Posts tagged ‘foreclosure’

Getting Ready For The Legislature’s Stretch Run

Yours truly is back from his Carolina vacation and has caught up with enough e-mail to finally post again.  While there is a lot I want to get off my chest – there is only so much my wife wants to hear about the banking industry during an eight-hour car ride – I think I will start with a description of some of the key legislative and regulatory issues that will be impacting New York state credit unions in the coming weeks. 

Not only is this an election year, but it is an election year following the redrawing of the election map, meaning that the legislature will want to get out of town as quickly as possible, especially with primaries scheduled for June. 

One of the most important issues we are dealing with is a bill that would retroactively impose strict new requirements on lenders foreclosing on property (S5473D Sanders).  As many of our members have already explained to their representatives during our state GAC, as currently drafted, the retroactive application of this bill and the ambiguity regarding the right of lenders and borrowers to negotiate modifications without running out of time to foreclose on property will actually make it more difficult to work with delinquent borrowers.

We are also continuing to advocate for changes to a proposed data portability and privacy bill which does not currently exempt financial institutions (S6701A Thomas / A680B Rosenthal) as well as continuing to express a strong opposition to state level anti-trust legislation (S933A Gianaris) which could negatively impact the ability of credit unions to help provide communities banking services, particularly in underserved areas. 

All this is taking place as New York’s highest court hears an appeal of a case challenging the legality of New York’s redrawn Congressional map which could allow Democrats to pick up four additional seats as they struggle to keep their majority.  Expect a decision to come down shortly.

As for the federal level, there is an interesting article in today’s WSJ reporting that privacy legislation may finally be getting traction in Congress.  This is potentially good news, provided the legislation does not impose additional requirements on credit unions and the legislation preempts state law.  But I still remain skeptical that Congress will be able to get legislation done this year.  Hopefully, I am wrong.

On the regulatory front, we are still waiting to see what will come out of the CFPB’s initiative against so-called “junk fees”.  The president of the American Bankers Association has already taken to publicly accusing the Bureau of going rouge.  My bet is that we are going to be hearing a lot about overdraft fees in the coming months. 

Last, but not least, let’s hope that the NCUA is going to be following up on its reach-out to credit unions by providing additional guidance as credit unions begin to explore the banking issues raised by distributed-ledger technologies and cyber currencies.  On May 11th yours truly will be discussing the state of regulation in this area and how it is going to impact your credit union as part of the Southern Tier’s Spring Chapter Event in Binghamton.  I noticed it’s at an Irish pub, so let’s share a half-and-half as we ruminate on how technology is once again upending the way banking is done.

Full disclosure, my wife and kids won’t be attending.  They already heard enough about how the NCUA needs to move more quickly and provide additional guidance in this area.  It was one of my favorite topics as we drove around North Carolina.

April 27, 2022 at 9:57 am Leave a comment

Another Important Foreclosure Case gives Lenders More Flexibility

A recent decision provides more clarity to New York’s Byzantine foreclosure process. For those of us who believe that the goal of foreclosure should be to ensure that the rights of homeowners are protected while at the same time ensuring that lenders can get access to homes that borrowers can no longer afford to be in, this is a good thing.

When you enter into a mortgage loan with a member, the member is agreeing to pay back the note in monthly installments.  If a member misses a payment, you can actually sue and demand payment for the past due installment, which would be a ludicrous waste of time.  Instead, a payment default is a violation of the repayment contract and the lender has the option of demanding that the member pay the full amount due on the mortgage note. New York has a six year statute of limitations for mortgage foreclosure actions. The six year time period starts when a bank or credit union makes an unequivocal demand on a delinquent homeowner to pay the entire amount due on a mortgage note. Since New York has one of the most intricate and time consuming foreclosure processes in the country, it is not uncommon for foreclosures to take several years to complete and there has been an explosion in litigation in which delinquent homeowners argue that the six years statute of limitations has expired.

