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Memorandum of Support

Empire Justice Memo of Support: Public Assistance Mortgages Annual Accounting Will Provide Transparency

A.7780 (Titus)/S.5498 (Savino)

Social Services Law § 106 permits social services districts to take a deed and/or mortgage against the homes of welfare applicants and recipients as a condition of eligibility for public assistance.  This statute permits the districts to recover the amount of assistance paid to the homeowner when the homeowner dies, sells or transfers the property, or attempts to refinance the primary mortgage.  New York State and local districts recover millions of dollars every year through this practice.  However, there is no requirement that homeowners be provided with an accounting of the amount of public assistance paid, the amount of the accrued debt or credits made against the debt.  As a result, homeowners do not realize the size of the mortgage against their home until they attempt to sell their property or refinance their mortgage, often many years after they were last on public assistance.  This bill would require transparency and accountability in this process.

Only cash public assistance is recoverable as part of the mortgage process.  However, all too often the amount of the mortgage is wrong because the local district has erroneously attempted to recover payments made under the Supplemental Nutrition Assistance Program (SNAP), the Home Energy Assistance Program (HEAP) or the Child Care Block Grant.  In addition, the size of the mortgage is often more than it should be because the local district has failed to credit child support collected that the district has retained to pay itself back for public assistance received, or failed to credit another payment made such as a lottery intercept under Social Services Law §131-n or child support that was collected and retained by the Social Services District. [1]
Only one other state, Connecticut, takes mortgages against the homes of public assistance recipients.  This archaic practice undermines the financial stability of some of the most vulnerable homeowners.  Individuals most often impacted by this policy are divorced spouses( typically women who received the house as the only asset in their divorce) elderly individuals and their families seeking to sell the family home, or former recipients seeking to refinance high interest mortgages or to obtain home equity loans for things such as home maintenance or medical care.  When homeowners apply for assistance they are not advised as to how the debt will be calculated.  During the course of the mortgage, they are never advised how much they owe and are never advised how they might arrange to pay back the debt.  To make matters worse, many homeowners are unaware that when they apply for public assistance, they have the right to refuse to execute a mortgage and still receive public assistance for their children. 

Former recipients, who have gotten their lives back on track, find that if they try to refinance their primary mortgage to get more favorable interest rates, they are often barred from doing so, even if they have decent credit ratings, because of the existence of the welfare lien.  This problem becomes particularly acute for individuals with high interest primary mortgages who are candidates for refinancing relief.

Accountability and Transparency

While Empire Justice Center strongly believes that Social Services Law §106 should be repealed, and supports existing legislation that would do so, [2] there is an urgent need to ensure that applicants to public assistance are aware of their rights and that recipients and former recipients of public assistance are regularly made aware of their accrued debt and credits.  This bill will amend Social Services Law §106, ensuring that public assistance recipients are fully aware of the accrual of debt that is recoverable by the local social service district.

This bill achieves these goals by prohibiting a local social service district from recovery of public assistance payments, unless it has first received a signed acknowledgement from the public assistance recipient acknowledging that: 

  • SNAP, child care assistance, emergency assistance to adults  and HEAP payments made by the Social Services District are not recoverable; AND
  • Children will remain eligible for public assistance if the homeowner refuses to sign a mortgage.

In addition, social services districts will be required to provide public assistance recipients with an annual accounting statement that clearly states the amount and type of public assistance benefits provided during the calendar year, any credits made against the debt, the total debt accrued, and instructions as to how to make payments on the lien.  Finally, this bill provides the authority for social services districts to subrogate these mortgages when the former recipient can refinance the primary mortgage at more favorable terms.

Social Services Law §106 provides New York State and local social services districts with millions of dollars every year in recovered public assistance costs, but provides those current and former public assistance recipients who are providing this reimbursement with no way to verify the accuracy of these recoveries. It is imperative that this process be transparent and accountable.  We urge immediate passage of this bill.

End Notes:
 [1] Bujinicki v. Blum, 77 A.D. 2d 809 (4th Dep’t 1980).
 [2] See A.543 (Gibson)/S.2816 (Adams) and S.3267 (Krueger)

This memo was prepared by:

Susan C. Antos

Empire Justice Center
119 Washington Avenue
Albany, NY  12210 

(518) 462-6831
(518) 935-2852