Implemented And Pending Mortgage Statutes In New York

Even though the meaningful increase in foreclosure volume in New York State has been less than in many other states, the legislature and the courts have nonetheless shown pointed concern about the fate of the borrowers, all resulting in the passage of new legislation over the past year and consideration of a number of new bills.  An overview of legislation already in effect and laws which might be passed follows.

Aside from what is generally known as the predatory lending law, which dates back to 2002, The Home Equity Theft Preservation Act became effective in July 2007. Although not directed at lenders (the focus was to discourage scam artists from stripping equity held by borrowers in default) it nonetheless had an effect upon foreclosures. It created a new section of the foreclosure statute (RPAPL ‘1303) requiring special additional notice in a foreclosure summons (upon a residential one-to-four family dwelling). While not so difficult to comply with the requirements, some delay has been generated by clerks in the various counties interpreting compliance in disparate ways.  Moreover, the door is opened for borrowers to claim they did not receive the notice in the summons.

Yet further additional notice by way of warnings in a summons for foreclosure of a residential property of not more than three units became effective in August 2007 (codified in RPAPL ‘1320).  This too offers the borrower a right to assert non-compliance.

Then there had been a statute long on the books requiring as a prerequisite to default judgment against a natural person in a contract action an additional mailing of the summons in a plain envelope, marked personal and confidential and not indicating that it comes from an attorney, except that it had no application to a mortgage foreclosure action.  Effective August 1, 2007, however  [codified in CPLR ‘3215 (g)(3)(iii)], the exception was removed so that the extra mailing requirement now does pertain to a residential mortgage foreclosure action.  While the plaintiff’s affidavit of service of this notice should remove  any serious dissention here, the courts will likely remain confused  as to whether mailing of the notice need be proven at the judgment stage (it should be yes) or at the earlier referee stage (it should be no).

In the category of pending legislation, there are five major bills, three introduced in both the assembly (A) and the senate (S), two solely in the assembly.

10817/S8143 mandates both a 60 day pre-foreclosure warning and a court conference within 60 days of initiating the action. The courts have already indicated an inability to handle such a volume of cases. Servicers would also opine that imposing yet more delay and increasing the debt will benefit very few borrowers.

A9645/S6724 permits courts to impose up to a one year moratorium upon foreclosure of subprime mortgages, allowing defaulting borrowers to live in their homes while seeking more affordable mortgage terms. How a year=s accrual of interest in these economic times will make this statute efficacious is problematic.

A10083/S8093 provides up to three months of mortgage payments to a borrower to match a like contribution from the lender for certain subprime and unconventional mortgages.  Even if lenders were prepared to forgive such payments, how this would help borrowers who simply cannot afford the payments is unclear.

A10219 requires borrowers to read and sign a mortgage applicants bill of rights as a condition of applying for a mortgage. The information provided would include procedures to complain to both the Banking Department and The Department of State.

A8972 would bar negative amortization, balloon payments and other supposed abuses in the subprime market. It would also bind lenders to verify a borrowers ability to afford the payments on a prospective mortgage.

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.