N.Y. Real Property Law Section 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 General Construction Law § 24 (Public holidays)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

Source: Section 265-B — Distressed property consulting contracts, https://www.­nysenate.­gov/legislation/laws/RPP/265-B (updated Dec. 15, 2023; accessed Jul. 13, 2024).

240
Definitions and use of terms
240‑B
Certain conveyances authorized
240‑C
Joint tenancy severance
241
Ancient conveyances abolished
242
Disclosure prior to the sale of real property
243
Grant of fee or freehold
244
When grant takes effect
245
Estate which passes by grant or devise
246
Certain deeds declared grants
247
Conveyance by tenant for life or years of greater estate than possessed
248
Effect of conveyance where property is leased
249
Covenants in mortgages
251
Covenants not implied
252
Lineal and collateral warranties abolished
253
Construction of covenants in grants of freehold interests
254
Construction of clauses and covenants in mortgages and bonds or notes
254‑A
Right of election of mortgagee in certain cases
254‑B
Limitation on late charges
254‑C
Right to a copy of real property appraisals and consumer reports in certain cases
254‑D
Fees by mortgagee for direct payment of real property taxes by mortgagor prohibited
255
Construction of grant of appurtenances and of all the rights and estate of grantor
256
Construction of grant in executor’s or trustee’s deed of appurtenances, and of the estate of testator and grantor
257
Covenants bind representatives of grantor and mortgagor and inure to the benefit of whom
258
Short forms of deeds and mortgages
259‑C
Provision in lease of real property for waiver of trial by jury in actions for personal injury or property damage
260
Lands adversely held may be conveyed or mortgaged
261
Maintenance of telegraph or other electric wires raises no presumption of grant
265
Fraudulent intent, question of fact
265‑A
Home equity theft prevention
265‑B
Distressed property consulting contracts
266
Rights of purchaser or incumbrancer for valuable consideration protected
267
Conveyances with power to revoke, determine or alter
268
Disaffirmance of fraudulent act by executor and others
269
When remainderman may pay interest owed by life tenant
270
Powers of courts of equity not abridged
271
Construction of covenants in mortgages on leases of real property and bonds or notes
272
Construction of grant of appurtenances, and all of the rights and estate of the mortgagor
273
What form of mortgage on lease of real property
274
Transfers and mortgages of interest in decedents’ estates
274‑A
Certificate of principal amount unpaid on mortgages of real property
275
Certificate of discharge of mortgage required
276
Effect of certain easements on the right to invest in mortgages
277
Modification and extension of mortgage investment
277‑A
Powers of fiduciaries and others holding guaranteed mortgages or mortgage investments
278
Exchange of mortgage investment
278‑A
Sale or exchange of certain real property or mortgage investments therein authorized
279
Graduated payment mortgage
280
Reverse mortgage loans for persons sixty years of age or older
280‑A
Reverse mortgage loans for persons seventy years of age or older
280‑B
Federal home equity conversion mortgage regulation
280‑D
Federal home equity conversion mortgage default and foreclosure regulation
281
Credit line mortgage
282
Mortgagor’s right to recover attorneys’ fees in actions or proceedings arising out of foreclosures of residential property

Accessed:
Jul. 13, 2024

Last modified:
Dec. 15, 2023

§ 265-B’s source at nysenate​.gov

Link Style