N.Y. Banking Law 595-C – Regulation of dealings of mortgage brokers and home improvement contractors
§ 595-c. Regulation of dealings of mortgage brokers and home improvement contractors. 1. No home improvement contractor nor any agents or salespersons thereof shall represent, act as an agent for, or advertise, promote or arrange for the services of a mortgage broker or its affiliate while soliciting home improvement contracts nor receive anything of value from a mortgage broker or its affiliate for the referral of a borrower to a mortgage broker. The staff of a home improvement contractor shall not act on behalf of a mortgage broker in any transaction.
Terms Used In N.Y. Banking Law 595-C
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Escrow: Money given to a third party to be held for payment until certain conditions are met.
- Guarantor: A party who agrees to be responsible for the payment of another party's debts should that party default. Source: OCC
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Mortgage loan: A loan made by a lender to a borrower for the financing of real property. Source: OCC
- Mortgage loan: shall mean a loan to a natural person made primarily for personal, family or household use, secured by either a mortgage or deed of trust on residential real property, any certificate of stock or other evidence of ownership in, and proprietary lease from, a corporation or partnership formed for the purpose of cooperative ownership of residential real property or, if determined by the superintendent by regulation, shall include such a loan secured by a security interest on a manufactured home;
(b) "Residential real 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;
(c) "Making a mortgage loan" shall mean for compensation or gain, either directly or indirectly, advancing funds, offering to advance funds, or making a commitment to advance funds to an applicant for a mortgage loan or a mortgagor as a mortgage loan;
(d) "Soliciting, processing, placing or negotiating a mortgage loan" shall mean for compensation or gain, either directly or indirectly, accepting or offering to accept an application for a mortgage loan, assisting or offering to assist in the processing of an application for a mortgage loan, soliciting or offering to solicit a mortgage loan on behalf of a third party or negotiating or offering to negotiate the terms or conditions of a mortgage loan with a lender on behalf of a third party;
(e) "Exempt organization" shall mean any insurance company, banking organization, foreign banking corporation licensed by the superintendent or the comptroller of the currency to transact business in this state, national bank, federal savings bank, federal savings and loan association, federal credit union, or any bank, trust company, savings bank, savings and loan association, or credit union organized under the laws of any other state, or any instrumentality created by the United States or any state with the power to make mortgage loans. See N.Y. Banking Law 590
2. Where a mortgage broker has solicited, processed, placed or negotiated a mortgage loan, a home improvement contractor shall not be paid directly but instead may receive payment from the proceeds of a home improvement loan payable solely to the borrower or, at the election of the borrower, through an independent third party escrow agent in accordance with the terms established in a written agreement signed by the borrower, the lender and the contractor prior to disbursement. A mortgage broker shall not offer a homeowner different loan terms contingent on the homeowner executing an agreement for payment through an independent third party as described in the preceding sentence. Any such agreement shall contain a clear and conspicuous disclosure: YOU ARE NOT REQUIRED TO EXECUTE THIS AGREEMENT. YOU MAY INSTEAD RECEIVE PAYMENT DIRECTLY. (NAME OF MORTGAGE BROKER) MAY NOT OFFER YOU DIFFERENT TERMS ON YOUR LOAN TO SIGN THIS AGREEMENT. The provisions of this subdivision shall not apply to a home improvement loan insured by the federal housing administration under section 203(k) of the National Housing Act, 12 U.S.C. § 1709(k), or to amounts added to a federal housing administration insured mortgage under the energy efficiency mortgage program originally established under section 106 of the Energy Policy Act of 1992, as from time to time amended.
3. A mortgage broker shall not permit a home improvement contractor to be a cosigner or to act as a guarantor for a mortgage loan for home improvement.
4. For the purpose of this section, "home improvement contractor", means, with respect to any home improvement, a person, firm or corporation which owns or operates a home improvement business or who undertakes, offers to undertake or agrees to perform any home improvement for a fee and for whom the total price for all labor, materials and other items is equal to or greater than two hundred dollars. Home improvement contractor does not include a person, firm, corporation, landlord, cooperative corporation, condominium board of managers, joint tenant or co-tenant that owns, in whole or in part, the property to be improved.
5. This section shall not annul, alter, affect or exempt any person subject to the provisions of this section from complying with the laws, ordinances, rules or regulations of any locality or other governmental body, relating to home improvement contracts, except to the extent that such laws, ordinances, rules or regulations are inconsistent with any provision of this section, but no such law, ordinance, rule or regulation shall be considered inconsistent, if it affords greater protection to the homeowner from persons subject to this section.