The New York State Legislature on November 16th passed Governor’s Program Bill No. 46, which provides critical protections for New York State homeowners, tenants and neighborhoods in the wake of the ongoing foreclosure crisis. The legislation will help homeowners facing foreclosure by, among other things, expanding the 90-day notice requirement and settlement conference process previously mandated for sub prime loans to all home loans; tightening the requirement that servicers negotiate in good faith at settlement conferences; and closing (at least partly) broker and attorney loopholes in the law governing "distressed property consultants," or loan modification scammers.

The legislation will also provide tenant protections, ensuring that tenants of foreclosed properties are informed that they have the right to stay in their homes for the remainder of their leases, and giving them a minimum of ninety days to move if the new purchaser does not want to keep the existing tenants. The state measure is an improvement on current federal law because it requires tenants to be told about their rights of the foreclosure and it ensures that any court-ordered removal of a tenant takes these rights into account.  Moreover, these protections will remain in effect past the sunset date on the federal law.

Additionally, the new legislation will require the foreclosing lender to maintain conditions in foreclosed properties to minimum safety standards once the judgment of foreclosure has been entered (which can be months prior to the actual sale).

An excerpt from the Governor's Office press release is below: 

Governor David A. Paterson and Legislative Leaders today announced passage of the Governor’s Program Bill No. 46, which provides additional critical protections for New York State homeowners, tenants and neighborhoods in the wake of the ongoing foreclosure crisis. The legislation builds upon Governor Paterson’s landmark subprime lending reform law enacted last year, by assisting homeowners currently at risk of foreclosure and minimizing the negative impacts that foreclosures have on communities.

“The laws we have passed in New York have stood as a national model for foreclosure mitigation. This is about keeping New Yorkers in their homes and protecting them during this economic crisis,” Governor Paterson said. “This legislation protects New York neighborhoods from the decay caused by foreclosure, by reducing the erosion of area property values and by preventing vacant homes from becoming sites of criminal activity. While the critical work of closing New York’s budget deficit still needs to be completed, I commend the legislature for passing this important piece of legislation.”

The Governor’s program bill expands the protections of reforms achieved in last year’s law. The bill would:

• Require the 90-day pre-foreclosure notice currently sent for subprime loans to be expanded to include all home loans. This measure allows additional time for many more homeowners to work with their lender to find an affordable solution to prevent unnecessary foreclosures.
• Require those lenders who serve a 90-day notice on a homeowner to within three days of that service make a regulatory filing with the Banking Department with specified information. This regulatory filing will allow the Banking Department and the Division of Housing and Community Renewal (DHCR) to provide targeted assistance to distressed homeowners during the critical pre-foreclosure timeframe and closely monitor foreclosure statistics.
• Expand the scope of the early mandatory settlement conference to include borrowers of all home loans and not just borrowers with subprime loans.
• Establish protections for tenants in foreclosed properties by requiring that they receive written notification of the change in ownership of the property and be permitted to remain in their home for the remainder of their lease term or 90 days, whichever is longer.
• Require plaintiffs in a foreclosure action who obtain a judgment of foreclosure and sale to maintain the foreclosed property.
• Prevent brokers who perform distressed property consulting services from accepting upfront fees.