§ 265-B — Distressed property consulting contracts

§ 265-b. Distressed property consulting contracts. 1. Definitions. The\nfollowing definitions shall apply to this section:\n (a) "Homeowner" means a natural person who is the mortgagor with\nrespect to a distressed home loan or who is in danger of losing a home\nfor nonpayment of taxes.\n (b) "Consulting contract" or "contract" means an agreement between a\nhomeowner and a distressed property consultant under which the\nconsultant agrees to provide consulting services.\n (c) "Consulting services" means services provided by a distressed\nproperty consultant to a homeowner that the consultant represents will\nhelp to achieve any of the following:\n (i) stop, enjoin, delay, void, set aside, annul, stay or postpone a\nforeclosure filing, a foreclosure sale or the loss of a home for\nnonpayment of taxes;\n (ii) obtain forbearance from any servicer, beneficiary or mortgagee or\nrelief with respect to the potential loss of the home for nonpayment of\ntaxes;\n (iii) assist the homeowner to exercise a right of reinstatement or\nsimilar right provided in the mortgage documents or any law or to\nrefinance a distressed home loan;\n (iv) obtain any extension of the period within which the homeowner may\nreinstate or otherwise restore his or her rights with respect to the\nproperty;\n (v) obtain a waiver of an acceleration clause contained in any\npromissory note or contract secured by a mortgage on a property in\nforeclosure;\n (vi) assist the homeowner to obtain a loan or advance of funds;\n (vii) assist the homeowner in answering or responding to a summons and\ncomplaint, or otherwise providing information regarding the foreclosure\ncomplaint and process;\n (viii) avoid or ameliorate the impairment of the homeowner's credit\nresulting from the commencement of a foreclosure proceeding or tax sale;\nor\n (ix) save the homeowner's property from foreclosure or loss for\nnon-payment of taxes.\n (d) "Distressed home loan" means a home loan for which an installment\npayment is more than sixty days past due, or a home loan where the\nlender has commenced a foreclosure action. For purposes of this\nparagraph, a "home loan" is a loan in which the debt is incurred by the\nhomeowner primarily for personal, family or household purposes, and the\nloan is secured by a mortgage or deed of trust on property upon which\nthere is located or there is to be located a structure or structures\nintended principally for occupancy of from one to four families which is\nor will be occupied by the homeowner as the homeowner's principal\ndwelling.\n (e) "Distressed property consultant" or "consultant" means an\nindividual or a corporation, partnership, limited liability company or\nother business entity that, directly or indirectly, solicits or\nundertakes employment to provide consulting services to a homeowner for\ncompensation or promise of compensation with respect to a distressed\nhome loan or a potential loss of the home for nonpayment of taxes. A\ndistressed property consultant does not include the following:\n (i) an attorney admitted to practice in the state of New York when the\nattorney is directly providing legal representation to a homeowner\npursuant to a retainer agreement, and has entered an appearance on\nbehalf of a homeowner, in the course of his or her regular legal\npractice. This exception shall not apply to non-attorney individuals\nengaged in activities covered by subdivision two of this section who are\nemployed by, associated with, or consultants for law firms when such law\nfirms are not providing legal representation to a homeowner in a\nforeclosure action pursuant to a retainer agreement;\n (ii) a person or entity who holds or is owed an obligation secured by\na lien on any property in foreclosure while the person or entity\nperforms services in connection with the obligation or lien;\n (iii) a bank, trust company, private banker, bank holding company,\nsavings bank, savings and loan association, thrift holding company,\ncredit union or insurance company organized under the laws of this\nstate, another state or the United States, or a subsidiary or affiliate\nof such entity or a foreign banking corporation licensed by the\nsuperintendent of financial services or the comptroller of the currency;\n (iv) a federal Department of Housing and Urban Development approved\nmortgagee and any subsidiary or affiliate of such mortgagee, and any\nagent or employee of these persons while engaged in the business of such\nmortgagee;\n (v) a judgment creditor of the homeowner, if the judgment creditor's\nclaim accrued before the written notice of foreclosure sale is sent;\n (vi) a title insurer authorized to do business in this state, while\nperforming title insurance and settlement services;\n (vii) a person licensed as a mortgage banker or registered as a\nmortgage broker or registered as a mortgage loan servicer as defined in\narticle twelve-D of the banking law, provided that no such person shall\ntake any upfront fee in conjunction with activities constituting the\nbusiness of a distressed property consultant;\n (viii) a bona fide not-for-profit organization that offers counseling\nor advice to homeowners in foreclosure or loan default; or\n (ix) a person licensed or registered in the state to engage in the\npractice of other professions that the superintendent of financial\nservices has determined should not be subject to this section.\n (f) "Property" shall mean real property located in this state improved\nby a one-to-four family dwelling used or occupied, or intended to be\nused or occupied, wholly or partly, as the home or residence of one or\nmore persons, but shall not refer to unimproved real property upon which\nsuch dwellings are to be constructed.\n (g) "Business day" shall mean any calendar day except Sunday or the\npublic holidays as set forth in section twenty-four of the general\nconstruction law.