Foreclosing in New York Just Gets More and More Difficult

November 8, 2018 at 9:22 am 1 comment

One of the developments  that real estate lawyers are paying a lot of attention to these days has to do with New York’s six year statute of limitations for foreclosures  and how it interacts with agreements to modify an existing debt. I’ve seen many credit unions bend over backwards to try to help a delinquent homeowner but the way the law is being interpreted, if you don’t protect yourself properly you may find your credit union is unable to collect on a mortgage.

Fortunately, New York’s General Obligation Law 17-101 provides a mechanism to revive claims that otherwise would be time barred. For the statute to work its magic however, a debtor must acknowledge in writing that he owes a debt and make an unequivocal commitment to paying. As the courts have explained, there must be nothing in the document which is inconsistent with a debtor’s intention to pay.

Just how tough is that standard? Well, do you think this language is good enough? “My partnership owes you money for the first mortgage payment (after the date of modification). We haven’t received the Modification Agreement from you as yet, and I would appreciate it if you would forward it to me as soon as possible.” The court ruled that this statement did not constitute an acknowledgement of the debt because while the letter “arguably” acknowledged the existence of the debt, it was not coupled with an unconditional promise to pay. (Sichol v. Crocker, 177 A.D.2d 842, 842, 576 N.Y.S.2d 457, 458 (1991)).

The issue is becoming increasingly important to foreclosure cases in which six years has passed since a foreclosure was initially filed and homeowners s argue that a purported agreement to modify a loan or voluntarily stop the foreclosure clock from running did not actually constitute an acknowledgment of debt sufficient to reset the foreclosure clock. For example, take a look at U.S. Bank, Nat’l Ass’n v. Kess, 159 A.D.3d 767, 767–68, 71 N.Y.S.3d 635 (N.Y. App. Div. 2018) and Yadegar v. Deutsche Bank Nat’l Tr. Co., 164 A.D.3d 945, 946, 83 N.Y.S.3d 173, 174 (N.Y. App. Div. 2018) to get a sense of how strictly the acknowledgment requirements are being interpreted.

This litigation underscores that agreements dealing with delinquent mortgages can’t be explicit enough. Personally, I would always include language in which the debtor acknowledges that she owes the lender an existing debt of _____________ and is hereby making an unconditional commitment to paying such debt. Of course run this language by your attorney. This is just my opinion.

On that happy note, get to work.

Entry filed under: Legal Watch, Mortgage Lending, New York State. Tags: , , , , , , , , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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