Real Estate, Mortgage & Foreclosure
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Dahiya Law Offices LLC
75 Maiden Lane Suite 606
New York NY 10038
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FAQs - Home Mortgage Foreclosure in New York
If you are current with the mortgage payment, there is no dislodging of your interest or ownership from your home. And if you have fallen behind in your payments, it does not mean that you lose your ownership upon default. There is a process in place to guard you and the lender’s interest. You are the owner of the house, and the bank has a lien.
What does New York lien theory mean?
When a bank finances the purchase of the real property, the buyer continues to be the deed owner of the said property with the bank retaining a lien as long as the mortgage amount is not paid back. So, mortgage is a lien secured by real property. This mortgage is not a transfer of the legal title to the lender. In some states like Massachusetts, legal title to the mortgaged real property “remains in the mortgagee (bank) until the mortgage is satisfied or foreclosed. This is a title theory state unlike New York. This is an important distinction. If the mortgage money is not paid and there is a default, the bank would commence a foreclosure proceeding. Actually, the bank could either commence a proceeding on the Promissory Note and then enforce the judgment or could proceed in equity by foreclosure action cut of the ownership and sell.
The bank would want to be paid back and one way is forced sale of the underlying property. Only through a court of law that the property could be forcibly foreclosed
How is removal initiated?
In New York, there are three ways to realize upon such secured loans (1) strict foreclosure, (2) Advertised foreclosure, and (3) statutory foreclosure by action and sale. Majority of the New York foreclosure, action to foreclose and sell are done through the Real Property Actions & Proceedings Laws--article 13 covers such foreclosure.
How is foreclosure commenced?
Foreclosure proceeding of a residential mortgage is commenced by a filing a complaint with the Supreme Court of the respective county. The bank has to provide special statutory notice besides the summons and complaint. This special notice is a sperate page. “Such notice shall be in bold, fourteen-point type and shall be printed on colored paper that is other than the color of the summons and complaint, and the title of the notice shall be in bold, twenty-point type.” NY RPAPL § 1303. It reads as follows:
Help for Homeowners in Foreclosure
New York State Law requires that we send you this notice about the foreclosure process. Please read it carefully.
Summons and Complaint
You are in danger of losing your home. If you fail to respond to the summons and complaint in this foreclosure action, you may lose your home. Please read the summons and complaint carefully. You should immediately contact an attorney or your local legal aid office to obtain advice on how to protect yourself.
Sources of Information and Assistance
The State encourages you to become informed about your options in foreclosure. In addition to seeking assistance from an attorney or legal aid office, there are government agencies and non-profit organizations that you may contact for information about possible options, including trying to work with your lender during this process.
To locate an entity near you, you may call the toll-free helpline maintained by the New York State Department of Financial Services at (enter number) or visit the Department’s website at (enter web address).
Rights and Obligations
YOU ARE NOT REQUIRED TO LEAVE YOUR HOME AT THIS TIME. You have the right to stay in your home during the foreclosure process. You are not required to leave your home unless and until your property is sold at auction pursuant to a judgment of foreclosure and sale.
Regardless of whether you choose to remain in your home, YOU ARE REQUIRED TO TAKE CARE OF YOUR PROPERTY and pay property taxes in accordance with state and local law.
Foreclosure rescue scams
Be careful of people who approach you with offers to “save” your home. There are individuals who watch for notices of foreclosure actions in order to unfairly profit from a homeowner’s distress. You should be extremely careful about any such promises and any suggestions that you pay them a fee or sign over your deed. State law requires anyone offering such services for profit to enter into a contract which fully describes the services they will perform and fees they will charge, and which prohibits them from taking any money from you until they have completed all such promised services.
If you do not have this notice, you could move to dismiss such an action. Watch out for the Contents of the Complaint.
What do you look for in the Foreclosure Complaint?
Besides the aforesaid notice, the Complaint must state, as of commencement of the case, the bank has complied with the provisions of RPAPL § 1304 of having sent a ninety day notice to the homeowner prior to the commencement of the foreclosure action. Also within the next 3 days of having sent the 90 days, the lender must, a send a notice (electronic) superintendent of bank. Also, this has also to be stated in the complaint, that the lender has complied with the filing with the superintendent of financial service. “Any complaint served in a proceeding initiated pursuant to this article shall contain, as a condition precedent to such proceeding, an affirmative allegation that at the time the proceeding is commenced, the plaintiff has complied with the provisions of this section.” Id. The notice to the superintendent must include, the name, address, last known telephone number of the borrower, and the amount claimed as due and owing on the mortgage, and such other information as will enable the superintendent to ascertain the type of loan at issue.
The Complaint must also make a reference to the acceleration notice. For that acceleration notice alone determines the default and paves the way for foreclosure proceeding. An acceleration notice would be giving the borrower a grace period for catching up with the mortgage payments.
