance
agreements terminating, the current crisis has brought with it a renewed
attention to the need for loss mitigation for struggling homeowners. The
private right of action under the servicing rules will assume even
greater importance as a tool for COVID-19-impacted homeowners, among
others, engaging in loss mitigation with mortgage servicers. The current
expansive loss mitigation provisions will be increasingly important but
will be the source of frustration if they exist only on paper with no
redress for consumers harmed by their violation.
LEGISLATIVE HISTORY:
2021-22: A.2428-A - Banks / S.2143-A - Passed Senate
2019-20: A.10851 - Banks / S.8789 - Rules
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
EFFECTIVE DATE:
Thirty days after becoming law.
STATE OF NEW YORK
________________________________________________________________________
2131--A
2023-2024 Regular Sessions
IN ASSEMBLY
January 23, 2023
___________
Introduced by M. of A. DINOWITZ, SEAWRIGHT, SIMON, DICKENS, GLICK,
TAPIA, FORREST -- Multi-Sponsored by -- M. of A. McDONOUGH -- read
once and referred to the Committee on Banks -- committee discharged,
bill amended, ordered reprinted as amended and recommitted to said
committee
AN ACT to amend the banking law, in relation to mortgage loan servicers
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 595-b of the banking law is amended by adding two
2 new subdivisions 3 and 4 to read as follows:
3 3. Actions and damages. (a) Any person who has been injured by reason
4 of any violation of any such rules, regulations or policies as the
5 superintendent may promulgate to effectuate the purposes of this arti-
6 cle, including but not limited to 3 NYCRR 419 or any subsequently
7 promulgated mortgage servicing rules pursuant to this subdivision, may:
8 (i) Bring an action in his or her own name;
9 (ii) Assert a counterclaim; or
10 (iii) If an action is commenced by the mortgagee or anyone acting on
11 its behalf, bring a third party claim, against either the mortgagee
12 and/or the mortgage servicer to enjoin any violations thereof.
13 (b) The person injured pursuant to this section:
14 (i) May recover statutory damages of one thousand dollars per
15 violation;
16 (ii) May recover treble actual damages; and
17 (iii) If awarded damages or injunctive relief, shall also be entitled
18 to recover costs and expenses, including but not limited to reasonable
19 attorneys' fees.
20 (c) The mortgagee and the mortgage servicer shall be jointly and
21 severally liable for any recoveries by an injured mortgagor in any
22 action brought pursuant to this subdivision.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD00882-04-3
A. 2131--A 2
1 4. Compliance with rules, regulations or policies. Material compliance
2 with any such rules, regulations or policies as the superintendent may
3 promulgate to effectuate the purposes of this article, including but not
4 limited to 3 NYCRR 419 or any subsequently promulgated mortgage servic-
5 ing rules pursuant to this subdivision, shall be a condition precedent
6 to commencing an action to foreclose upon a mortgage subject to this
7 article or an action on the note, and the failure to materially comply
8 with such rules, regulations or policies shall be a defense to a fore-
9 closure action or action on the note, even if servicing has been trans-
10 ferred to a different mortgage servicer when a foreclosure action or
11 action on the note is commenced.
12 § 2. This act shall take effect on the thirtieth day after it shall
13 have become a law.
