N.Y. Real Property Law § 265-b: Distressed property consulting contracts

§ 265-b. Distressed property consulting contracts. 1. Definitions. The

following definitions shall apply to this section:

(a) "Homeowner" means a natural person who is the mortgagor with

respect to a distressed home loan or who is in danger of losing a home

for nonpayment of taxes.

(b) "Consulting contract" or "contract" means an agreement between a

homeowner and a distressed property consultant under which the

consultant agrees to provide consulting services.

(c) "Consulting services" means services provided by a distressed

property consultant to a homeowner that the consultant represents will

help to achieve any of the following:

(i) stop, enjoin, delay, void, set aside, annul, stay or postpone a

foreclosure filing, a foreclosure sale or the loss of a home for

nonpayment of taxes;

(ii) obtain forbearance from any servicer, beneficiary or mortgagee or

relief with respect to the potential loss of the home for nonpayment of

taxes;

(iii) assist the homeowner to exercise a right of reinstatement or

similar right provided in the mortgage documents or any law or to

refinance a distressed home loan;

(iv) obtain any extension of the period within which the homeowner may

reinstate or otherwise restore his or her rights with respect to the

property;

(v) obtain a waiver of an acceleration clause contained in any

promissory note or contract secured by a mortgage on a property in

foreclosure;

(vi) assist the homeowner to obtain a loan or advance of funds;

(vii) assist the homeowner in answering or responding to a summons and

complaint, or otherwise providing information regarding the foreclosure

complaint and process;

(viii) avoid or ameliorate the impairment of the homeowner's credit

resulting from the commencement of a foreclosure proceeding or tax sale;

or

(ix) save the homeowner's property from foreclosure or loss for

non-payment of taxes.

(d) "Distressed home loan" means a home loan for which an installment

payment is more than sixty days past due, or a home loan where the

lender has commenced a foreclosure action. For purposes of this

paragraph, a "home loan" is a loan in which the debt is incurred by the

homeowner primarily for personal, family or household purposes, and the

loan is secured by a mortgage or deed of trust on property upon which

there is located or there is to be located a structure or structures

intended principally for occupancy of from one to four families which is

or will be occupied by the homeowner as the homeowner's principal

dwelling.

(e) "Distressed property consultant" or "consultant" means an

individual or a corporation, partnership, limited liability company or

other business entity that, directly or indirectly, solicits or

undertakes employment to provide consulting services to a homeowner for

compensation or promise of compensation with respect to a distressed

home loan or a potential loss of the home for nonpayment of taxes. A

distressed property consultant does not include the following:

(i) an attorney admitted to practice in the state of New York when the

attorney is directly providing legal representation to a homeowner

pursuant to a retainer agreement, and has entered an appearance on

behalf of a homeowner, in the course of his or her regular legal

practice. This exception shall not apply to non-attorney individuals

engaged in activities covered by subdivision two of this section who are

employed by, associated with, or consultants for law firms when such law

firms are not providing legal representation to a homeowner in a

foreclosure action pursuant to a retainer agreement;

(ii) a person or entity who holds or is owed an obligation secured by

a lien on any property in foreclosure while the person or entity

performs services in connection with the obligation or lien;

(iii) a bank, trust company, private banker, bank holding company,

savings bank, savings and loan association, thrift holding company,

credit union or insurance company organized under the laws of this

state, another state or the United States, or a subsidiary or affiliate

of such entity or a foreign banking corporation licensed by the

superintendent of financial services or the comptroller of the currency;

(iv) a federal Department of Housing and Urban Development approved

mortgagee and any subsidiary or affiliate of such mortgagee, and any

agent or employee of these persons while engaged in the business of such

mortgagee;

(v) a judgment creditor of the homeowner, if the judgment creditor's

claim accrued before the written notice of foreclosure sale is sent;

(vi) a title insurer authorized to do business in this state, while

performing title insurance and settlement services;

(vii) a person licensed as a mortgage banker or registered as a

mortgage broker or registered as a mortgage loan servicer as defined in

article twelve-D of the banking law, provided that no such person shall

take any upfront fee in conjunction with activities constituting the

business of a distressed property consultant;

(viii) a bona fide not-for-profit organization that offers counseling

or advice to homeowners in foreclosure or loan default; or

(ix) a person licensed or registered in the state to engage in the

practice of other professions that the superintendent of financial

services has determined should not be subject to this section.

(f) "Property" shall mean real property located in this state improved

by a one-to-four family dwelling used or occupied, or intended to be

used or occupied, wholly or partly, as the home or residence of one or

more persons, but shall not refer to unimproved real property upon which

such dwellings are to be constructed.

(g) "Business day" shall mean any calendar day except Sunday or the

public holidays as set forth in section twenty-four of the general

construction law.

