NY A08610

Mortgage bankers, exempt organizations, and mortgage brokers are prohibited from paying referral fees or compensation to home improvement contractors unless the contractor is an employee or agent, the relationship is reported to the Department of Banking, and the relationship is separately disclosed in writing to consumers.

The Banking Superintendent may impose conditions on mortgage lenders with a pattern of complaints involving home improvement contractors, including requiring verification of contractor licensing, disclosure of consumer rights, inspection of work performed, and termination of problematic relationships.

Home improvement contractors must provide a bold-faced written notice to consumers when referring them for mortgage financing that states: "IF YOU OBTAIN OR USE ANY TYPE OF MORTGAGE LOAN TO FINANCE THIS PROJECT, YOU COULD LOSE YOUR HOME AND ANY MONEY YOU HAVE PUT INTO IT IF YOU DO NOT MEET YOUR OBLIGATIONS UNDER THE LOAN."

"Home improvement" is broadly defined to include repairs, remodeling, and improvements to residential property and adjacent structures, excluding new home construction, appliance sales, and warranty work.

The act takes effect 120 days after enactment, with regulations authorized to be promulgated prior to the effective date; the contractor notice requirement takes effect 180 days after enactment.