On February 1, 2007, pursuant to Chap. 308, Laws 2006, New York State enacted Real Property Law § 265-a. Titled as the Home Equity Theft Protection Act ("HETPA"), this chapter also amends the Banking Law §595-a and enacts a new Real Property Actions and Proceedings Law § 1303.
The legislative findings and purpose of HEPTA is contained in policy statement that is part of § 264-, as follows:
1(a) The legislature finds and declares that homeowners who are in default on their mortgages or in foreclosure may be vulnerable to fraud, deception, and unfair dealing by home equity purchases....During the time period between default on the mortgage and the scheduled foreclosure sale date, homeowners in financial distress, especially poor, elderly and financially unsophisticated homeowners, are vulnerable to aggressive "equity purchasers" who induce homeowners to sell their homes for a small fraction of their fair market values, or in some cases even sign away their homes, through the use of schemes which are often involve oral and written representations, deceit, intimidation, and other unreasonable commercial practices.
(d) The intent and purpose of this section...to afford equity sellers a reasonable and meaningful opportunity to rescind sales to equity purchasers; and to preserve and protect home equity for the homeowners of this state.
(Emphasis added)
1. AN OVERVIEW OF §265-a:
To accomplish its purpose, the HEPTA creates a presumption that contracts entered into between
a. an Equity Seller, defined as an individual who owns a residence, and
b. an Equity Purchaser defined as any person or its agent who acquires title to a residence (§ 265-a(2)(e), and
c. where such residence, defined as residential; real property consisting of one to four-family dwelling units, is owner occupied at a time immediately prior to the equity sale as {the owner's} primary residence (see §265-a(2)(k)), which is subject to -
i. A Notice of Pendency filed in an action to foreclose a mortgage, or is shown on an active tax lien sale list ("Foreclosure"), or
ii. the owner is in default of the mortgage payments for two months or more ("Default"), and where the contract agreement or arrangement with the owner, who is subject to foreclosure or default, includes a reconveyance arrangement.
§ 265-a(2)
(i) "Reconveyance arrangement" means:
(i) the transfer of title to residential real property by an equity seller who is in default or transfer of interest from an equity seller to an equity purchaser or by creation of a mortgage or other lien or encumbrance during the time of default or foreclosure that allows the equity purchaser to obtain legal or equitable title to all or part of the property, and
(ii) the subsequent conveyance, or promise of a subsequent conveyance, of an interest back to the equity seller by the equity purchaser that allows the equity seller to regain possession of the property, which interest shall include but not limited to a purchase agreement, option to purchase, or lease.
The transaction meeting the criteria set forth above is considered to be a "Covered Contract" and is subject to the notice, procedure, recision and redemption rights under the HEPTA law, irrespective of whether or not the Equity Seller receives consideration for the sale.
(See §265-a(2)(e)(i)-(vii)).
A purchase is not an Equity Purchaser subject to the provisions of §265-a et seq. Where such purchaser acquires title -
d. to use, and who uses, such property as his or her primary residence;
e. by deed from a referee in a foreclosure sale conducted pursuant to article thirteen of the Real Property Actions and Proceedings Law;
f. at any sale of property authorized by statute;
g. any sale by order or judgment of any court;
h. from a spouse, or from a parent, grandparent, child, grandchild or sibling of such person or such person's spouse;
i. as a not-for-profit housing organization or as a public housing agency; or
j is Bone Fide Purchaser or encumbrancer for value.
Item "j" above refers to a "bone fide purchaser or encumbrancer for value" who is defined as a party:
"acting in good faith who purchases the residential real property from the equity purchaser for valuable consideration or provides the equity purchaser with a mortgage or provides a subsequent bona fide purchaser with a mortgage, provided that he or she had no notice of the equity seller's continuing right to, or equity in, the property prior to the acquisition of title or encumbrance, or of any violation of this section by the equity purchaser as related to the subject property."
Section 265-(4) requires that each Covered Contract contain the following information:
a. Notice that the instrument of conveyance does not become effective until midnight of the fifth business day after the date of the contract.
b. Notice of Equity Seller has a right to rescind the transaction not later than midnight of the fifth business day after the date of the contract.
c. The total consideration to be given by the Equity Purchaser to the Equity Seller in connection with or incident to the sale.
d. A description of the terms of payment including any services of any nature which the Equity Purchaser represents he or she will perform, either before of after the sale.
e. The time at which physical possession of the residence is to be transferred to the Equity Purchaser;
f. The terms of any rental or lease agreement.
g. The Notice of Cancellation as required by § 265-a(6)(a).
2. COVERED CONTRACT FORMS AND FIVE DAY COOLING-OFF PERIOD
a. Section 265-a (3) sets forth specific requirements for the type size and appearance of the contract and notice of cancellation. The documents must a)be in print equivalent to 12-point bold type, b) be written in English or in English and Spanish if Spanish is the primary language of the Equity Seller and c) be fully completed and signed and dated by both Equity Seller and Equity Purchaser. The section further states that any instrument of convenyance shall become effective no sooner than midnight of the fifth business day after the date on which the covered contract is executed.
b. Section 265-a(4) mandates that specific content and of the Contract and Notice of Cancellation that must be part of the contract,
While Section 2654-(3) states that "any instrument of conveyance shall become effective no sooner than midnight of the fifth business day after the date on which the Covered Contract is executed", paragraph (7) expressly prohibits the Equity Purchaser from accepting or inducing a conveyance by the Equity Seller or recording any document.
c. Section 265-a(6) requires that the Equity Purchaser also include with the contract, in duplicate and completed by the Equity Purchaser, the form of Notice of Cancellation in accordance with the requirements in that section.
d. Section 265-a(7) describes prohibited conduct by the Equity Purchaser and makes it unlawful for the Equity Purchaser to complete any Covered Contract that takes unconscionable advantage of the Equity Seller.
3. TWO YEAR RIGHT OF RECISION
A material failure of the Equity Purchaser to comply with §265-a (3),(4),(6),(7) and (11) of the law allows the Equity Seller to rescind the transaction within two years of the date of the recording of the conveyance of the residential real property that was subject to the Covered Contract.
In addition §§ 265-a(9), (10) also exposes the Equity Purchaser or its representatives to liability for civil damages, conviction of a Class E felony and a criminal crime.
A full copy of the Law and a further explanation is available upon request.
Comments(0)