Are New York Foreclosure Laws About To Become Even More Burdensome?

June 28, 2019 at 9:16 am 1 comment

By many measures New York has the most complicated, time consuming foreclosure process in the country with the possible exception of California but believe it or not, bills passed by the New York State Legislature in the closing hours of the legislative session will, if they are approved by the Governor, actually make the process longer and more complicated. That is not a typo.

Exhibit one is AB.5615 that would mean that the defense of standing could never be waived. On a practical level what this means is that you could be two or three years into the process of foreclosing on a house only to have the homeowner raise for the first time, the issue of whether or not the party bring the foreclosure action has the legal authority to be foreclosing. From a procedural standpoint this has a certain facial appeal. I’ll spare you the gory details but with the rise of a system under which mortgages can be recorded a single time and then assigned to several different parties over the lifetime of the loan. It’s not as easy as it used to be to figure out who actually has both the note and the mortgage which you need in order to have standing to bring a foreclosure action in New York State. The problem is that this is an issue that can be easily discovered at the beginning of litigation and there is no reason to allow a party to wait until the eve of foreclosure to raise the issue for the first time. If this law goes through it will simply be one more potential means of keeping people in houses that they can’t afford and that they probably can’t afford to maintain.

A second bill, S.4182, would impact those of you who do co-op and condominium mortgages. These are very unique animals but under legislation which is now going to be sent to the Governor, mortgage holders would be responsible for paying delinquent homeowner association fees on abandoned co-ops and condominium payment foreclosure.

Why? In many ways co-ops are better positioned than banks and credit unions to note someone can afford to buy one of their units in the first place. Why should the lender be any more responsible for these maintenance fees than the co-op board which, unlike traditional home purchases has the right to deny a co-op application to anyone they don’t think is qualified to own one of their units.

Finally, there is S.5079A that would give localities the ability to sue lenders holding liens on abandoned property to compel them to bring foreclosure actions complete with strict timelines for compliance. This troubles me for two reasons. First there are apparently legislators who believe that it is lenders who are holding up the foreclosure process. This is simply not the case. Ask any foreclosure lawyer and they will tell you that motions can take months to decide and that delinquent homeowners are given too many opportunities to unveil themselves of services before moving on with the process. Secondly, call me wacky but to me a lien holder should have the right to decide whether or not to exercise a lien to the extent a lender has made such a bad investment that it isn’t worth the time, effort or expense to foreclose on property, then it should be free to do so.

What all these bills reflect is a lack of appreciation for the harm caused to consumers by an overly burdensome and legalistic foreclosure process. Every day an individual is allowed to stay in a house he or she can’t afford is one more day that their next door neighbor who is paying his or her mortgage has to deal with declining property values because the neighborhood as a whole isn’t being properly maintained and houses can’t be sold for their underlying value in part because the expense lending money to buy a house in New York is so much more expensive. This is not an abstraction. There are companies today that simply won’t service mortgages in New York because of the expense and regulation involved in doing so. All consumers, including the vast majority who pay their bills on time, are the ones who pay the price for this.

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

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1 Comment Add your own

  • […] It has not taken long for a law providing extra protection to individuals facing foreclosure to have a devastating impact on New York’s mortgage market. If you provide mortgages in New York State, you should read this blog, and if you think I am exaggerating, reach out to colleagues in the title insurance industry. For more background on this issue, take a look at this blog. […]


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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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