As a result, a key issue is how and when a lender can stop the foreclosure clock from running out by withdrawing a demand for full payment of a delinquent mortgage loan. Earlier this year the Court of Appeals decided Freedom Mortgage Corporation v. Engel in which it clarified the circumstances under which lenders could deaccelerate a mortgage note on which a bank had made a demand for full payment. In making its ruling, the court made clear that lenders simply had to put borrowers on notice that they no longer were obligated to immediately pay the entire amount due on their mortgage.

Seems clear enough, but what happens when a homeowner can show that a bank or credit union’s decision to stop demanding full payment of the note was primarily motivated by a desire to simply keep the six years statute of limitations from running out? For example, in Milone v. US Bank a homeowner defaulted on a mortgage note on October 1, 2008 and a demand of full payment for the entire amount due was made in December of 2008. Fast forward to October 21, 2014 when the homeowner received a letter that the mortgage note was being deaccelerated and that its demand for immediate payment of the entire debt was withdrawn.  Instead, our homeowner simply had to start making the monthly installment of payments. 

But in March of 2015 the homeowner sued the bank claiming that it was entitled to have the mortgage note discharged because the six year statute of limitations had expired. The court agreed. It effectively ruled that a decision to halt a foreclosure action did not stop the six year statute of limitations when a financial institution’s primary motivation is not to cease demanding full payment of the debt but to simply stop the foreclosure clock.

Here is the good news.  In a recent decision, 53rd Street LLC v. U.S. Bank, the Court of Appeals for the Second Circuit flatly rejected this logic. So long as a lender unequivocally deaccelerates the amount due on a mortgage note, it has the option of commencing a subsequent foreclosure action, even if the subsequent foreclosure action is filed six years after the initial demand for full payment of the note.

August 18, 2021 at 9:47 am Leave a comment

More Foreclosure Mandates Coming Your Way

This week the Governor signed legislation imposing additional requirements on lenders foreclosing on residential property in New York State but did so only after citing technical flaws with the bill that the Legislature has agreed to address. The measure takes effect on January 1st.

Let’s review New York’s alphabet soup of mortgage requirements. Section 6-l and 6-m impose additional disclosure requirements for high-cost and subprime loans. Section 595-a imposes general requirements on mortgage lenders in New York, such as a prohibition against misrepresenting material fact.  But this statute has never been part of New York’s foreclosure process.

What is clear is that the intent of this Legislation is to mandate that all foreclosing parties must affirmatively state that they have possession of both the note and the mortgage on which they are seeking to foreclose. As originally drafted the legislation would have imposed all of 6-l and 6-m’s requirements on residential mortgages in New York State. This would have meant, for example, that you would have been required to provide mortgage escrows for all of your homeowners.

Frankly, even with the amendments, it is still challenging to figure out precisely who has what obligations under this new measure. Hopefully the amendments that are made by the legislature will clarify precisely what provisions of New York Law now apply to all mortgages in New York that become subject to a foreclosure. For example, as drafted a lender not only has to comply with the certain provisions of 6-l and 6-m but also section 595-a.  We will keep you updated on the proposed legislative fix.

August 5, 2021 at 9:19 am Leave a comment

CFPB Proposes Nationwide Foreclosure Moratorium

In one of the most aggressive claims of regulatory authority in decades, the CFPB proposed regulations yesterday that would sharply limit the ability to begin foreclosure actions until the end of the year. 

To make sure borrowers aren’t rushed into foreclosure when a potentially unprecedented number of borrowers exit forbearance at around the same time this fall, the proposed rule would provide a special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after December 31, 2021.”

To accomplish this goal regulations would create a new temporary COVID-19 pre-foreclosure emergency review period that wouldn’t expire until the end of the year.  The regulation would be coupled with enhanced loss mitigation options.  For example, current regulation already requires servicers to attempt to make live contact with delinquent borrowers.  The proposed rule would amend these regulations to mandate that borrowers be told about COVID-19 loss mitigation options.  The new time period for evaluating loss mitigation options would effectively prohibit foreclosures. 

Where does the CFPB have the authority to impose this de facto moratorium? It points out in the legal authority section of the regulations preamble that § 1032 of the Dodd-Frank Act mandates that the Bureau “shall consider available evidence about consumer awareness, understanding of, and responses to disclosures or communications about the risks, costs, and benefits of consumer financial products or services.” 12 U.S.C. 5532(c).  It argues that researchers have pointed to a link between financial stress and poor decision making that a longer pre-foreclosure period would help address. 