2. Prohibitions. A distressed property consultant is prohibited from

doing the following:

(a) performing consulting services without a written, fully executed

consulting contract with a homeowner;

(b) charging for or accepting any payment for consulting services

before the full completion of all such services, including a payment to

be placed in escrow pending the completion of such services;

(c) taking a power of attorney from a homeowner;

(d) retaining any original loan document or other original document

related to the distressed home loan, the property or the potential loss

of the home for nonpayment of taxes;

(e) inducing or attempting to induce a homeowner to enter a consulting

contract that does not fully comply with the provisions of this article;

(f) inducing the transfer of a deed to any person or entity, including

to the distressed property consultant;

(g) accepting or taking ownership of a deed from a homeowner for any

period of time whatsoever;

(h) simulating in any manner a law enforcement officer, or a

representative of any governmental agency;

(i) disclosing or threatening to disclose information affecting the

homeowner's reputation for credit worthiness with knowledge or reason to

know that the information is false;

(j) communicating with the homeowner or any member of his family or

household with such frequency or at such unusual hours or in such a

manner as can reasonably be expected to abuse or harass the homeowner;

(k) claiming, attempting, or threatening to enforce a right with

knowledge or reason to know that the right does not exist;

(l) using a communication which simulates in any manner legal or

judicial process or which gives the appearance of being authorized,

issued or approved by a government, governmental agency, or attorney at

law when it is not; or

(m) encumbering the property with a lien without any contractual or

legal basis.

If any provision of this subdivision or the application thereof to any

person or circumstances is held invalid, the invalidity thereof shall

not affect other provisions or applications of this subdivision which

can be given effect without the invalid provision or application, and to

this end the provisions of this subdivision are severable.

3. Distressed property consulting contracts. (a) A distressed

property consulting contract shall:

(i) contain the entire agreement of the parties;

(ii) be provided in writing to the homeowner for review before

signing;

(iii) be printed in at least twelve point type and written in the same

language that is used by the homeowner and was used in discussions

between the consultant and the homeowner to describe the consultant's

services or to negotiate the contract;

(iv) fully disclose the exact nature of the distressed property

consulting services to be provided by the distressed property consultant

or anyone working in association with the distressed property

consultant;

(v) fully disclose the total amount and terms of compensation for such

consulting services;

(vi) contain the name, business address and telephone number of the

consultant and the street address (if different) and facsimile number or

email address of the distressed property consultant where communications

from the homeowner may be delivered;

(vii) be dated and personally signed by the homeowner and the

distressed property consultant and be witnessed and acknowledged by a

New York notary public; and

(viii) contain the following notice, which shall be printed in at

least fourteen point boldface type, completed with the name of the

distressed property consultant, and located in immediate proximity to

the space reserved for the homeowner's signature:

"NOTICE REQUIRED BY NEW YORK LAW

You may cancel this contract, without any penalty or obligation, at

any time before midnight of (fifth business day after

execution).

(Name of Distressed Property Consultant) (the "Consultant") or

anyone working for the Consultant may not take any money from you or ask

you for money until the Consultant has completely finished doing

everything this Contract says the Consultant will do.

You should consider consulting an attorney or a government-approved

housing counselor before signing any legal document concerning your

home. It is advisable that you find your own attorney, and not consult

with an attorney recommended or provided to you by the Consultant. A

list of housing counselors may be found on the website of the New York

State Department of Financial Services, (enter web address) or by

calling the Department of Financial Services toll-free at (enter

number). The law requires that this contract contain the entire

agreement between you and the Consultant. You should not rely upon any

other written or oral agreement or promise."

The distressed property consultant shall accurately enter the date on

which the right to cancel ends.

(b)(i) The homeowner has the right to cancel, without any penalty or

obligation, any contract with a distressed property consultant until

midnight of the fifth business day following the day on which the

distressed property consultant and the homeowner sign a consulting

contract. Cancellation occurs when the homeowner, or a representative of

the homeowner, either delivers written notice of cancellation in person

to the address specified in the consulting contract or sends a written

communication by facsimile, by United States mail or by an established

commercial letter delivery service. A dated proof of facsimile delivery

or proof of mailing creates a presumption that the notice of

cancellation has been delivered on the date the facsimile is sent or the

notice is deposited in the mail or with the delivery service.

Cancellation of the contract shall release the homeowner of all

obligations to pay fees or any other compensation to the distressed

property consultant.

