Anyone who is experiencing a loss of income due to the National Emergency and is unable to make their regularly scheduled mortgage payments are directed to contact their mortgage servicer. Regrettably, most if not all mortgage servicers are operating with reduced staff and it is very difficult to contact them. If you have automatic withdrawal you may want to stop it immediately. If you are lucky and make contact with the servicer, you will need to submit an application for mortgage assistance and you may be given a forbearance from 3 to 12 months. After a forbearance is completed, the servicer will determine if you qualify for a loan modification, and if approved, the unpaid payments are essentially added to the principal balance and the loan is re-amortized over 30 or 40 years. If, however, you still do not have sufficient income after the forbearance period is completed, you may be denied a modification and the account may go into foreclosure.  This is what happened after the financial crisis of 2008.

​If your mortgage is state regulated then in NY, you may qualify for a three month forbearance, but again, you need to submit an application for assistance with your mortgage servicer. I understand that the NYS Department of Financial Services has required all state regulated mortgage companies to waive late fees and not report any negative credit history to the credit bureaus.  If you have a federally insured mortgage (FANNIE MAE or FREDDIE MAC) then you may qualify for a forbearance up to 12 months. I understand that late fees are waived and all negative credit reporting is suspended. If you do ultimately receive a loan modification, it is likely that the modification will be reported to the credit bureaus. Lastly, the application process for a forbearance is lengthy (3 months on average) and you will need to provide your tax returns, bank statements, all sources of income and hardship letter. After the forbearance period is over, you will need to apply for a mortgage modification which is almost identical to the forbearance application and the process will likely be another three months before a final decision is made. Note: if you have large sums of money and or assets, you may not qualify for a modification. My best advise is to save as much money as you can during these challenging times because whatever you save can be used to pay down any arrears if your are denied a modification later on.  I wish you all well and bless us all!!!

Below are useful sites to further assist you in determining whether your mortgage is federally insured with FANNIE MAE or FREDDIE MAC.  Stay Safe everyone!!!!

https://www.fhfa.gov/Homeownersbuyer/MortgageAssistance/Pages/Coronavirus-Assistance-Information.aspx

https://www.ffiec.gov/consumercenter/default.aspx

https://www.dfs.ny.gov/reports_and_publications/press_releases/pr202003241

May 25, 2020 UPDATE:

FANNIE MAE and FREDDIE MAC are now offering a new deferral option which will permit borrowers in forbearance due to Covid-19 pandemic to defer their missed mortgage payments (up to one year while on forbearance) and they will not have to pay the missed payments until the end of their mortgage term (the mortgage maturity date). In other words, if a borrower/homeowner's mortgage has 20 years remaining then the deferred payments will become due immediately after the remaining 20 years.  If the borrower/homeowner sells or refinances the mortgaged property before the maturity date then the deferred payments become due at the time of the sale or refinance. lenders are required to offer this deferral option  beginning July 1, 2020. As of now, it is unclear if the borrower/homeowner will be required to submit a formal application for the deferral. It is also unclear if the deferral applies to the entire missed payments including escrows or if it only applies to the principal and interest portion of the mortgage payments. Obviously, any forbearance will result in an escrow shortage and it is unlikely that Fannie Mae or Freddie Mac will be reaching into its coffers to pay the taxes while allowing borrowers to defer the entire missed mortgage payments until their mortgage maturity dates. See below link for Fannie Mae's official press release:

​https://www.fanniemae.com/portal/media/corporate-news/2020/covid-payment-deferral-7018.html


June 18, 2020 UPDATE: Fannie Mae and Freddie Mac are extending the temporary three-month forbearance for up to 12 months to homeowners who continue to reside in their homes that have mortgages insured by Fannie Mae and Freddie Mac.  Homeowners should contact their loan servicers to make sure that the initial three-month forbearance is extended another three-months. Failure to make the request may cause problems with the loan account. After the additional three month extention, homeowners can decide if they need additional extensions (totaling no more than 12 months). At the end of the forbearance terms, homeowners can request that the principal and interest portions of their missed payments during the forbearance term be added to the loan balance. The servicers are not to charge any additional interest or late fees and the sum for the missed principal and interest will be payable at the end of the mortgage maturity date or upon refinance or transfer. There will be no formal application process for this unless a homeowner cannot make payments due to financial reasons and in those cases, a homeowner will need to submit a formal loss mitigation application to the lender to see if the mortgage can be modified. If, however, a homeowner lacks sufficient income to resume mortgage payments then it is likely the servicer will deny an application for loan modification. It is still too early to know how things will play out and whether the current pandemic will result in additional considerations that prompt servicers to offer additional relief to homeowners...so hang in there!

Missed tax and insurance escrows during the forbearance term(s), however, must be paid back after the last forbearance term ends (maximum of 12 months), and the missed escrows can be paid down and/or paid back over a one year period or whatever period the servicer permits. This will result in a larger mortgage payment upon homeowners resuming the regular monthly mortgage payments after the last forbearance term ends. It is therefore recommended that homeowners save as much money as they can to pay down or pay off the missed escrows. 