For those of us in New York, the regulations wouldn’t be all that different than statutory requirements which our elected representatives voted on and chose to put in place.  In contrast, I have half-jokingly referred to the CFPB Director as the benign dictator of consumer protection law.  If this regulation is allowed to take effect, I won’t be joking anymore.  No elected representative voting to create the CFPB thought they were giving an unelected bureaucrat overseeing an independent agency the right to preempt state property law in the absence of explicit Congressional authority. 

To be clear, I am proud of working for an industry that by and large does everything it can to avoid foreclosures.  But, for those of you in support of the Bureau’s action remember, that there will someday be a Director in charge appointed by a president with whom you disagree.  Do you want him or her to be able to exercise this much power?

April 6, 2021 at 10:04 am Leave a comment

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

Key Changes Made to New York Foreclosures, SBA Loans

Yours truly is discharging his duty to faithfully provide you with the most pertinent information to start your credit union day this morning by giving you a heads up on two recent developments that may impact your operations. First, I want to provide a snapshot of a vitally important recent decision by New York’s court of appeals clarifying how to calculate the statute of limitations for residential foreclosures in New York State. Spoiler alert: this is actually good news for New York lenders. Secondly, I have a few thoughts on the Biden Administration’s announcement yesterday of sudden and dramatic changes to the Paycheck Protection Program, with the aim of increasing the number of small businesses gaining access to these loans. 

Anyone who provides mortgage loans in New York State should make sure that they receive a summary of the decision issued late last week by New York’s court of appeals in Freedom Mortgage Corp. v. Engel. New York already has one of the longest, most complicated foreclosure processes in the country. This case resolved a series of issues which had threatened to make the foreclosure process even more difficult to execute for lenders. For example, there are two basic ways for commencing a mortgage foreclosure action in New York State and triggering the six year statute of limitations. One way is to actually go to court and file a foreclosure action. A second way is to send a delinquent borrower a notice of default. One of the questions addressed by the court of appeals was how to distinguish between putting a borrower on notice that they may be subject to a foreclosure action if they don’t make payments, and a notice that actually commences a foreclosure action. This distinction is crucial because an increasingly large number of defaults in New York take more than six years to resolve, and delinquent borrowers are claiming that the lender can no longer foreclose on their property. Fortunately, the court of appeals ruled that “even in the event of a continuing default, default notices provide an opportunity for pre-acceleration negotiation—giving both parties the breathing room to discuss loan modification or otherwise devise a plan to help the borrower achieve payment currency, without diminishing the noteholder’s time to commence an action to foreclose on the real property, which should be a last resort.” 

A second issue that has been hotly debated in New York courts is what actions stop a foreclosure action. For example, can a lender who is afraid that the statute of limitations is going to run out withdraw a foreclosure action and commence a new action in the future if they are unable to come to an agreement with the delinquent homeowner? Using wonderfully unequivocal language designed to provide lenders and borrowers in New York State a bright line rule that is easily understood, a voluntary discontinuation of a foreclosure action by withdrawal of the foreclosure complaint constitutes a revocation of the foreclosure. A lender can subsequently bring a new action with an entirely new six-year statute of limitations, even if the lender withdrew the previous action specifically to avoid having the statute of limitations run out. 

Shifting Gears to the Biden Administration and PPP

The Biden Administration announced that, starting tomorrow, SBA would be imposing a two-week window during which the agency will only accept PPP applications with 20 or fewer employees. The exclusive window will also be coupled with changes expanding who is eligible to receive PPP loans by stipulating that student loan debt and certain prior criminal convictions should not be part of the underlying criteria that constitute an effective strike against an applicant’s eligibility. I will have more to say on this as the process gets underway. While I understand what the Biden Administration is trying to accomplish, I’m more concerned with the speed with which they expect these changes to take effect. At the risk of sounding like an aging elementary school teacher in a 1950s sitcom, haste makes waste. 

