When Your Borrowers Are Missing

Sometimes it isn’t easy for mortgage servicers to keep track of their borrowers’ whereabouts, a meaningful fact if there is a default.  While most mortgage forms oblige borrowers to notify a lender when they move to a new address, we needn’t confirm here how many borrowers neglect the obligation.  So long as the borrower is sending the mortgage installments, servicers are perhaps unlikely to make note of the return address on the envelope.  The payments are arriving, so all seems well.  But it might be enormously helpful if there were a way to capture and preserve that information, because borrowers in hiding can become very expensive if that mortgage goes into default and a foreclosure must be pursued – particularly in a judicial foreclosure state like New York.

In short, if a borrower cannot be found for proper service of process, then the summons must be published.  That is the problem of which we speak.

Although judicial foreclosures can always be prone to offering frustration, one of the particularly irksome aspects is publication of the summons.  Why publication exists at all, what happens when a lender or servicer is forced into this odious pursuit, and what it means in the end will be the focus here, with the procedure in New York presented as an example and an abject lesson.

Except in heavily litigated matters where motions, discovery or a trial are the reasons for delay (which in residential foreclosures are a minority anyway), a significant portion of the foreclosure cases in judicial foreclosure states is consumed at the initial stage – service of process.

In New York, if a borrower (or any necessary party) in the foreclosure is served with the summons and complaint by personal delivery, the time to answer is a mere 20 days.  That is not bad.

No One Home

But what if the person is not home (or if service is attempted at the place of business and the person is not there either)?  Then the summons and complaint can be left with a person of suitable age and discretion.  That, too, is fine, except that for this type of service, there must also be a mailing of the pleadings.  Service is not complete until 10 days after an affidavit of the delivery and mailing is filed with the court.

There is yet more.  When this method is used, the time to answer does not expire until 30 days after service was complete, which, as mentioned, wasn’t until 10 days after the affidavit was filed.  So, 40 days is a virtual minimum time, and that doesn’t account for whatever time it took to deliver the papers to the process server, however long it took the process server to go to the house or business, and how many times the server had to visit before he found someone fitting the definition of “suitable age and discretion.”

The preliminaries are still not over.  What if no one is ever home?  Then the process server must attempt service at least three times, and on the fourth occasion the papers can be affixed to the door and then posted (“nail and mail”).  This approach likewise suffers from the detainment of 30 days plus 10 days.  Worse yet, when there is a multiplicity of defendants, while one may be served on Monday – first triggering the seemingly interminable time periods – another might not be served until Friday, with others the week after.

Although, to be sure, not every case is a process serving nightmare, the potential should be obvious.  Dismayingly, the whole discussion to this point was just an appetizer for the main course – the need to publish the summons – which leads to a proverbial cath-22.  Because service by publication is so unwelcome, special efforts to avoid it are made.

That means servicers must make diligent efforts to ferret out elusive defendants, such as:

•  seeking other or different addresses from the lender’s files,
•  employing a skip trace,
•  “running” the social security number,
•   inquiring of neighbors, or
•   pursuing a forwarding address from the post office.

The ironic result is that if the lender or servicer must ultimately publish after all, still more time was consumed trying to avoid the delay publication imposes.

Publication Woes

What, then, is so terrible about publication of the summons?  Because setting the stage for this narrative was itself time consuming, let’s shorten the verbiage by presenting the points here more tersely.

Some reasons publication of the summons is unwanted (in no particular order):

•  It adds considerable time to the case.
•  Counsel must prepare an order for publication and an affirmation in support, as well as present evidence of all the efforts made to find the defendant or defendants against whom publication is sought.  That order must be submitted for signature, and even waiting for that could take many weeks – or months.
• Once the order is signed – and received – publication ensues once a week for four successive weeks in two newspapers, thus creating still more delay.
• The publication order – proceeding on the theory that the party who couldn’t be located might theoretically be dead – appoints a guardian ad litem.  The guardian is entitled to a fee, and counsel must prepare a host of papers for that guardian (i.e., an answer, consent, affidavit, waiver).  And guardians, busy with their own law practices, do not always respond as servicers and their counsel would prefer.
• A part of this whole process is preparation of a supplemental summons, amended lis pendens and amended complaint, all because the caption in the case changes with the variety of unknown parties added.  (This is called the “omnibus clause.”)
• Still another aspect is the naming of the state (and sometimes the United States of America) as a new party to the foreclosure for any estate taxes which may be due – not so surprisingly because the person might theoretically be dead.
• Remember those two newspapers which publish the summons for a month each?  The court selects those.  Counsel has nothing to say about it.  But legal advertising in some papers is expensive – very expensive.
• If counsel did all this work, some additional fee is required.
• And then there is the final insult.  Service by publication in New York is not personal service.  So, if the missing person was an obligor or guarantor, no deficiency judgment can be pursued against that person.

The mess is really somewhat more convoluted than we have noted here, but further emphasis should not be needed to make the point.  Neither servicers nor their counsel want to encounter a need to publish the summons.  Sometimes, though, it is just unavoidable.

Unfortunately, self-help for servicers is rather limited.  If counsel needs a directive as to whether to publish or not (even though there is rarely room for choice), respond as quickly as possible.  Lengthy deliberation in-house will probably not be very helpful.  Next, scour your files for leads as to addresses.  Any information which will help locate an elusive party can save considerable expense.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.