The complaint has to identify the mortgage holder, for that shall determine the issue of standing to commence the lawsuit. Also, the servicer of the loan too could be commencing party, however that has to be identified in the complaint. Standing is not such a serious impediment n the state court actions, if it is not challenged—standing is waivable in New York.. You will also find the demand for foreclosure of the mortgage. And to the extent there is a demand for the debt paid and not the foreclosure, there would not be any foreclosure of the property. Lastly the Complaint must have certificate of merit, which actually is the attorney affirmation that which declares the attorney personally having examined the underlying paperwork is objectively satisfied about the standing of his client to sue.
Is it the right party suing for foreclosure?
In the secondary mortgage market, the record keeping is abysmal. Only a party holding both, the note and the mortgage can institute a foreclosure proceeding. Neither the debtor alone nor the mortgage alone could provide standing. The usual impression is that the mortgage follows the note, so anyone holding the note would presumptively the holder the mortgage. However, in the securitized mortgage transactions, it is not strictly followed. The foreclosing party must have the ability to enforce the note. Since the complaint usually makes a declaration that the bank has the right to sue, the bank could be compelled to make a showing that they are indeed holding the original note. A photocopy would not do. In a recent case, the appellate court held that, since, it could not be ascertained from the copy of the note provided by the bank whether the separate page that bears the endorsement in blank was stamped on the back of the note, as alleged by the bank, or on an allonge, and if on an allonge, whether the allonge was “so firmly affixed as to become a part thereof,” as required under UCC 3–202(2), the bank was compelled to grant discovery about the said note in original. The court had also found that since the answers to these questions are “material and necessary” to the defense of lack of standing, the bank could be compelled to produce the original note and endorsements. Bayview Loan Servicing, LLC v. Charleston, 175 A.D.3d 1229, 1232(2019). There are other distinctions about the Note holder and Note owner which will be addressed separately. Once you challenge the standing of the particular bank, the bank will have to produce additional paperwork to show that they indeed have the right paperwork to commence the case. Usually the banks as soon as an answer is filed move for summary judgment, see that it is checked and challenge their standing. See Ocwen Loan Servicing, L.L.C. v. Schacker, 129 N.Y.S.3d 91 (N.Y. App. Div. 2020) (finding that the bank could not meet the evidentiary standard for presenting admissible evidence of standing for purpose of summary judgment with hearsay affidavits of servicer’s loan specialist and its attorney).
What other defenses could be availed to challenge the claim of the bank?
Look at the loan package, unpack the numbers. Understand the amounts paid to each party and look for the real beneficiary of cash disbursed at the time of purchase. Overreaching by the banks would be found where the borrower was saddled with the loan without ability to repay the loan. See New York Banking law section 6-l(2)) (ability of the repayment is to be considered). Also, section 6-m lenders are prohibited from making subprime home loan without reasonable, good faith belief that borrower has ability to repay. The New York Banking laws has some serious checks against abusive lenders. These defenses can be raised anytime even including foreclosure. Most of homeowner are not very sophisticated to understand the real estate transaction and the complexity of the forms though the governmental agencies have tried their best to make the process simple. However, the same has not been very useful especially when the borrowers are made to sign a plethora of paperwork at the closing, the attorneys not spending much time to explain nitty-gritty of the loan. Lot of these closing are arranged by the real estate brokers who bring the home purchasers to the attorney of their choice. The other relief could be gauged from federal laws, like the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), and fair lending laws, including the Home Ownership and Equity Protection Act of 1994. Failure to comply with ability-to-repay and income verification rules may also violate TILA. The other counterclaims could be premised upon common law causes of action such as fraud, misrepresentation, estoppel, breach of fiduciary duty, unconscionability.
Can the foreclosure action be commenced in a federal court?
Yes, only if there is a complete diversity between the parties, i.e. that all plaintiffs must be from different states than all defendants. National banks are citizen of the state in which they are respectively located. Corporations have two citizenships, the state of incorporation and corporate place of business. Foreclosure in the district court might not entail some protections accorded by the state court, especially loss mitigation, court-supervised settlement conference. (See N.Y. C.P.L.R. 3408.) . Federal courts follow federal rules and not state court rules, even if the state court rules might allow some substantive relief.
What happens if there is no Answer filed or if the Defenses are ineffectual?
If no answer is posited to the foreclosure complaint, a default would occur, and the bank will have one year within which to seek a entry of default judgment against the responsible parties.
If the defenses are not meritorious or there are not issues of facts to resolved, then the bank would be seen to moving for summary judgment. In a foreclosure action, the banks by default move for summary judgment. Summary judgement is usually granted where the facts speaks for themselves, reflected in the complaint and answer and other paperwork executed between the parties as the affidavit of person with personal knowledge about the debt and amount outstanding. Even the homeowner could move for summary judgment. But where the facts are disputed, there is no summary judgment.
Is there a right to jury trial in a foreclosure case?
Since the foreclosure action is deemed to be a equitable proceeding, there is no right to jury for the parties. However, if there are counterclaims seeking money damages, the defendant would be entitled to jury trial.