On that note, peace out people. Enjoy your day.

February 23, 2021 at 9:56 am Leave a comment

Court to Hear Arguments on Key Mortgage Cases

New York’s Court of Appeals today will hear three cases that will have a direct impact on the length of time it takes to foreclose on mortgages in the state. Considering that New York’s foreclosure process is already among the longest in the nation, even if you don’t delve into the weeds on this subject, the issues raised are worth knowing about. 

These cases deal with the issue of standing, which in the foreclosure context refers to the foreclosing lender demonstrating why they have the legal right to even bring a lawsuit against the homeowner in the first place. In JP Morgan Chase, N.A. v. Caliguri, JP Morgan Chase moved to foreclose on a mortgage loan after the Caliguri’s fell into delinquency on their $1 million home in Suffolk County on Long Island. The bank had acquired the mortgage in 2008 from Washington Mutual Bank (remember them?). The bank had possession of the mortgage, the unpaid note, and evidence of default. Furthermore, it even served the homeowners with a summons and complaint, attaching to these documents a copy of the consolidated note bearing a blank endorsement from the original lender. You would think this would be enough to prove standing, but Caliguri is effectively arguing that a foreclosing plaintiff must prove that it had possession of the original mortgage note in order to bring suit. Otherwise, the bank would lack the standing to bring such an action against the homeowner. 

This may not seem like a big deal. But considering how often mortgages are bought and sold on the secondary market, keeping track of who possesses the original note is not as easy as it might seem. Furthermore, imposing this requirement would once again put form over function in New York when there is no dispute as to whether the mortgage has been properly negotiated. 

In US Bank v. Nelson, the Court of Appeals will weigh in on when and how a defendant raises a lack of standing in a foreclosure action. As a general rule, affirmative defenses to civil actions require that the defendant raise defenses, including a lack of standing, at the first opportunity. Should they fail to raise such a defense at this time, this defense would be considered waived. In Nelson, the court will decide whether a defendant has adequately raised standing as a defense. This is admittedly extremely esoteric stuff, but it is nuances such as these which result in foreclosures being dragged out, in some cases, for more than a decade. Last but not least, the Court of Appeals will hear Deutsche Bank National Trust Company v. Morgan Stanley Mortgage Capital Holdings LLC. Do you ever wonder why your vendors always allow you to sue them for gross negligence? Do you ever wonder what remedies you really have in the event someone breaches a representation and warranty they have made to you? Probably not, but I do. And trust me when I tell you that this last case is important precisely because it addresses those issues. As a matter of fact, I’m going to be designating a blog specifically to this case in the coming days. Stay tuned and don’t let your anticipation keep you from getting a good night sleep.

November 17, 2020 at 9:59 am Leave a comment

Everything You Need to Know about Foreclosures but have been Too Afraid to Ask

The only thing more confusing than the latest government pronouncements about the proper response to the pandemic has been trying to figure out the status of foreclosures in New York State. There has been a multitude of guidance ranging from emergency regulations to pronouncements by the Department of Financial Services on the state level to federal legislation and industry letters from the GSEs on the federal level. These competing orders each have their own end dates and nuances, creating the perfect storm for compliance departments trying to do the right thing. Fortunately, there are signs that the confusion is beginning to come to an end as the courts step in and clarify the scope of all these competing requirements. 

Against this backdrop, the case that I think you all should read this morning is Money Source, Inc. v. Mevs, in which Judge Thomas Whelan wrote an extensive analysis describing the state of foreclosure law in New York. Although a court decision in Suffolk county does not bind the rest of the state, it can be used as persuasive authority for those of you still trying to figure out how to deal with foreclosures during the pandemic. Before I get into the weeds, the Judge succinctly summarizes the state of New York’s foreclosure laws as follows: 

“(1) that the moratorium of the CARES Act has expired; (2) the Governor’s most current EO, that is, 202.48, only precludes enforcement of commercial foreclosure proceedings; and (3) the most recent and controlling AO from the CAJ, that is, AO/131/20 (as amended), only remains in effect for such time “as state and federal [*8]emergency measures addressing the COVID-19 pandemic amend or suspend statutory provisions governing foreclosure proceedings…” There is no longer any state prohibition on pre-COVID-19 residential foreclosure proceedings and the new state legislation, detailed above, is addressed to initiation of new proceedings.”