Governor Cuomo recently signed a new law (NYS bill S5160) that now gives a substantial right to borrowers in a foreclosure action.  The new law is RPAPL Section 1302-a. Before this new law, if the borrower defaulted in the foreclosure action, the borrower would have had to file a motion seeking to set aside his/her default and show a good reason for defaulting along with a showing that there were meritorious defenses to the foreclosure.  Many such motions, however, were denied because the borrower could not prove good cause for defaulting unless the default occurred very early in the foreclosure action. Under the new law, the borrower can assert standing anytime and even after a foreclosure sale if the borrower was in default.  This new law which is effective immediately permits borrowers with another bite at the apple and it's a potential game changer. The new law can be found by clicking the following link below.

https://www.nysenate.gov/legislation/bills/2019/s5160

One of the most effective defenses to assert in a mortgage foreclosure action is the Plaintiff's lack of standing.  What does lack of standing mean? Simply put, it's when the Plaintiff cannot prove that it is the holder (owner) of the note. If the Plaintiff bank commences a foreclosure action and fails to demonstrate "standing", the foreclosure action will likely be dismissed by the court.  This seems like a great result, but if there is also a statute of limitations defense that can be asserted (the Plaintiff bank waited more than six years after accelerating the mortgage (declaring entire loan amount due and owing) then the statute of limitations defense can be deemed moot if the Plaintiff bank or its predecessor never had standing when the mortgage was accelerated. The statute of limitations defense only applies when the loan was accelerated by the actual owner of the note.  A statute of limitations defense is a complete defense to a foreclosure action while a lack of standing defense may or may not act as a complete defense to a foreclosure action (i.e. the real owner of the note commences a new foreclosure action). Thus, when a borrower has grounds to assert both defenses, the borrower may need to make a strategic decision not to raise the standing defense.  Below is a court case that essentially disallowed the statute of limitations defense when it was shown that the Plaintiff bank did not have ownership of the note at the time it allegedly accelerated the loan.  Obviously, there are many intricacies and it is imperative that a borrower in foreclosure always consult with an experienced foreclosure attorney. The case mentioned above can be reviewed by clicking the following site:  
http://www.nycourts.gov/REPORTER/3dseries/2012/2012_02866.htm

A mortgage lender (bank) will typically refer a mortgage loan account to foreclosure when the borrower (homeowner) is in default, such as when the homeowner fails to pay the mortgage payment(s), property taxes, hazard insurance, etc.  If the house is occupied by the homeowner, the bank is required to serve the homeowner with a 90 day pre-foreclosure notice (aka the "RPAPL Section 1304 notice") advising the homeowner that s/he must pay all arrears to the bank and that the homeowner can contact the bank to find out if the homeowner qualifies for any mortgage assistance (modification, forbearance, repayment, etc.). The notice permits a 90 day breathing period for the homeowner to try and resolve the default before the bank commences foreclosure. If the default is not resolved within the 90 day period, the bank will likely send another notice (notice of default) indicating that if the default is not cured within thirty days, the bank will accelerate the loan balance and the entire loan amount will become due. If the default is not cured after the thirty days, the bank can commence foreclosure proceedings anytime thereafter. Formal foreclosure proceedings begin when the bank records a notice of pendency in the land records and files a summons and complaint seeking the right to foreclose against the homeowner's house. There are numerous legal requirements that the bank must comply with when it serves the summons and complaint on the homeowner. Typically, the homeowner has 20 or 30 days to file an answer contesting the bank's foreclosure action. Usually sixty days after the foreclosure action is commenced, the court will order the parties to appear for a mandatory foreclosure settlement conference which is intended to see if the homeowner is eligible for mortgage assistance. If the borrower is denied mortgage assistance and does not have the ability to pay the arrears, the litigation will proceed. The below link offers additional information pertaining to the typical motions that the bank will file with the court. If the motions are not contested by the homeowner, the bank will be granted the right to foreclose and sell the house at public auction. 

See: https://www.nycourts.gov/courthelp/Homes/foreclosureBasics.shtml

Fortunately most mortgage agreements do not contain a provision waiving a borrower's potential statute of limitations defense, but occasionally we do see some mortgages with such clauses. It seems oppressive to require a borrower to waive such a right at the time of the mortgage execution which would obviously occur before any statute of limitations defense would arise.  Why is this oppressive, you ask? Although the defense is not typically availing in most foreclosure cases, the defense is the most potent defense that can prevent a mortgage holder from foreclosing against the mortgaged property; therefore, waiving the defense could result in a large loss to the borrower/homeowner assuming of course that the mortgage goes into default. Typically, the mortgage agreement is a one sided agreement in favor of the lender. The waiver could be deemed an "adhesion clause" which essentially means that the borrower possessed no meaningful bargaining power to negotiate the terms of the mortgage which was drafted by the lender and for its own advantage; thus, it would be unfair to deprive the borrower of his/her right to assert such defense. Regrettably, New York Courts do regularly uphold such "oppressive" waivers in a mortgage agreement and even in cases when the borrower is unsophisticated and unable to fully appreciate the significance of waiving such rights. The below case is illustrative of the appellate court's willingness to apply an even more "oppressive" waiver--the waiving of defenses and counterclaims.  Seems fundamental that a borrower should be entitled to raise meritorious defenses and counterclaims regardless on the boiler plate language in the mortgage agreement, but it's the terms of the mortgage that control.  Although this particular waiver is not a complete bar to raising ALL defenses, the waiver is still problematic for a sympathetic borrower.  The case that illustrates the point can be found here:
https://www.leagle.com/decision/innyco20100513340

