Relates to prohibiting pre-payment penalties for mortgages secured by real property owned in a cooperative form of ownership

◆ The sponsor's argument

Why Luis R. Sepúlveda says this is needed

The Consumer Financial Protection Bureau has rules restricting the abil- ity to impose prepayment penalties on most new mortgages for individuals and not commercial properties. The CFPB has limited prepayment penalties to fixed-mortgages that are considered to be "qualified mortgages". This rule applies to single family units, including those that are part of co-ops; therefore if an individual owns a single unit in a 200-unit building, the protections would apply. However, these protections exclude the 200-unit building as a whole, due to it being considered a commercial property. Currently in New York State, there are provisions that limit the ability of a lender to impose a prepayment penalty on loans with an interest rate that exceeds six percent per annum and which are secured primarily by a one-to-six family owner-occupied residence or certificates of stock or other evidence of owner in a corporation or other entity formed for the purpose of cooperative ownership of real estate. A lender may not impose a prepayment penalty on such loans on or after one year from the date the loan was made and, in the case of loans that are not fixed rate the interest rate must remain fixed for a period of at least five years for a prepayment penalty to be legally permissible. In all cases, the mortgage note must expressly provide for a prepayment penalty. Prepayment penalties and fees can trap families and leave them in situ- ations with the only option being foreclosure. With similar legislation passed in Colorado, this elimination of prepayment penalties would be a step in the right direction for lowering the increasing number of fore- closures.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.