LEGAL OPINION ON THE LAW AND PROCEDURE FOR FORECLOSURE ACTIONS
This is my opinion on the applicable law and procedure for foreclosure actions. In the opinion, I have explained as clearly as possible, the following three issues that you stated in your instructions:
- When a foreclosure is filed;
- What are the supporting documents in order to initiate a foreclosure; and
- What are the applicable laws that support foreclosure applications.
- When are foreclosure filed?
A foreclosure action is filed after a borrower misses their mortgage payments. Usually, the servicer of the mortgage contacts the borrower to notify them of the default on the mortgage repayments. They may also want to discuss a repayment plan or loss mitigation options (to help you avoid incurring further charges as interests from the default). However, the servicer of the mortgage is bound by the New York Fair Debt Collection Practices Act. For instance, under the Act, a lender is prohibited from making threats, calling too often, calling at inconvenient times in the day, making robocalls and collecting old debts.
In New York, a lender should send the borrower a ninety days’ notice before initiating the foreclosure process, if the property is a borrower-occupied, one- to four-family dwelling, or a condominium unit. Federal law is quite different. In federal law, the lender is required to provide at least 120 days’ notice before initiating the foreclosure. The notices should notify the borrower of the default, and advise them on any counselling agencies around them. Please note that failure of the lender to send the notice is a defense for the borrower, in the foreclosure case.
After the expiry of the ninety days’ period (or the 120 days in federal law), and the borrower has not settled the debt, the lender may proceed to file the foreclosure action.
- What are the supporting documents in order to initiate a foreclosure?
A lender who files a foreclosure action must file a lawsuit in court. The lender files a Summons and a Complaint. The lender also files a Notice of Pendency (lis pendens). A notice of pendency gives public notice of a pending New York state or federal lawsuit in which the parties dispute ownership, possession, enjoyment or use of a particular piece of real estate. The lender will also need to file copies of the mortgage documents, and promissory notes. The documents are filed in the office of the county clerk of the county where the real estate lies.
- What are the applicable laws that support foreclosure applications?
- N.Y. Real Prop. Acts. Law §§ 1301 — 1393
The applicable law with regards to foreclosure in New York is N.Y. Real Prop. Acts. Law §§ 1301 — 1393).
One major provision of the law is that the lender must prove standing for them to successfully prosecute a foreclosure case. See N.Y. Real Prop. Acts. Law § 1302-A. The plaintiff must say in the complaint for foreclosure that it is the owner and holder of the subject mortgage and promissory note, or that it has been delegated the authority to start a mortgage foreclosure action by the owner and holder of the mortgage and note. The law states specifically that a defendant shall not be deemed to have waived their right to challenge standing, if they failed to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss.
- N.Y. Civil Practice Rules
Foreclosure actions are also subject to the rules of civil procedure in New York. One such procedural guidelines is N.Y. Civil Practice Rule 3408, which provides for Mandatory settlement conference in residential foreclosure actions. The conference takes place within 60 days after the lender files proof of service with the court clerk. The purpose of the conference is to provide an opportunity to work out an agreement to avoid foreclosure, such as a loan modification.
Another example of a procedural guideline is N.Y. Civil Practice Rule 205-a, which creates a new “savings” statute which permits a new foreclosure action to be commenced where a prior action for the same relief was timely filed but later dismissed for any reason other than: (1) by voluntary discontinuance; (2) failure to obtain personal jurisdiction over the defendant; (3) dismissal for neglect to prosecute; or (4) dismissal on the merits, so long as the new action is also timely under the statute of limitations.
- Foreclosure Abuse Prevention Act (S5473)
This law provides that a lender’s voluntary discontinuance of an action to foreclose a mortgage doesn’t stop the six-year statute of limitations period from running. Therefore, if a lender fails to bring the foreclosure case within the six-year time limit, the lender is barred from filing the case after the time limit ends. Interestingly, this law applies retroactively to any pending foreclosure action filed before December 30, 2022 (when the law was enacted), for which a final judgment and order of sale had not been enforced.
- CONCLUSION
Based on the foregoing analysis, my opinion is as follows:
- A foreclosure action is filed after the lender or servicer gives the borrower a ninety-day notice (for New York foreclosures) and 120-day notice (for federal court foreclosures).
- The documents that are needed to file a foreclosure action include a Summons, Complaint, and a Lis Pendens. The lender should also include supporting documents including the mortgage agreement, and the promissory note.
- There are a variety of laws that govern foreclosure in New York. These include N.Y. Real Prop. Acts. Law §§ 1301 — 1393, N.Y. Civil Practice Rules, and Foreclosure Abuse Prevention Act (S5473).
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