A 88: Prohibits pre-payment penalties for mortgages secured by real property owned in a cooperative form of ownership where over fifty percent of the units are shareholder occupied.
The proposed law aims to modify the general obligations law to provide more flexibility for homeowners in cooperative forms of ownership. It allows homeowners to prepay their mortgages without incurring penalties, provided the prepayment is made at least one year after the loan or forbearance is made. However, if the prepayment is made earlier, the provision must be explicitly stated in the loan contract. The law also prohibits prepayment penalties for loans secured by real property owned in a cooperative form of ownership where over fifty percent of the units are shareholder occupied. The right to prepayment must be stated in the instrument evidencing the loan or forbearance, but the law does not apply if it is inconsistent with federal law or regulation.
| Jan. 07, 2026 | referred to judiciary |
| Jan. 08, 2025 | referred to judiciary |
STATE OF NEW YORK ________________________________________________________________________ 88 2025-2026 Regular Sessions IN ASSEMBLY (Prefiled) January 8, 2025 ___________ Introduced by M. of A. DINOWITZ, R. CARROLL -- read once and referred to the Committee on Judiciary AN ACT to amend the general obligations law, in relation to pre-payment penalties for mortgages secured by real property owned in a cooper- ative form of ownership The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Paragraph b of subdivision 3 of section 5-501 of the gener- 2 al obligations law, as amended by chapter 472 of the laws of 2008, is 3 amended to read as follows: 4 b. notwithstanding any other provision of law, the unpaid balance of 5 the loan or forbearance may be prepaid, in whole or in part, at any 6 time. If prepayment is made on or after one year from the date the loan 7 or forbearance is made, no penalty may be imposed. If prepayment is made 8 prior to such time, no penalty may be imposed unless provision therefor 9 is expressly made in the loan contract, provided that no penalty may be 10 imposed if prohibited by sections six-l and six-m of the banking law. No 11 prepayment penalty or fee shall be charged or collected on a loan or 12 forbearance secured by real property owned in a cooperative form of 13 ownership where over fifty percent of the units are shareholder occu- 14 pied. Such prepayment penalty shall be unenforceable. In all cases, the 15 right of prepayment shall be stated in the instrument evidencing the 16 loan or forbearance, provided, however, that the provisions of this 17 subdivision shall not apply to the extent such provisions are inconsist- 18 ent with any federal law or regulation. 19 § 2. This act shall take effect immediately. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD00908-01-5