And Still Foreclosures Become Harder

Mortgage servicers’ experience suggests that defaulting borrowers well understand their own problems.  Some of those borrowers choose to ignore the situation; others fight vigorously to delay the actions as long as possible.  So it would be surprising to learn that New York’s Chief Administrative Judge  was concerned enough about perceived borrower unawareness to recommend passage of two new laws to remedy the concern.  These two additions now impose yet further layers of procedure to the already unwieldy foreclosure process in New York.

While these new requirements are properly left to counsel to comply with, servicers should be aware of their existence.

First, a new section is added to the foreclosure statute¹ mandating a “Special summons requirement in private residential cases.”  This provides that in an action to foreclose a mortgage on a residential property with not more than three units, the summons must also contain notice – in boldface type – in the following form:

“NOTICE

YOU ARE IN DANGER OF LOSING YOUR HOME

If you do not respond to this summons and complaint by serving a copy of the answer on the attorney for the mortgage company who filed this foreclosure proceeding against you and filing the answer with the court, a default judgment may be entered and you can lose your home.

Speak to an attorney or go to the court where your case is pending for further information on how to answer the summons and protect your property.

Sending a payment to your mortgage company will not stop this foreclosure action.

YOU MUST RESPOND BY SERVING A COPY OF THE ANSWER ON THE ATTORNEY FOR THE PLAINTIFF (MORTGAGE COMPANY) AND FILING THE ANSWER WITH THE COURT.”

Because it would appear that this notice is solely for the homeowner, and could have no application to any other defendants, the additional language should be confined to the summons served upon that homeowner.  To the extent there may be doubt, counsel may elect to put this in every summons in this type of case.

And yet there is more.

There is a statute in New York² requiring in some considerable detail an additional mailing of a summons in a certain type of envelope (among other requirements) when a default judgment is pursued against the natural person based upon non-payment of a contractual obligation.  (An affidavit to that affect must then be filed with the court as a prerequisite to the judgment)

This statute had always specifically excluded any action affecting title to real property – which therefore meant no application to a mortgage foreclosure action.  Now, that section³ has been amended to include “residential mortgage foreclosure actions.”  In short, this means that an additional mailing will be required in any residential foreclosure case.

Why the courts concluded that borrowers needed these extra warnings is perplexing.  Again, the experience of servicers and their attorneys does not support the view that defaulting borrowers have suffered from inadequate notice.  Nonetheless, these new statutes are effective August 1, 2007 and they create yet further opportunity for borrowers to assault the foreclosure case.

¹  RPAPL Article 13 is the foreclosure statute and the law adds a new §1320.

²  CPLR §3215 entitled “Default judgment”.

³  CPLR §3215 entitled “Default judgment”.

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.