\n 2. Prohibitions. A distressed property consultant is prohibited from\ndoing the following:\n (a) performing consulting services without a written, fully executed\nconsulting contract with a homeowner;\n (b) charging for or accepting any payment for consulting services\nbefore the full completion of all such services, including a payment to\nbe placed in escrow pending the completion of such services;\n (c) taking a power of attorney from a homeowner;\n (d) retaining any original loan document or other original document\nrelated to the distressed home loan, the property or the potential loss\nof the home for nonpayment of taxes;\n (e) inducing or attempting to induce a homeowner to enter a consulting\ncontract that does not fully comply with the provisions of this article;\n (f) inducing the transfer of a deed to any person or entity, including\nto the distressed property consultant;\n (g) accepting or taking ownership of a deed from a homeowner for any\nperiod of time whatsoever;\n (h) simulating in any manner a law enforcement officer, or a\nrepresentative of any governmental agency;\n (i) disclosing or threatening to disclose information affecting the\nhomeowner's reputation for credit worthiness with knowledge or reason to\nknow that the information is false;\n (j) communicating with the homeowner or any member of his family or\nhousehold with such frequency or at such unusual hours or in such a\nmanner as can reasonably be expected to abuse or harass the homeowner;\n (k) claiming, attempting, or threatening to enforce a right with\nknowledge or reason to know that the right does not exist;\n (l) using a communication which simulates in any manner legal or\njudicial process or which gives the appearance of being authorized,\nissued or approved by a government, governmental agency, or attorney at\nlaw when it is not; or\n (m) encumbering the property with a lien without any contractual or\nlegal basis.\n If any provision of this subdivision or the application thereof to any\nperson or circumstances is held invalid, the invalidity thereof shall\nnot affect other provisions or applications of this subdivision which\ncan be given effect without the invalid provision or application, and to\nthis end the provisions of this subdivision are severable.\n 3. Distressed property consulting contracts. (a) A distressed\nproperty consulting contract shall:\n (i) contain the entire agreement of the parties;\n (ii) be provided in writing to the homeowner for review before\nsigning;\n (iii) be printed in at least twelve point type and written in the same\nlanguage that is used by the homeowner and was used in discussions\nbetween the consultant and the homeowner to describe the consultant's\nservices or to negotiate the contract;\n (iv) fully disclose the exact nature of the distressed property\nconsulting services to be provided by the distressed property consultant\nor anyone working in association with the distressed property\nconsultant;\n (v) fully disclose the total amount and terms of compensation for such\nconsulting services;\n (vi) contain the name, business address and telephone number of the\nconsultant and the street address (if different) and facsimile number or\nemail address of the distressed property consultant where communications\nfrom the homeowner may be delivered;\n (vii) be dated and personally signed by the homeowner and the\ndistressed property consultant and be witnessed and acknowledged by a\nNew York notary public; and\n (viii) contain the following notice, which shall be printed in at\nleast fourteen point boldface type, completed with the name of the\ndistressed property consultant, and located in immediate proximity to\nthe space reserved for the homeowner's signature:\n"NOTICE REQUIRED BY NEW YORK LAW\n You may cancel this contract, without any penalty or obligation, at\nany time before midnight of (fifth business day after\nexecution).\n (Name of Distressed Property Consultant) (the "Consultant") or\nanyone working for the Consultant may not take any money from you or ask\nyou for money until the Consultant has completely finished doing\neverything this Contract says the Consultant will do.\nYou should consider consulting an attorney or a government-approved\nhousing counselor before signing any legal document concerning your\nhome. It is advisable that you find your own attorney, and not consult\nwith an attorney recommended or provided to you by the Consultant. A\nlist of housing counselors may be found on the website of the New York\nState Department of Financial Services, (enter web address) or by\ncalling the Department of Financial Services toll-free at (enter\nnumber). The law requires that this contract contain the entire\nagreement between you and the Consultant. You should not rely upon any\nother written or oral agreement or promise."\nThe distressed property consultant shall accurately enter the date on\nwhich the right to cancel ends.\n (b)(i) The homeowner has the right to cancel, without any penalty or\nobligation, any contract with a distressed property consultant until\nmidnight of the fifth business day following the day on which the\ndistressed property consultant and the homeowner sign a consulting\ncontract. Cancellation occurs when the homeowner, or a representative of\nthe homeowner, either delivers written notice of cancellation in person\nto the address specified in the consulting contract or sends a written\ncommunication by facsimile, by United States mail or by an established\ncommercial letter delivery service. A dated proof of facsimile delivery\nor proof of mailing creates a presumption that the notice of\ncancellation has been delivered on the date the facsimile is sent or the\nnotice is deposited in the mail or with the delivery service.\nCancellation of the contract shall release the homeowner of all\nobligations to pay fees or any other compensation to the distressed\nproperty consultant.\n (ii) The consulting contract shall be accompanied by two copies of a\nform, captioned "notice of cancellation" in at least twelve-point bold\ntype. This form shall be attached to the contract, shall be easily\ndetachable, and shall contain the following statement written in the\nsame language as used in the contract, and the contractor shall insert\naccurate information as to the date on which the right to cancel ends\nand the contractor's contact information:\n"NOTICE OF CANCELLATION\nNote: You may cancel this contract, without any penalty or obligation,\nat any time before midnight of ______. (Enter date)\nTo cancel this contract, sign and date both copies of this cancellation\nnotice and personally deliver one copy or send it by facsimile, United\nStates mail, or an established commercial letter delivery service,\nindicating cancellation to the Distressed Property Consultant at one of\nthe following:\nName of Contractor_________________________\nStreet Address_____________________________\nCity, State, Zip___________________________\nFacsimile:_________________________________\nI hereby cancel this transaction.