​Some homeowners in foreclosure who have not been successful with typical loss mitigation options (repayment plan or modification) may have a right to reinstate their mortgages. Reinstatement is when the borrower is able to cure all mortgage arrears (all prior missed payments) by paying the full sum of such arrears. Once the lender receives the reinstatement funds, it is required to reinstate the mortgage and discontinue the foreclosure action, if one was commenced. Thereafter, the homeowner will continue making all future monthly mortgage payments. Regrettably, mortgages are contracts and typically have provisions limiting the homeowner's right to reinstate. For instance, most mortgages prohibit reinstatement after a judgment of foreclosure and sale has been granted by a court. Some private mortgages (mortgages granted to non-institutional lenders) prohibit reinstatement after a number of successive missed payments! Despite these unforgiving prohibitions, the homeowner may be able to reinstate the mortgage in a Chapter 13 bankruptcy. Once a Ch. 13 bankruptcy petition has been filed, the foreclosure is stayed and the homeowner (debtor) agrees to pay each monthly mortgage payment going forward after the bankruptcy filing and the full arrears (missed mortgage payments) will be paid back by way of monthly payments to the U.S. Trustee in the bankruptcy case. The arrears can be amortized over a period of time not to exceed five years (60 months). Under this scenario, the homeowner (debtor) will be making two payments each month--the current mortgage payment to the lender and a payment to the trustee to cover the arrears. Obviously the lower the arrears the better the chance for a successful resolution; thus, it pays to be proactive from the beginning and to contact an experienced foreclosure attorney as soon as possible to fully protect a homeowner's rights.

In addition to state laws that offer protections to homeowners in mortgage foreclosures, homeowners can avail themselves to additional protections if the mortgage was insured through HUD (Housing and Urban Development). The servicer of a HUD insured loan is required to comply with HUD regulations and failure to comply may provide the homeowner with additional defenses in a foreclosure action. HUD regulations put a heavy emphasis on loss mitigation and require that when a borrower has missed three mortgage payments, the servicer must contact the borrower for a face-to-face meeting for purposes of reviewing the borrower for loss mitigation options (24 CFR Section 203.604). HUD intended that its loan servicers take a proactive approach when a default has occurred and for good reason.

Additionally, most HUD mortgages contain a paragraph that likely creates a condition precedent to foreclosure. Paragraph 9(a) of a typical HUD mortgage provides: “Default. Lender may, except as limited by the regulations issued by the Secretary, in the case of payment defaults, require immediate payment in full of all sums secured by this security instrument if : (1) Borrower defaults by failing to pay in full any monthly payment required by this security instrument prior to or on the due date of the next monthly payment…”(emphasis added). The language in bold type mandates that before the servicer can commence foreclosure it must be in compliance with HUD regulations. 

Recently, the Appellate Division for the Third Department addressed the issue of whether a foreclosing Plaintiff must comply with HUD regulations prior to accelerating and foreclosing on a HUD insured mortgage. See Green Planet Serv., LLC v. Martin, 141 AD3d 892 (3rd Dept 2016).  In that case, the court held that compliance with HUD regulations was a condition precedent to acceleration and foreclosure. Id. at 893. The court also held that where the defendant’s answer alleges non-compliance with such condition precedent in accordance with the pleading requirement of CPLR Section 3015(a), the plaintiff-lender has the burden of demonstrating the occurrence of the condition precedent as part of its prima facie case. Id. at 893. The court went on to hold that the plaintiff-lender was not entitled to summary judgment because its moving papers were “wholly devoid of any proof, explanation or argument” regarding the plaintiff-lender’s compliance with the face-to-face meeting requirement. Id. at 893.

Failing to raise these defenses may seriously limit the homeowner's chances of prevailing in a foreclosure action; consequently, it is imperative that the homeowner consult with an experienced foreclosure attorney. Every defense matters and failing to raise just one defense can make all the difference. 

  
​After a home in foreclosure is sold at a foreclosure auction, the foreclosing lender is required to file a 1099-A which reports the foreclosure auction to the IRS. The auction is deemed a sale for IRS purposes, and the homeowner/borrower is required to report the sale on his or her tax returns for the year in which the auction/sale occurred. If, however, there was a cancellation of debt, the lender would then be required to file a 1099-C (the 1099-C was discussed in detail in my July 24, 2014 blog post).

