BILL NUMBER: S70
SPONSOR: KAVANAGH
 
TITLE OF BILL:
An act to amend the banking law, in relation to mortgage loan servicers
 
PURPOSE OR GENERAL IDEA OF BILL:
This bill will add new subdivisions to section 595-b of the banking law
in order to provide a private right of action to homeowners who are
injured by a mortgage servicer or mortgagee's failure to comply with
foreclosure rules and regulations. This bill will make the failure to
comply a defense in a foreclosure proceeding, and compliance a condition
before which a foreclosure action may be commenced.
 
SUMMARY OF PROVISIONS:
Section 1 amends section 595-b of the banking law to add new subdivi-
sions 3 and 4.
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 2 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.
 
PRIOR LEGISLATIVE HISTORY:
2024: S564A (Kavanagh) - PASSED SENATE /A2131A (Dinowitz) - banks
2023: S564A (Kavanagh) - PASSED SENATE /A2131A (Dinowitz) - banks
2022: S2143A (Kavanagh) - PASSED SENATE /A2428A (Dinowitz) - banks
2020: S8789 (Kavanagh) - RULES /A10851 (Dinowitz) - banks
 
FISCAL IMPLICATIONS:
None.
 
EFFECTIVE DATE:
This act shall take effect immediately.

Statutes affected:
S70: 595-b banking law