Posts tagged ‘statute of limitations’

Developments Over The Weekend You Need To Know About

There have been some important developments over the weekend that you need to know about.

First, state and federal banking regulators, including the NCUA, issued a joint statement yesterday encouraging financial institutions to work with borrowers “who are or may be unable to meet” payment obligations because “of the effects of the COVID-19”. In addition, the regulators conferred with the Financial Accounting Standards Board and confirmed that credit unions can take these steps without automatically characterizing them as Troubled Debt Restructurings (TDRs) for accounting purposes. According to the statement “regardless of whether modifications result in loans that are considered TDRs or are adversely classified, agency examiners will not criticize prudent efforts to modify the terms on existing loans to affected customers”. This is a good statement to keep in the files.

Second, common sense has prevailed. In response to an emergency declaration issued by President Trump on March 13th, NCUA issued this guidance allowing credit unions to conduct virtual annual meetings provided that certain conditions are met. It also reiterates that credit unions have the option of postponing the annual meeting. Incidentally, an earlier order issued by New York State also gives corporations and credit unions the explicit authority to conduct virtual, annual and special meetings.

Third, an Executive Order issued by New York’s Governor Cuomo clarified what the DFS expects financial institutions to do in response to the pandemic. The order also makes clear that this mandate only applies to state chartered and state licensed institutions. This means that a federal credit union is not subject to this order but its CUSO is. For those of you subject to New York law, the order stipulates that a financial institution that does not provide a 90-day mortgage forbearance to any person or business who has a financial hardship as a result of the COVID-19 pandemic where it would be prudent to do so shall be committing an unsafe and unsound business practice. This is not guidance. It is a mandate. When in doubt, grant the forbearance. The order also empowers DFS to regulate and restrict ATM fees, overdraft fees and credit card fees during this emergency. This will be done pursuant to emergency regulations.

Fourth, there are two other orders you may have missed that impact your credit union whether it is state of federally chartered. The first permits electronic notarization. This is a huge potential benefit to your members who are nervous about going into your branch. Secondly, New York State has suspended all statutes of limitations in civil actions. This means that even though the court system is all but shut down it will not prevent you from taking legal action against members from whom debts need to be collected or mortgages foreclosed on once the emergency period has ended.

Finally, my wife assures me that liquor stores are classified as essential services under New York’s stay-at-home-order. I don’t know about anyone else, but a couple of months of cabin fever combined with non-stop regulations is the perfect recipe for a five o’clock drink. Have a good day and stay safe.

March 23, 2020 at 9:41 am 1 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


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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