Because most foreclosures involve non-recourse loans (where the borrower is personally liable for the repayment of the loan) the sale price is deemed the fair market value (FMV) of the property at the time of the auction sale. The homeowner/borrower will then need to determine the adjusted basis in the property and subtract that sum from the FMV which will then determine if there is a loss or a gain. If there is a gain then it may result in a tax bill unless the homeowner/borrower can claim the $250,000 Lifetime Capital Gains Exclusion ($500,000 for married couples). If there is a loss, the homeowner cannot use such loss to offset any income if the property was a personal residence. There are many rules that apply here and it is best to consult with an experienced CPA. Additional information is available through the IRS's link:   https://www.irs.gov/taxtopics/tc432 

It is often enough when a homeowner is served with a supplemental summons and amended complaint which can occur anytime after the initial summons and complaint were served on the homeowner.  Typically, the foreclosing attorney will seek to file a supplemental summons and amended complaint when there is a need to change or add to the allegations in the the complaint-for example, another defendant is being added or an additional cause of action seeking to correct the mortgage recording information or amend the legal description. The serving of the supplemental summons and amended complaint will permit the homeowner to file an answer which can be important if the homeowner previously defaulted in responding to the initial summons and complaint. 

There is a statutory rule (CPLR Section 306[b]) that requires that a defendant be served within 120 days of the filing of the summons and complaint. Thus, CPLR 306(b) must be complied with if the foreclosing attorney is seeking to add another Defendant in the action; however, if the foreclosing attorney can show good cause for amending the complaint to include an additional defendant, the court upon motion may grant permission to serve such party after 120 days.  It is vital for a homeowner to consult immediately with an experienced foreclosing attorney before unwittingly defaulting in answering a foreclosure complaint or an amended complaint which will result in the homeowner waiving important defenses that may prevent the bank from foreclosing. 

A Qualified Written Request (QWR) is simply a borrower's request to have a mortgage company or its servicing agent provide loan account information. A QWR applies to loan account issues as opposed to issues pertaining to a modification of the loan. The requests come under the Real Estate Settlement Procedures Act (RESPA) and they are broken down into two categories: 1) request for information, and 2) notice of error.  A Request for information is just that, a request for specific information. For example, you want an account history which is a statement showing the credits and debits to a loan account. Another example is requesting copies of the loan documents and a current reinstatement and payoff letter.

A notice of error is alerting the mortgage company that it committed an error in the handling of the account. For example, the mortgage company failed to credit a payment or charged your account for something, say an insurance premium for a forced placement insurance policy when you already had insurance in place. Another example of an error could be that the amount of arrears claimed by the mortgage company is incorrect or the mortgage company is engaged in dual tracking (moving the case in a foreclosure proceeding despite the borrower submitting a full mortgage assistance application). 

Whether the request is for information or is a notice of error, the mortgage company is required to respond within thirty business days. Any request or notice of error should be sent via certified mail. If the mortgage company fails to respond, it could be subject to a claim by the borrower for actual damages including reasonable attorney fees. 

The QWR and notice of error can provide an opportunity to have an issue resolved within a relatively short period of time, assuming of course the mortgage company responds. If it does not respond, a borrower should file an online complaint with the Consumer Financial Protection Bureau (CFPB).  This federal government agency is not always adequate in resolving disputes between a borrower and a mortgage company, but it does provide an avenue that should be pursued when facing a recalcitrant mortgage company. For more information of the CFPB click the site below. 

​https://www.consumerfinance.gov/

When a homeowner has defaulted on his or her mortgage loan, it is vital that the homeowner immediately contact an experienced foreclosure attorney to guide him/her in the best direction in accordance with the homeowner's goals.  Many homeowners who are in default, procrastinate and if the delay is significant enough, it could then significantly reduce the homeowner's chance in saving the property.  It a sage advise to consult with an experienced attorney ASAP.  Our firm provides free legal consultations so there is no reason to delay.  Thus, the message here is clear: do NOT delay and call an experienced foreclosure attorney before your situation worsens.  

Recently, New York State amended its foreclosure laws to provide mandatory protections for homeowners who have defaulted on a reverse mortgage. Homeowners are now entitled to additional notice protections and to a mandatory foreclosure settlement conference all of which are intended to increase the likelihood of a resolution.  Typically, a default is triggered when the homeowner fails to pay the real estate taxes. Immediately reimbursing the bank for the back real estate taxes can permit the homeowner to reinstate the mortgage and result in the foreclosure case being discontinued. Some homeowners are unable to immediately reimburse the bank and may need to enter into a workout plan to repay the bank over a period of time. If, however, the homeowner does not have sufficient monthly income, he or she may not be granted a repayment plan which would permit the bank to continue with its foreclosure. It is still early to predict how the courts will address loss mitigation options with respect to reverse mortgages, and I will keep you all posted. 