(ii) The consulting contract shall be accompanied by two copies of a

form, captioned "notice of cancellation" in at least twelve-point bold

type. This form shall be attached to the contract, shall be easily

detachable, and shall contain the following statement written in the

same language as used in the contract, and the contractor shall insert

accurate information as to the date on which the right to cancel ends

and the contractor's contact information:

"NOTICE OF CANCELLATION

Note: You may cancel this contract, without any penalty or obligation,

at any time before midnight of ______. (Enter date)

To cancel this contract, sign and date both copies of this cancellation

notice and personally deliver one copy or send it by facsimile, United

States mail, or an established commercial letter delivery service,

indicating cancellation to the Distressed Property Consultant at one of

the following:

Name of Contractor_________________________

Street Address_____________________________

City, State, Zip___________________________

Facsimile:_________________________________

I hereby cancel this transaction.

Name of Homeowner:_________________________

Signature of Homeowner:____________________

Date:______________________________________"

(iii) Within ten days following receipt of a notice of cancellation

given in accordance with this subdivision, the distressed property

consultant shall return any original contract and any other documents

signed by or provided by the homeowner. Cancellation shall release the

homeowner of all obligations to pay any fees or compensation to the

distressed property consultant.

3-a. Distressed property consultant advertisements. (a) All

advertisements disseminated by a distressed property consultant must

prominently include the following statement: "In New York State, Housing

Counselors, who are approved by the U.S. Department of Housing & Urban

Development or the New York State Department of Financial Services, may

provide the same or similar services as a distressed property consultant

for free. A list of approved Housing Counselors can be found on the New

York State Department of Financial Services website at (enter web

address) or by contacting the New York State Department of Financial

Services toll-free at (enter number). You should consider consulting an

attorney or a government-approved housing counselor before signing any

legal document concerning a distressed property consultant." Such

statement, if disseminated by print media or the internet, shall be

clearly and legibly printed or displayed in not less than twelve-point

bold type, or, if the advertisement is printed to be displayed in print

that is smaller than twelve point, in bold type print that is no smaller

than the print in which the text of the advertisement is printed or

displayed.

(b) For the purposes of this subdivision, the term "advertisement"

shall include, but is not limited to, all forms of marketing,

solicitation, or dissemination of information related, directly or

indirectly, to securing or obtaining a consulting contract or services.

Further, it shall include any and all commonly recognized forms of media

marketing via television, radio, print media, all forms of electronic

communication via the internet, and all prepared sales presentations

given in person or over the internet to the general public.

(c) The advertising provisions of this subdivision shall apply to all

distressed property consultants who disseminate advertisements in the

state of New York or who intend to directly or indirectly contact a

homeowner who has property located in New York state. Distressed

property consultants shall establish and at all times maintain control

over the content, form and method of dissemination of all advertisements

of its services. Further, all advertisements shall be sufficiently

complete and clear to avoid the possibility of deception or the ability

to mislead or deceive.

4. Penalties and other provisions. (a) If a court finds that a

distressed property consultant has violated any provision of this

section, the court may make null and void any agreement between the

distressed homeowner and the distressed property consultant.

(b) If the distressed property consultant violates any provision of

this section and the homeowner suffers damage because of the violation,

the homeowner may recover actual and consequential damages and costs

from the distressed property consultant in an action based on this

section. If the distressed property consultant intentionally or

recklessly violates any provision of this section, the court may award

the homeowner treble damages, attorneys' fees and costs.

(c) Any provision of a consulting contract that attempts or purports

to limit the liability of the distressed property consultant under this

section shall be null and void. Inclusion of such provision shall at the

option of the homeowner render the consulting contract void. Any

provision in a contract which attempts or purports to require

arbitration of any dispute arising under this section shall be void at

the option of the homeowner. Any waiver of the provisions of this

section shall be void and unenforceable as contrary to public policy.

(d) In addition to the other remedies provided, whenever there shall

be a violation of this section, application may be made by the attorney

general in the name of the people of the state of New York to a court or

justice having jurisdiction by a special proceeding to issue an

injunction, and upon notice to the defendant of not less than five days,

to enjoin and restrain the continuance of such violations; and if it

shall appear to the satisfaction of the court or justice that the

defendant has, in fact, violated this section, an injunction may be

issued by such court or justice, enjoining and restraining any further

violation, without requiring proof that any person has, in fact, been

injured or damaged thereby. In any such proceeding, the court may make

allowances to the attorney general as provided in paragraph six of

subdivision (a) of section eighty-three hundred three of the civil

practice law and rules, and direct restitution. Whenever the court shall

determine that a violation of this section has occurred, the court may

impose a civil penalty of not more than ten thousand dollars for each

violation. In connection with any such proposed application, the

attorney general is authorized to take proof and make a determination of

the relevant facts and to issue subpoenas in accordance with the civil

practice law and rules.

(e) The provisions of this section are not exclusive and are in

addition to any other requirements, rights, remedies, and penalties

provided by law.

5. The department of financial services shall prescribe the telephone

number and web address to be included in the notice.