Statewide Judicial System Report Issued on N.Y. Foreclosure Cases

Statewide Judicial System Report Issued on N.Y. Foreclosure Cases

Earlier this month, the Chief Administrative Judge of New York's Unified Court System issued a report on the status of foreclosure cases in the state judicial system. The 2013 report contains important information about how the state's courts are handling the large volume of foreclosure cases in New York, based on case data covering the period of October 9, 2012, to October 6, 2013. Among other findings, the report noted a major uptick this year in the number of new foreclosure filings, which is likely to pose further challenges to a system already facing a daunting caseload.

The report is issued annually in accordance with Section 10-a(2) of Chapter 507 of the Laws of 2009, which enacted various provisions principally related to foreclosure proceedings on residential mortgages in New York State. Under this legislation, the chief administrator of the courts must submit a report to the governor and designated key legislative officials addressing "the adequacy and effectiveness" of mortgage foreclosure settlement conferences authorized by the legislation, which must also include statistical information regarding the conferences.

The report noted that foreclosure cases account for nearly one-third of the Unified Court System's civil cases in the supreme court system (the statewide trial-level court system). Given this heavy caseload, the court system is "committed to prioritizing the foreclosure docket," according to the report. To that end, the system has refined and enhanced the case information gathered in foreclosure cases—a process that continues to evolve. For example, recently the court system proposed amending the Request for Judicial Intervention (RJI) form filed at the initiation of a residential mortgage foreclosure case (discussed below) to require identification of the mortgage servicer involved in the case.

The report also noted the role of the Statewide Foreclosure Committee. The Committee, which was created in December 2011, comprises state and local administrators, judges, and legal and clerical staff from every judicial district in the state. It gathers and shares case management strategies, best practices, and lessons learned from local programs. It also has begun to explore an expedited procedure for foreclosures involving abandoned properties.

The report highlighted success in the statewide initiative to create uniformity and streamline data entry in foreclosure matters, observing that the courts "have embraced the new data collection system." Every county in the state is using the same data metrics, which will soon allow for reliable year-to-year comparisons and also will be very helpful in individual counties as a case management resource.

Based upon the data compiled, the report also addressed salient aspects of the judicial foreclosure system:

Foreclosure Filing Trends

In 2011 and 2012, filings had decreased substantially. This decline is attributed to the requirement (established by a court system administrative order in 2010) that the plaintiff file an affirmation certifying the accuracy of court documents in residential foreclosure cases; the requirement was intended to combat the practice of "robo-signing" (where, as described in the report, bank representatives claimed to have reviewed thousands of documents in impossibly short time periods). The report stated that the filing declines in 2011 and 2012 indicated "that the banking industry had difficulty complying with the affirmation requirement," but that the 2013 filing trends "suggest that they are now better able to meet the requirement."

Consequently, the report explained that so far in 2013, the number of new foreclosure cases has increased, projecting approximately 44,000 new cases by year-end—a "markedly higher" number than in the prior two years. In fact, this projection is more than the combined total of filings in 2011 and 2012. The report noted that the pending inventory of foreclosure cases has increased more than 16 percent since the beginning of the year. This increase will no doubt further challenge the already heavily burdened system.

Settlement Conferences

An important addition to New York foreclosure reform was the adoption in 2008, by statute, of a mandatory settlement conference early on in a residential foreclosure action. The provision was enacted as a mechanism to facilitate prompt resolution where a homeowner is in default and faces foreclosure. The recent substantial increase in filings has caused a major increase in these mandated settlement conferences.

The report explained that in the first nine months of 2013, more than 76,000 of these conferences were held, and that nearly 100,000 conferences are projected to be held in 2013. According to the report, "[t]he conference process has stretched resources to their limits in the courts, as well as for the housing counseling agencies and legal service providers that handle these matters on a daily basis."

Representation by Counsel

New York is very aware of the need to afford appropriate legal services to homeowners facing foreclosure, particularly for low-income New Yorkers. As the report emphasized: "The Judiciary continues its efforts to increase the availability of counsel to homeowners unable to afford representation. Legal service providers, volunteer lawyers, law school clinics and housing counselors are working with the courts in each judicial district to provide representation at these conferences."

In 2011, only 33 percent of defendants in residential foreclosure cases were represented at their settlement conferences, but this representation increased to 51 percent for 2012, according to the report. And for 2013, more than 54 percent of defendants had counsel—even though this increase in representation occurred when the number of conferences greatly increased. The report stated that the level of 2013 representation is a marked increase from when the foreclosure crisis began. The flip side is that many defendants still are unrepresented and frequently appear pro se, making it harder to resolve a foreclosure.

'Shadow Inventory' Pilot

Although a case can be commenced with filing and service in New York, a judge does not become involved for conferencing or addressing motions until an additional document—the RJI—is filed. As a result, the New York court system includes many residential foreclosure cases that, while commenced against a homeowner, are not actually before the court for action by a judge. The report notes that there are thousands of these cases, referred to as "shadow inventory."

In June 2012, the Chief Administrative Judge authorized special "pilot" courts designed to schedule foreclosure cases, even though an RJI had not been filed. After initial success with that program, the approach was expanded by adding a new rule authorizing special calendars (no longer as pilot programs) for certain residential foreclosure actions. This likewise would permit scheduling foreclosure cases for conference without an RJI filing. The county clerks of the five supreme courts in New York City then undertook the labor-intensive task of identifying more than 7,500 cases in shadow inventory. These courts began notifying homeowners to appear for conferences.

The goal is to get as many of these cases as possible to a foreclosure settlement conference early in the proceeding, when resolution is most feasible. The report noted that approximately 7,000 conference appearances have resulted from this approach. The report underscored, however, that county clerks outside of New York City are not easily equipped to identify these cases, so only a few counties statewide have progressed with their shadow inventory.

New Certificate of Merit Legislation

The report noted that effective August 30, 2013, new legislation requires the filing of a certificate of merit at the time of filing a residential foreclosure action. This legislation addresses both the practice of "robo-signing" of documents and the "shadow inventory" concern. It continues the court system's enhancements to address the integrity of filings for residential foreclosure cases.

In 2010, an administrative order was promulgated that required a plaintiff to file an affirmation certifying the accuracy of documents when the RJI is filed. The new legislation advances the timing on that showing by requiring that an equivalent certificate of merit be filed when the action is commenced. The report stated that this new legislation "is critical to ensuring the integrity and transparency of the foreclosure process."

The Chief Administrative Judge's report is an informative synopsis of the status of residential foreclosure cases in New York and how the court system is endeavoring to handle this very important inventory of cases before it. The report highlights the innovative actions and foreclosure-specific litigation requirements taken systemically to address the burgeoning foreclosure docket. All players in the foreclosure arena—lenders, borrowers, servicers, and others—should be attuned to these actions and the court system's evolving efforts to manage the unique challenges of New York foreclosure cases efficiently and fairly.

- Scott M. Himes


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