When a loan modification has been denied, the homeowner/borrower must decide if he/she wants to appeal. The appeal time is generally listed on the denial. Most of the time it is 30 days. If the denial is erroneous then it is necessary to appeal.  Many times, the denial does not have a detailed analysis and is merely an unsupported denial. If this is the case, it is recommended to send a request for a detailed explanation with a reservation of rights to appeal the denial upon you receiving a detailed explanation for the denial. Sometimes the loan servicer that issued the denial may have misapplied the regulations which often results in a wrongful denial.  In these cases, it is vital to appeal the decision and, if possible, bring the issue to the attention of the court overseeing the foreclosure action. In cases where the denial is based on insufficient income, it is important to make sure that the lender or its servicer relied on the correct sources of income that was documented in the application, i.e., pay stubs, rental income, and all other sources of income.  Typically, rental income is discounted by a lender and/or the servicer.  The rental income is usually reduced by 25%.  If the lender or its servicer did not include all income then a homeowner must timely appeal the denial and submit documentary evidence supporting the unacknowledged income. This could make all the difference. Additionally, many homeowners think that increasing the monthly expenses will increase their chances to receive a modification, but this could actually do the opposite.  Always be sure to reflect accurate monthly expenses in your application for mortgage assistance. It is best to consult with an experienced attorney before you apply for a loan modification or when you are denied one.  

When a foreclosing bank is the successful bidder at the foreclosure auction, the bank can list the property with a local realtor to sell the property or the bank may instead decide to list the property with a foreclosure auction company that auctions properties through an online auction process.  In the latter, the bank has a minimum reserve price which means that the bank will not accept a bid for less than its minimum reserve price. Because the online auctions are relatively new, many real estate attorneys are unfamiliar with the various protocols and the issues that may arise.  Each site is different and has many terms and conditions. Some companies do not fully disclose all relevant facts and may charge a commission to the purchaser, who must pay it at time of closing. This commission can be as much as 5% of the winning bid amount. Additionally, many online foreclosure auction sites are owned and operated by companies in other states which can be an issue if you have been wronged by the company and want to sue it for breach of contract and/or fraud. New York has what is referred to as a "long arm statute" which subjects foreign companies to the jurisdiction of New York courts so long as the transaction arose out of minimum contacts with New York State. The application of the statute is heavily dependent on the facts of each case. Additionally, many online auction companies contract with an "escrow agent"  or title company that acts as an intermediary for the successful bidder and the bank that is permitting the property to be auctioned off. This escrow agent may not always act in the best interest of the purchaser and it is vital that an attorney experienced in these matters be retained to represent the successful purchaser. What is of further concern is that the escrow agent will be accepting the down payment at the time of the winning bid and the balance funds at the time of closing. These funds are not protected against the agent's misappropriation. Unlike New York, many states permit the escrow agent's insurance provider to issue a "closing servicing letter" or 'closing protection letter" to the purchaser. Such a letter insures the purchaser against any misappropriation of the funds while in the custody of its escrow agent.  This is very important coverage, but the New York State Department of Insurance has not approved such letters in this state, and the letter cannot be issued in New York. Consequently, the winning bidder will have little or no recourse against an escrow agent's misappropriation of funds or if the agent goes out of business. It is, however, uncommon for escrow agents to misappropriate escrow funds or go out of business over night, but I can assure you that it does occasionally happen, and when it does, it can be disastrous for the purchaser. Perhaps New York State Department of Insurance should jump on the band wagon and do what most other states have been doing for many decades.  Until then, the winning bidder must accept the risk.  Unfortunately, there are other risks involved in these auctions and a winning bidder would be wise to retain an experienced foreclosure attorney to minimize such risks.

In foreclosure actions commenced in New York, the CPLR Section 3408 requires the court to schedule a mandatory foreclosure settlement conference.  Such conference is to the benefit of both the bank and the homeowner. During the conference(s) the bank is prohibited from moving forward with the foreclosure until the court determines if the parties are able to resolve the matter through some type of loss mitigation. If the homeowner or his/her attorney does not appear at the conference, the homeowner will be deemed in default and the case will be transferred to the active foreclosure part which permits the bank to move forward with the action.  During the conference(s) the law requires that the parties negotiate in good faith in trying to resolve the foreclosure through some type of loss mitigation or settlement.  Although the obligation to act in good faith applies to both parties, the banks are often accused of acting in bad faith by frustrated homeowners. How then is bad faith defined by the courts? Recently, the Appellate Division for the Second Department clarified the meaning of “negotiate in good faith”.  The court held that the standard was not a showing of gross disregard or conscious or knowing indifference to another’s rights but rather under the totality of circumstances did the party's conduct fail to constitute a meaningful effort at reaching a resolution. See US Bank N.A. v. Sarmiento, 121 AD3d 187 (2nd Dept 2014). Obviously each case is different, but the bank may be acting in bad faith if it can be shown that it failed to take meaningful steps in trying to resolve the matter such as consistently delaying the mortgage assistance application process, misrepresenting the facts such as the amounts owed on the reinstatement letter or wrongfully denying a modification to the homeowner.  Always speak to an experienced attorney early in the foreclosure process. 

