Key Case on Mortgage Foreclosures Before New York’s Highest Court

February 7, 2020 at 9:11 am 1 comment

Greetings People.

Our good friends at the New York Mortgage Bankers Association gave me a heads-up the other day that an extremely important case dealing with New York’s six year statute of limitations is going before New York’s Court of Appeals, which is New York’s highest court. Regardless of what the court ultimately rules, for those of you who deal with delinquent mortgage loans it underscores how clearly and unequivocally you should be entering into agreements which freeze foreclosure actions so that you can continue to negotiate with the delinquent homeowner. This is one area of the law where the lender should beware.

The facts of this case show just how convoluted foreclosure actions have become in New York State. I read both briefs- which are excellent by the way- and no one challenges the fact that the homeowner has been repeatedly delinquent on his mortgage loan payments. Nevertheless, in our efforts to provide greater protections to homeowners, delinquency is increasingly immaterial to foreclosure litigation.

Freedom Mtge. Corp. v Engel has its roots in a $225,000 mortgage that Herbert Engel entered into in 2005. The defendant did not make a payment due on March 1st 2008, and in July of that year a foreclosure action was commenced. The action hit a glitch in January 2013 when the defendant homeowner contended that he was never properly served the papers triggering this action because the summons and complaint were not sent to the proper address. Freedom Mortgage disagreed but entered into a stipulation in which the homeowner accepted service of the foreclosure papers and the foreclosure action would be discontinued “without prejudice” as both parties worked to “amicably resolve the dispute and the issues raised in it without further delay, expense or uncertainty”.

Well, things didn’t exactly work out as planned. Two years later on February 19th, 2015 Freedom Mortgage once again moved to foreclose on the property. The defendant argued that the action was time-barred; after all, the initial foreclosure was commenced in 2008. In contrast, Freedom Mortgage pointed out that it had agreed to dismiss the initial foreclosure without prejudice. But the appellate division concluded that the stipulation the parties entered into in 2013 did not constitute “an affirmative act” to deaccelerate the mortgage note i.e. insist that the entire outstanding amount of the mortgage loan be paid immediately.

Now that the case is going to the court of appeals, the court will be able to provide much needed guidance on precisely when and how lenders can enter into stipulations discontinuing foreclosure actions without putting themselves in jeopardy of losing the right to foreclose on property. This is good news not only for lenders but for borrowers as well. If Mr. Engal successfully avoids paying off his mortgage loan, his victory will actually make it more difficult for consumers facing difficulty paying off their loans to enter into modification agreements.

On that happy note, enjoy your weekend. Yours truly is headed down to God’s Country- Long Island- to celebrate my Mom’s 85 years, a good chunk of which has been spent putting up with me. Peace out!

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

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1 Comment Add your own

  • 1. Anonymous  |  February 7, 2020 at 10:29 am

    Happy birthday to your mom.

    Reply

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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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