The first source of confusion were the Governor’s executive orders. To be clear, much of this confusion was unavoidable since executive orders must be renewed every 30 days, and must be amended to reflect changes in law. Originally, EO 202.14 prohibited residential foreclosure actions stipulating that there should be “no initiation of a proceeding or enforcement of a foreclosure action.” Yours truly has always read this order conservatively. Specifically, since the order applied not only to foreclosure actions, but to proceedings “leading to foreclosures,” it is my opinion that the order not only prevented foreclosures, but the sending of pre-foreclosure notices mandated by Section 1304 of New York’s Real Property and Proceedings Law. 

Fortunately, this is no longer a valid concern. On June 7th, the Governor issued EO 202.48, which recognized that the executive orders were now superseded by the creation of Section 9-x of the Banking Law. This law applies to individuals in need of residential mortgage forbearances beginning in March 2020 and will be in existence on a county by county basis until there are no restrictions on non-essential gatherings of any size in the county in which the residence is located. According to the court, “there is little doubt that the new statute is designed to address mortgages affected by the COVID-19 pandemic, and should not apply to borrowers who defaulted before March 7, 2020.” Remember, where the law does apply, lenders seeking to go forward with foreclosures must demonstrate that they have complied with 9-x. 

Section 9-x does not apply to federally-backed mortgages. In other words, if you are servicing a mortgage loan and holding it in your portfolio, 9-x applies, but if you are simply servicing a loan that has been sold off to the GSEs, federal standards apply. 

This seems clear enough at first. After all, the CARES Act only provided a moratorium on foreclosures through May 15, 2020. The GSEs, however, are technically private companies that can set their own standards. I say technically because they are also bankrupt and are overseen by the Congressionally created Federal Housing Finance Agency. The FHFA recently announced they would not foreclose on property until at least December 31, 2020.

September 29, 2020 at 9:39 am Leave a comment

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

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!

February 7, 2020 at 9:11 am 1 comment

New York Law Makes it More Difficult to Get Title Insurance on Foreclosed Property

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.

One of the bills signed by the Governor during the final days of 2019 created a new section 1302-a of the Real Property Actions Law which reads as follows:

“Notwithstanding the provisions of subdivision (e) of rule thirty-two hundred eleven of the civil practice law and rules, any objection or defense based on the plaintiff’s lack of standing in a foreclosure proceeding related to a home loan, as defined in paragraph (a) of subdivision six of section thirteen hundred four of this article, shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss. A defendant may not raise an objection or defense of lack of standing following a foreclosure sale, however, unless the judgment of foreclosure and sale was issued upon defendant’s default.”

This legislation has two major consequences. First, it raises the very real possibility that New York’s already cumbersome mortgage foreclosure process will become even more complicated and time consuming. This concern pales in comparison; however, to the reality that under this legislation, anyone buying foreclosed property subject to a default judgment or a foreclosure proceeding in which lack was not raised cannot be assured that they have clean title to the property. In other words, the previous owner could, under this law, contest the purchase of his or her home even after the sale is final in most circumstances.

As one of my colleagues pointed out, this is going to be a mess. The title insurers agree, which is why I’ve heard of two prominent title insurance companies that do business in New York which plan to either refuse to grant title insurance in the state, or grant it with an exception accounting for this new loophole. The latter option will be of little benefit for the new homeowner, let alone the mortgage holder.

This is bad news not only for lenders and borrowers, but for the communities in which these properties are located. Although the intent of the legislation was to make sure that homeowners at risk of losing their house don’t lose the right to raise this defense, the legislation has been drafted in such a way that it will actually make it more difficult to interest people in buying foreclosed property, contributing to the blight which disproportionately impacts poorer neighborhoods. In addition, theses title insurance exceptions will, in my opinion, make it impossible to sell these properties to Fannie Mae and Freddie Mac given the uncertainty of title.

January 22, 2020 at 9:28 am Leave a comment

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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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