When a homeowner is in foreclosure, it is likely that the homeowner will receive solicitations from "investors" who will offer money for the homeowner's deed. In the typical situation where the mortgage debt exceeds the value of the house, an investor may approach the homeowner early in the foreclosure process and offer the homeowner a few thousand dollars in exchange for the deed and keys to the house. Typically the homeowner is unaware of how long the foreclosure process is and out of fear of being evicted by the bank, the homeowner may agree in haste to convey the deed for a few thousand dollars.  The investor is likely inclinded to rent out the property and contest the foreclosure to delay the action as long as possible.  The investor will likely be made whole for the few thousand dollars paid to the homeowner once the investor receives from the tenant two months' deposit and one month's rent. All rent after that is pure profit.  Since the investor is not paying real estate taxes, the investor is earning pure profit. Depending on the county, the investor could collect rent for up to three years!  Other times, the mortgage debt may be significantly less than the value of the property, but the homeowner has no equity due to various judgments.  In this situation, the investor may again approach the homeowner early in the foreclosure process and offer a few thousand dollars to the homeowner in exchange for the deed to the property. The investor will do this if he/she feels that it is highly likely that the property will sell at the foreclosure auction for more than what is owed the foreclosing bank, and if it does, the difference between the amount owed the bank and the selling price is deemed surplus money, which will be paid to all subsequest lienors who petition for all or a share of the surplus money. If the subsequent lienors do not petition or file claim for thesurplus monies then they will be barred after the proceeding is completed. The homeowner can petition for surplus money but in this case, the investor steps into the shoes of the homeowner and may petition for all or a share of the surplus money. If the investor petitions for surplus money and the subsequent lienors fail to file claim then the investor could be entitled to all the surplus money. There are, however, many nuances to these scenarios that are beyond this post, and the real point of this post is to alert homeowners to always speak with an experienced foreclosure attorney before agreeing to transfer a deed to property in foreclosure.  

Many times when a homeowner is in default on a mortgage or is in foreclosure, the homeowner will be contacted by "investors" who are interested in purchasing the property. Some investors are looking to prey on the homeowner by offering an arrangement that at first blush seems to offer some degree of hope to the homeowner who typically is desperate to save the home and is inclined to sign a contract that may not be in the homeowner's best interest. This act is designed to protect the homeowner from being such victims of shady type investors and it is codified in Real Property Law Section 265-a.  For the act to apply, the homeowner must be residing at the property at the time the contract is entered into, and the purchaser/investor is not intending to reside at the property.  Generally the act covers the following contracts: 1).  A contract incident to a sale of a residence in foreclosure or 2). a contract incident to a sale of a residence in foreclosure or default where such contract includes a reconveyance arrangement. A reconveyance arrangement is similar to a lease with an option to buy back the property. Before any homeowner in default and/or in foreclosure enters into a contract with someone, he or she should speak to a qualified attorney who specializes in foreclosure and real estate law.  If an investor is looking to purchase your property or is offering some type of arrangement that promises to offer a solution to your situation then there is pause to consider why the investor is interested. Perhaps the mortgage is defective and the investor knows that the foreclosure action can be dismissed for substantive reasons or perhaps the second lien holder is willing to take pennies on the dollar which increases the homeowner's equity.  There are many other possible scenarios, and it's the wise homeowner who consults with an experienced attorney before ever signing on the dotted line.  A brief summary of the act may be found on the website below: 
http://www.dfs.ny.gov/consumer/hetpa.htm

For a further discussion of investors see my August 2016 post entitled "We buy houses for all cash"

Reverse mortgages are a great way for seniors to use the equity in their primary residence to receive monthly payments to help pay for living expenses. Reverse mortgages are generally associated with the FHA's Home Equity Conversion Mortgage (HECM). Mortgage companies must comply not only with state procedural and substantive laws, but must also comply with FHA and HUD rules and regulations since reverse mortgages are insured through FHA and/or the Department of Housing and Urban Development (HUD). When the mortgagor/owner dies, the mortgage company is entitled to demand that the entire outstanding balance be satisfied. The first thing it will do is determine if an estate proceeding has been commenced and if so, it will serve the representative of the estate with a default notice. If no estate proceeding has been commenced, then the mortgage company will likely seek to file a petition for administration and the court will appoint an administrator (usually a public administrator). Once the administrator or estate representative is served with the default notice, the estate will have the right to demand that the mortgage company undertake to have an appraisal done (must be a HUD certified appraiser). If the appraisal shows that the value of the property is greater than the amount owed on the mortgage then the estate is entitled to pay the amount owed in return for a satisfaction of the mortgage.  In the alternative, If the appraisal shows that the value of the property is less than the amount owed on the mortgage then the estate is entitled to pay the 95% of the current appraised value in return for a satisfaction of the mortgage. This could be a Godsend if the amount owed is significantly higher than the appraised value of the mortgaged property. 

