New Foreclosure Statute in New York -- Lawmakers Hammer Mortgage Lenders

New Foreclosure Statute in New York -- Lawmakers Hammer Mortgage Lenders

New York State has passed foreclosure statutes which will impose considerable delay upon the mortgage foreclosure process and create numerous new opportunities for borrowers and other defendants to contest the foreclosure case. The law will also expose lenders to potentially significant repair and maintenance costs for properties during foreclosure as well as other costs. In this Analysis, Bruce Bergman, of Berkman, Henoch, Peterson & Peddy, PC, examines the new statutory requirements. He writes:

     There is ample historic evidence that lenders have not been an exalted group. But of course they serve a critical role in society and need to be able to enforce their rights when, for example, a mortgage may go into default. That ability and the efficiency attendant to it can readily be compromised, however, by state statutes. That some under-appreciation of lenders continues may be implied by a host of new foreclosure laws in many jurisdictions.

     New York State as a prime example has passed foreclosure statutes which will impose considerable delay upon the mortgage foreclosure process and create numerous new opportunities for borrowers and other defendants to contest the foreclosure case. (See RPAPL §§ 1303, 1304, 1305, 1306, 1307 and CPLR §3408) The law will expose lenders to potentially significant repair and maintenance costs for properties during foreclosure - and even after foreclosure - as well as incurrence of increased insurance premiums, legal and administrative costs and exposure to tort liability. It will also work a reversal of title priorities so that leases junior to the mortgage will survive foreclosure and thereby be elevated to seniority.

     Here, just as a short introduction, is a list of the new requirements in outline form:

  • Notice to all tenants concerning their rights to remain at the mortgaged premises must be mailed within ten days of service of the summons and complaint (even if tenants are not being served). (RPAPL §1303 effective 30 days after December 15, 2009.)
  • Ninety-day notice of default to be sent to borrowers for all home loans, including co-ops, (no longer confined to sub-prime or any amount) as a condition precedent to foreclosure. (RPAPL § 1304 effective 30 days after December 15, 2009.)
  • Post-sale notice to be given to all tenants or occupants allowing those with a lease (even oral or implied) to remain for the balance of the lease (others to remain for 90 days after notice.) (RPAPL §1305 effective 30 days after December 15, 2009.)

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