Posts tagged ‘foreclosure process’

If Your Member is Facing Foreclosure, You Should Read This Blog

Given the complexities of New York’s foreclosure law, minor mistakes can result in years of delay when it comes to repossessing a house that the borrower cannot afford.  Even before a foreclosure begins, for example, lenders have to be able to document that they sent out highly prescriptive pre-foreclosure notices.  The good news is that if you have consistent policies and procedures, these pitfalls can be avoided.  The Court of Appeals recently addressed this esoteric but vital area of the law.  For those of you who handle loss mitigation at the credit union the case is certainly worth reading and comparing to your policies and procedures. 

Section 1304 of New York’s Real Property Actions and Proceedings Law mandates that “…at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower, or borrowers … such lender, assignee or mortgage loan servicer” shall mail a notice that they are in danger of being foreclosed on.  The notice must be sent by registered or certified mail.   

Sounds easy enough but how does a foreclosing party demonstrate that it has complied with this provision? 

In CIT Bank N.A. v. Schiffman, the Court of Appeals provided guidance on precisely this question.  One of the most common ways of demonstrating compliance with this requirement is to have a well-established documented procedure that your credit union always follows when sending out the required notices.  Use of a standardized procedure allows a third party to provide an affidavit to the court that pursuant to policy and procedure the notice was sent out in compliance with the law.  Crucially, New York law creates a rebuttable presumption that a mailed notice is received.  This means that a member can’t avoid a foreclosure action unless he can demonstrate why the notice was not received.  In this case the Court of Appeals provided guidance on precisely what type of proof meets this burden.  The court explained that “…the crux of the inquiry is whether the evidence of a defect casts doubt on the reliability of a key aspect of the process such that the inference that the notice was properly prepared and mailed is significantly undermined. Minor deviations of little consequence are insufficient.”

The type of proof necessary to meet this standard will depend on the specific facts but the more your credit union has a standard approach and doesn’t deviate from those protocols, the better off it is going to be.  In contrast, in this case CIT Bank raised the eyebrows of the borrower’s attorney by sending the 90 day pre-foreclosure notice almost a year before beginning the foreclosure. 

Another approach your credit union could take is to have the individual mailing the pre-foreclosure notice fill out an affidavit every time a notice is sent.  But even this approach should follow standard procedures and the affidavit should detail, among other things, how the notice was delivered to the post office.  There is actually a case in which a mailing was deemed to be insufficient because it did not include this information.   

Within three business days of the mailing of a pre-foreclosure notice, lenders must file a notice with New York’s Department of Financial Services (§ 1306).  The form includes basic information such as the address of the borrower.   Does the law require that this notice include all joint borrowers on a mortgage loan? I know this might seem like a little too much minutia on a Monday morning, but it is a key question for anyone who wants to foreclose on property anytime soon.  The Court of Appeals held that for purposes of the § 1306 filing, lenders satisfy this requirement by simply listing one borrower.  

April 5, 2021 at 10:38 am Leave a comment

New York to Nation: Thank Us for the Mortgage Regs

I have some good news for anyone in New York responsible for sifting through the mortgage servicing regulations released by the CFPB yesterday.  We have a huge advantage over other parts of the country because the framework for much of what the CFPB is proposing has been in New York State regulation since 2010.  In fact, the CFPB noted in the preamble to yesterday’s rule that New York’s “regulations impose obligations on servicers with respect to, among other things, consumer complaints and inquiries, statements of accounts, crediting of payments, payoff balances, and loss mitigation procedures.”  If you’re from another part of the country, brace yourself, you have a lot of work to do.

Here are some of the similarities where New York is ahead of the curve.

  • New York already requires prompt crediting of mortgage payments.
  • The new servicing requirements mandate that servicers respond in writing with explanations as to why members do or do not qualify for modifications or other forms of debt relief.
  • A major thrust of the new regulations is to ensure that members have a contact person that they can get a hold of when trying to work through mortgage problems.
  • Most importantly, New York statute and regulation already require pre-foreclosure notices and impose a legal obligation on lenders to make a good faith effort to work with delinquent borrowers prior to commencing a foreclosure.  Don’t fool yourself, there is a good faith standard in what the CFPB outlined yesterday.  For example, depending on the time frame “a borrower may appeal a denial of a loan modification program so long as the borrower’s complete loss mitigation application is received 90 days or more before the scheduled foreclosure sale.”

Now, I don’t want to overstate the case.  There are a lot of details in the federal regulations that aren’t in New York law, so I’m by no means suggesting you put the CFPB’s proposal on the back burner.  Credit unions that don’t meet the 5,000 or fewer mortgages exemption will have to send out monthly statements to their members as opposed to the annual requirement imposed by our regulations, but I know there is at least one servicer that already does this.

In addition, the CFPB’s attempt to end dual track modifications/foreclosures is going to propose even more procedural hurdles to an already cumbersome foreclosure process. The bottom line is that as envisioned by CFPB’s new regulations, a foreclosure cannot be completed until the servicer responds in writing to a member’s written mitigation request provided such request is sent at least 37 days before the foreclosure.  In addition, if you gave a member an adjustable rate mortgage, they will have to get at least 210-240 days advance notice before the mortgage resets for the first time.  I’ve been told by people who do this sort of thing for a living that this time frame makes it impossible to provide accurate information since you don’t know what the rate is going to be down the road.  Don’t worry, the CFPB knows this and is allowing you to estimate what the new rate would be.

I recently did a blog pointing out that the Federal Housing Finance Administration wants to impose additional fees on mortgages purchased from New York because of expenses imposed by our foreclosure process.  Perhaps when Dodd-Frank is fully implemented, everyone can have an expensive, cumbersome foreclosure process with the potential for keeping people in houses long after they can realistically afford to live there.  As New York goes, so goes the nation.

Armstrong Should be a Bank CEO

Now that Lance Armstrong has admitted he cheated and lied to build up his stellar reputation as America’s best cyclist ever, he is more than qualified, at least with his chutzpah and clear lack of contrition, to become a CEO at one of America’s largest investment banks.  After all, is Armstrong’s “everyone did it so let me get on with my life defense” any different than the grudging apologies offered by the captains of industry after the financial crisis only to go on the attack against any regulations holding them accountable for what they actually did?  I’ll be impressed with Armstrong if he offers to give back the 100’s of millions of dollars he’s made off his cheating.  On that note, have a nice weekend.

January 18, 2013 at 8:23 am Leave a comment

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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