​Generally, if the default is not cured within 30 days, then the mortgage company can move to commence foreclosure proceedings. However, if the decedent was married and living with a spouse at the house, then the spouse may be entitled to stay in the house, but in order for this to occur, certain conditions must be met. There are many other nuances that are too long to discuss. Always speak with an experienced foreclosure lawyer who is also familiar with the HUD regulations and contract provisions pertaining to reverse mortgages. ​

In NY, the law does not permit a lawsuit to pursue against an individual who is deceased (you can't sue the dead), but the lawsuit can be permitted if the plaintiff has named the decedent's estate representative(s) and or heirs.  For instance, if your uncle owned the real property and died without a will (died intestate), the plaintiff, in order to proceed, can name your uncle's natural heirs at law. In New York, real property passes by operation of law to the decedent owner's heirs at law which is based on the laws of succession pursuant to the intestacy statute. If your uncle had a will (died testate) then the plaintiff must name the representative in the probate proceeding and no need to name the natural heirs since they are bound by the probate proceeding. If, however, the plaintiff is seeking a deficiency judgment against your uncle's estate (let's assume he signed a promissory note in favor of the foreclosing plaintiff) then regardless of whether your uncle had a will or not, the plaintiff must serve your uncle's personal representative. If there is no personal representative, the plaintiff will need to file a petition in surrogate's court to have a representative appointed. Once the representative is appointed, the plaintiff can serve the representative and the representative will be bound by any court order or judgment in the foreclosure action. If the foreclosing plaintiff is seeking a deficiency judgment against the decedent's estate then it must name and serve the decedent's personal representative. 

Owners of houses in foreclosure are frequently approached by all sorts of "investors" claiming that they will offer all cash for a property in foreclosure.  Before you engage such investors, be very suspicious since you do not want to unwittingly give any of your personal information to a fraudster who is looking to self-deal and take advantage of your situation. How can you tell if an investor is legitimate or not? Well, it's not so easy. You can begin by checking with the department of consumer affairs in the county where the property is located and in the adjoining counties to see if any complaints have been filed and if the investor or company was fined.  You can also "google" the investor and see what you find. One effective method is to see how many lawsuits the investor is involved in and what kind of litigation it involved. Our firm can assist you in this and provide free general advice over the phone. When someone offers you money for a deed to your property, don't give any personal information and tell the person you will call him/her back after you speak with a lawyer. Our firm can guide you in any situation involving your property.  Call us for a free consultation!

Effective this December 20, 2016, vacant and abandoned properties that are the subject of foreclosure actions will be covered under the new law. The law now obligates lenders to frequently inspect, secure and maintain the vacant and abandoned property even before the foreclosing lender obtains a judgment of foreclosure and sale.  After the lender commences its foreclosure action and the homeowner's time to answer the complaint expires, the lender, upon proof and certification that the property is abandoned, will be permitted to move via order to show cause for an accelerated judgment of foreclosure and sale. This will clearly accelerate the foreclosure of abandoned properties which will likely lead to quicker rehabilitations. The order to show cause must state in bold letters that the property is vacant and abandoned and that it may be foreclosed on without any further proceedings if the motion is not opposed. The court is also required to send a separate notice advising the homeowner that the lender has filed for an expedited foreclosure action based on the property being abandoned and vacant. The owner of the property must respond to the motion or appear on the return date to challenge the lender's determination that the property is abandoned and vacant. 

Additionally, the law requires the Department of Financial Services (DFS) to maintain a statewide electronic registry and the lender is required to furnish information to the DFS within 21 days from when it learns that the property is abandoned and vacant. RPAPL Section 1309 requires that the Plaintiff prove by a preponderance of evidence that it conducted at least 3 inspections, each between 25 to 35 days apart and at different times of the day, and at each inspection, no occupancy was present. Evidence of this includes: overgrown vegetation, accumulation of newspapers and or flyers, past due utility notices, disconnected utilities, accumulation of trash, absence of window coverings, broken, boarded or missing windows, property that is open to entry or property that is unsound and poses a potential threat or danger.  The new law carves out exceptions, such as when property is under construction, renovation, seasonal use, subject to a Surrogate Court proceeding or a quiet title action, occupied by someone who has a legal right to occupy, etc. In addition to the typical mortgage foreclosure action, the new law will cover tax lien foreclosures too.  Failure of lenders to comply may result in fines that can be as much as $500.00 per day. The law allows all municipalities to enforce the law and collect the fines.  

If an owner of vacant property is served with any notice declaring the property to be abandoned and vacant, the owner must determine if the property is worth saving and if so, such owner must take immediate action to avoid the plaintiff from obtaining the judgment of foreclosure and sale.  My firm will provide a free phone consultation in such matters, but it is vital that the owner not waste anytime otherwise the property may be lost at a foreclosure sale. 

