New Statutory Defenses in New York For Homeowners Who Are Fighting Against Mortgage Foreclosure
These legislative changes are intended to protect owners of residential properties by requiring that additional notices be sent to homeowners both before and during the foreclosure process.
The underlying goal is to decrease the number of properties lost through foreclosure by ensuring the homeowners are aware of their rights to file answers in response to foreclosure complaints.
The notice requirements have been strictly interpreted by the courts, and have resulted in the dismissal of foreclosure actions that were filed by lenders who did not comply with the specific dictates of the new laws.
In 2008, the New York Legislature amended the Real Property Action and Proceedings Law (known as the "RPAPL") to require that a 90-day notice be sent to residential borrowers for high-cost, subprime or non-traditional loans.
Under the 2008 amendment, 90-days notice is a perquisite to the filing of a mortgage foreclosure proceeding, and it applies to subprime loans that were consummated between January 1, 2003 and September 1, 2008.
The foregoing time-period is clearly intended to cover the period during which it is believed that the most abusive lending practices occurred.
The statute defines non-traditional loans as those which are interest-only and/or have variable rates.
Under the statute, "subprime loans" are those with interest rates above a certain threshold, which is determined based on a formula that is set forth in the statute.
Most recently, in November, 2009, the New York legislature voted to extend the 90-day notice requirement to all types of home loans - not just subprime mortgages.
The bill also gives protections to renters living in foreclosed properties, allowing them to stay in their homes for the full 90-day notice period or the length of their leases, whichever is longer.
The legislature also enacted new requirements relating to summonses that are served in foreclosure cases.
RPAPL § 1320 is labeled "Special summons requirement and private residential cases.
" This section requires that a particular notice be included in the summons in residential foreclosure cases of three units or less.
The notice consists of a warning to the borrower that a default in answering could lead to the loss of the borrower's home.
The precise text that must be included in the summons is set forth in the statute.
When filing an answer to a mortgage foreclosure complaint, a homeowner should assert, as an affirmative defense, that the lender failed to comply with the special summons requirement applicable to foreclosure cases.
The filing of an answer form in response to a foreclosure complaint will ensure that the dismissal of a lender's summons and complaint which fails to include the new, mandatory warnings.
In the alternative, a homeowner may assert his or her rights under the new law by filing a motion to dismiss the foreclosure action.
While it may seem obvious that a foreclosure action can result in the loss of the subject property, the reality is that historically, many homeowners do not file answers to foreclosure complaints.
With the new laws, the legislature and courts seek to emphasize the need for homeowners to take quick action by filing and serving an answer to the foreclosure complaint.
The hope is to give homeowners, particularly those who are burdened with subprime loans, a chance to stop foreclosure and reach an alternative solution not involving the loss of their properties.
The foregoing RPAPL amendments are just a few of the various statutory provisions that have been enacted to protect residential property owners in New York from the loss of their homes in foreclosure.
In addition to the new foreclosure defense legislation, the courts in New York have become increasingly vigorous in ensuring that homeowners actually receive the required notifications.
Judges have not hesitated to dismiss foreclosure cases that were filed in violation of the new laws.
The key is for a homeowner to actually answer a foreclosure summons and complaint, thereby ensuring that the lender's complaint is subject to the judicial scrutiny.
In this manner, homeowners have the chance to stop foreclosure.
As a result of the changed laws and procedures, homeowners are more likely to succeed in their efforts to defend against the loss of their homes through foreclosure.
Although the foreclosure crisis in New York is not as severe as in some states (e.
Nevada and Florida), the statistics give ample cause for concern.
As of November, 2009, it is estimated that 12% of New York homeowners are delinquent in their mortgage payments.
Meanwhile, New York suffers from a 9% unemployment rate, giving reason to believe that the rate of foreclosures will continue to be high.
Thus, the defensive measures enacted in New York represent an effort to deal with an ongoing crisis that shows no sign of abating in the near future, and which will continue to affect individuals and neighborhoods throughout the state.