\nName of Homeowner:_________________________\nSignature of Homeowner:____________________\nDate:______________________________________"\n (iii) Within ten days following receipt of a notice of cancellation\ngiven in accordance with this subdivision, the distressed property\nconsultant shall return any original contract and any other documents\nsigned by or provided by the homeowner. Cancellation shall release the\nhomeowner of all obligations to pay any fees or compensation to the\ndistressed property consultant.\n 3-a. Distressed property consultant advertisements. (a) All\nadvertisements disseminated by a distressed property consultant must\nprominently include the following statement: "In New York State, Housing\nCounselors, who are approved by the U.S. Department of Housing & Urban\nDevelopment or the New York State Department of Financial Services, may\nprovide the same or similar services as a distressed property consultant\nfor free. A list of approved Housing Counselors can be found on the New\nYork State Department of Financial Services website at (enter web\naddress) or by contacting the New York State Department of Financial\nServices toll-free at (enter number). You should consider consulting an\nattorney or a government-approved housing counselor before signing any\nlegal document concerning a distressed property consultant." Such\nstatement, if disseminated by print media or the internet, shall be\nclearly and legibly printed or displayed in not less than twelve-point\nbold type, or, if the advertisement is printed to be displayed in print\nthat is smaller than twelve point, in bold type print that is no smaller\nthan the print in which the text of the advertisement is printed or\ndisplayed.\n (b) For the purposes of this subdivision, the term "advertisement"\nshall include, but is not limited to, all forms of marketing,\nsolicitation, or dissemination of information related, directly or\nindirectly, to securing or obtaining a consulting contract or services.\nFurther, it shall include any and all commonly recognized forms of media\nmarketing via television, radio, print media, all forms of electronic\ncommunication via the internet, and all prepared sales presentations\ngiven in person or over the internet to the general public.\n (c) The advertising provisions of this subdivision shall apply to all\ndistressed property consultants who disseminate advertisements in the\nstate of New York or who intend to directly or indirectly contact a\nhomeowner who has property located in New York state. Distressed\nproperty consultants shall establish and at all times maintain control\nover the content, form and method of dissemination of all advertisements\nof its services. Further, all advertisements shall be sufficiently\ncomplete and clear to avoid the possibility of deception or the ability\nto mislead or deceive.\n 4. Penalties and other provisions. (a) If a court finds that a\ndistressed property consultant has violated any provision of this\nsection, the court may make null and void any agreement between the\ndistressed homeowner and the distressed property consultant.\n (b) If the distressed property consultant violates any provision of\nthis section and the homeowner suffers damage because of the violation,\nthe homeowner may recover actual and consequential damages and costs\nfrom the distressed property consultant in an action based on this\nsection. If the distressed property consultant intentionally or\nrecklessly violates any provision of this section, the court may award\nthe homeowner treble damages, attorneys' fees and costs.\n (c) Any provision of a consulting contract that attempts or purports\nto limit the liability of the distressed property consultant under this\nsection shall be null and void. Inclusion of such provision shall at the\noption of the homeowner render the consulting contract void. Any\nprovision in a contract which attempts or purports to require\narbitration of any dispute arising under this section shall be void at\nthe option of the homeowner. Any waiver of the provisions of this\nsection shall be void and unenforceable as contrary to public policy.\n (d) In addition to the other remedies provided, whenever there shall\nbe a violation of this section, application may be made by the attorney\ngeneral in the name of the people of the state of New York to a court or\njustice having jurisdiction by a special proceeding to issue an\ninjunction, and upon notice to the defendant of not less than five days,\nto enjoin and restrain the continuance of such violations; and if it\nshall appear to the satisfaction of the court or justice that the\ndefendant has, in fact, violated this section, an injunction may be\nissued by such court or justice, enjoining and restraining any further\nviolation, without requiring proof that any person has, in fact, been\ninjured or damaged thereby. In any such proceeding, the court may make\nallowances to the attorney general as provided in paragraph six of\nsubdivision (a) of section eighty-three hundred three of the civil\npractice law and rules, and direct restitution. Whenever the court shall\ndetermine that a violation of this section has occurred, the court may\nimpose a civil penalty of not more than ten thousand dollars for each\nviolation. In connection with any such proposed application, the\nattorney general is authorized to take proof and make a determination of\nthe relevant facts and to issue subpoenas in accordance with the civil\npractice law and rules.\n (e) The provisions of this section are not exclusive and are in\naddition to any other requirements, rights, remedies, and penalties\nprovided by law.\n 5. The department of financial services shall prescribe the telephone\nnumber and web address to be included in the notice.\n