Sometimes when a foreclosed property is sold at a public auction, the winning bid may exceed the amount that is owed to the foreclosing bank. This excess amount over the amount owed the bank is deemed surplus money. The court appointed referee handling the foreclosure is required to deposit the surplus money with the county treasurer in the county the foreclosed property is located in. After this deposit is made, anyone with an interest or claim (a lienor and/or owner) to the money must bring a "surplus money proceeding".  This is a legal action whereby the claimant is requesting some or all the surplus funds. Typically, the claimant will have a lien against the foreclosed property or an ownership interest, like the foreclosed owner.  A lienor is usually  a second mortgage company or a judgment creditor or another creditor like the IRS. A lienor or owner who appeared in the foreclosure action will likely be notified of the foreclosure sale and can attend the sale to see what the property sells for.  Once the lienor or foreclosed owner learns that there is a surplus, either one can make claim to the funds. In a surplus money proceeding, the court requires that a title report be submitted for purposes of disclosing what liens are against the foreclosed property. The lienor making claim for the proceeds does not have to be in any particular lien position (can be the holder of a lien that is inferior to other liens). This lienor, however, is required to notify all other lienors, which lienors can then assert their own claims or assert priority if their liens are prior to the lien held by the lienor bringing the action.  If, however, the other lienors fail to appear and/or fail to assert claims of priority then they may be barred from receiving any of the funds. Similarly, if the foreclosed owner is noticed in the surplus money proceeding then he/she can make claim for any remaining funds or can contest any of the lienors' claims. Moreover, if the foreclosed owner brings the action, he/she must notify all lienors. The bottom line is, if you snooze, you lose; hence, it's always advisable to retain an experienced foreclosure attorney to help ensure your rights are protected. 

Unfortunately New York State does NOT have a right of redemption period post foreclosure sale. Once the property is sold at the public auction to the highest bidder, the original foreclosed owner has no right to satisfy the entire amount owed the lender.  Unless the prior foreclosed owner has legal and/or equitable defenses to the foreclosure action, once the sale has occurred, the owner will be without a remedy. The only thing the prior owner can do in such case is to retain an attorney to determine if the sale was properly held and conformed to statutory law. If the sale was not proper then there could be grounds to move to set aside the sale.  If the sale is set aside, then the prior owner would have the chance to satisfy the loan.  If, however, the sale was proper, then the prior owner would need to show a defense to the foreclosure action, and if such defense is meritorious, it  may result in the foreclosure sale being vacated and maybe  the action being dismissed. 

Typically, the foreclosing attorney will file a request for judicial intervention (the "RJI") which essentially is a request by the moving party to have the court schedule a foreclosure settlement conference in the foreclosure part of the supreme court located in the county where the property is situated.  Once the request is filed and served, the court will schedule a foreclosure conference for the sole purpose of determining if the homeowner will be seeking some type of mortgage assistance from the lender, such as a HAMP mortgage modification or some other workout arrangement.  The court will send notification of the first conference and the date the parties must appear.  Essentially, the foreclosure action is stayed (put in temporary abeyance) during the time the case is in the foreclosure settlement part. At the conference, a court appointed referee will preside over the conference and ask questions regarding the feasibility of a modification and/or workout. If it appears that a workout can be accomplished then the referee will adjourn the conference to permit the parties time to complete the process. If the homeowner does not appear at the conference or the homeowner is unable to enter into a modification or workout, the referee will likely transfer the case out of the foreclosure settlement part, which will end the stay on the foreclosure permitting the bank to continue with its foreclosure. Generally, the conference is not intended to discuss the merits of the bank's foreclosure action, but rather intended to discuss workout options.

Additionally, the court will often inquire as to whether the borrower is residing at the subject property, as to the monthly gross income, and as to the reason for the loan default. If the borrower does not reside at the subject property or does not have sufficient monthly income then the borrower may be disqualified for certain government modification programs.  Sometimes, however, when a borrower is ineligible for a government modification, the bank may have its own "in-house loan modification program" or a forbearance or repayment option that it may offer to the borrower.  Generally, if a borrower is intent on a modification, whether it be through a government program or an in-house modification program, the borrower will want to make sure that he or she provides all documentation and complies with court directives. Always consult with an experienced foreclosure attorney. 

RPAPL Section 1304 generally applies to situations where there is an individual homeowner who has defaulted on his/her home mortgage. As long as the borrower is still residing in the property, the holder of the home mortgage ("the mortgagee") may be required to serve the borrower with a 90 day pre-foreclosure notice and failure to do so may be fatal to any subsequent foreclosure action filed by the mortgagee. The section 1304 notice is intended to permit the borrower breathing time to seek mortgage counseling and to apply for mortgage assistance directly with the mortgagee.  Sometimes, the mortgagee may issue the section 1304 notice, and contemporaneously issue a standard default notice pursuant to the terms of the mortgage.  If this is the case, the default notice issued pursuant to the mortgage will need to be compared with the section 1304 notice to see if there is any conflict.  If there is a conflict, it can be a strong legal defense which must be raised in the foreclosure action.  It is sage advice to always seek representation from an experienced foreclosure lawyer.