BILL NUMBER: S9514A
SPONSOR: KAVANAGH
 
TITLE OF BILL:
An act to amend the banking law, in relation to prohibiting certain
financial institutions from charging fees based on the frequency of
mortgage payments or changing such payment schedule
 
PURPOSE OR GENERAL IDEA OF BILL:
This bill would prohibit financial institutions from charging fees to
borrowers who change the frequency of their mortgage payments, and would
require lenders to provide borrowers with clear information about
payment options and potential interest savings.
 
SUMMARY OF PROVISIONS:
Section one of the bill would add new section 9aa to the Banking law,
prohibiting "mortgage payment servicers," a defined term encompassing
mortgage loan servicers and other entities that service, administer, or
process mortgage payments, from charging fees based on the frequency of
mortgage payments or for changing the payment schedule. Federally char-
tered or licensed entities are excluded from coverage. It requires
services to permit mortgagors to elect and switch among monthly, semi-
monthly, and biweekly payment schedules while allowing services to make
reasonable adjustments to implement schedule changes. It requires servi-
cers to provide an amortization schedule and estimate of potential
interest savings for each available payment frequency, along with
instructions for changing schedules. The Superintendent of the Depart-
ment of Financial Services would be required to prescribe a standardized
written notice informing mortgagors of their right as outlined under
this section.
Section two of the bill sets its effective date.
 
JUSTIFICATION:
Homeowners may seek to change the frequency of their mortgage payments
to better align with their pay schedules or to reduce the total interest
paid over the life of the loan. Despite the potential benefits to
borrowers, some financial institutions impose fees or additional
requirements that effectively penalize consumers for choosing these
options.
These fees can increase housing costs for families already facing
affordability challenges. Requiring additional payments or charging
administrative fees for payment frequency changes creates unnecessary
financial barriers and undermines consumer financial stability. This
bill would ensure that homeowners can choose the payment schedule that
works best for their financial circumstances without incurring punitive
or arbitrary charges. By also requiring lenders to provide clear amorti-
zation and interest savings information, this would empower consumers to
make informed decisions about their mortgages and promote transparency
in mortgage servicing practices.
 
PRIOR LEGISLATIVE HISTORY:
None.
 
FISCAL IMPLICATIONS:
None to the state.
 
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law.