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.
Typically it is better to apply for a mortgage modification as early as possible. Delaying in applying increases the mortgage arrears and the larger the arrears the higher the chance the borrower will be denied a modification. Contact an experienced foreclosure/modification attorney before it is too late.
The Home Assistance Mortgage Program (HAMP) was set to expire at the end of 2015, but fortunately the program has been extended to the end of 2016. This extension is a blessing for struggling homeowners who need some type of mortgage foreclosure assistance; however, not all mortgage companies are participating in the HAMP program, and if you're not sure if your lender is participating then you can contact your lender directly for clarification.
Another program that has helped many struggling homeowners in default and foreclosure is the New York State Mortgage Assistance Program (NYSMAP) which program offers borrowers grant money up to $40,000.00 towards reinstating their mortgages, allowing them to resume making mortgage payments, but like the requirements under HAMP, the borrowers will need to demonstrate sufficient monthly income covering the mortgage payment along with the additional monthly household expenses shown by the borrowers on the application. The NYSMAP will usually approve the grant funds when the borrowers have been denied mortgage assistance through their lenders.
If you need additional information, you may contact us, and we will be happy to assist you.
Anyone who has applied for a mortgage modification knows how difficult and confusing the process can be. Most of the delay and confusion is completely unnecessary.
A significant part of the problem is that financial institutions overburden their individual underwriters with an unrealistic number of loan modification files which invariably results in long delays and in the applications going stale. State and federal agencies should consider new rules that limit the number of files that any individual underwriter can have at any given time. Such a requirement would force financial institutions to hire additional underwriters which would result in less delays. Insurance companies that handle claims need to have an appropriate ratio of claims per claim examiner, and why is this not the case with financial institutions reviewing mortgage assistance applications?
Additionally, many times when a financial institution renders a loan modification decision, it provides little or no information pertaining to how the decision was made: what formulas and calculations were used? Was the borrower considered for other types of assistance? How did the borrower fail to meet the requirements for such other types of assistance? Because most financial institutions do not provide any real explanations for their decisions, borrowers are left in the dark and they cannot determine if their applications were reviewed appropriately for the most favorable outcome that they were entitled to under existing rules and regulations. Such omission to provided a detailed analysis leads to unnecessary complaints to regulatory agencies as well as to appeals which result in further unnecessary delay.
Perhaps if the financial institutions were required to use a standardized form that provided an actual breakdown with calculations regarding how they came to their decisions and why the borrowers were not entitled to other forms of assistance, then such requirement would likely result in less delay while also ensuring that the borrowers were receiving the relief that they were entitled to under all existing and applicable programs.
Until the financial institutions are required to set limits on the number of applications assigned to an underwriter and required to provide a detailed analysis regarding how their decisions are made, it will be business as usual with continued delay, and confusion.
In New York, if a borrower executes a promissory note and then subsequently defaults under the terms of the note, the creditor, who holds the note, can sue the borrower for the full amount due under the terms of the note.
If in addition to the note, the borrower executes a mortgage pledging real estate as security for repayment of the note then if the borrower defaults, the creditor, who holds the note, will decide if it will elect to sue on the note or foreclose against the property. If the creditor chooses to foreclose and is successful in bringing the property to auction then assuming that the property is worth less than what is owed under the note, the creditor can seek a deficiency judgment against the borrower for the difference between the fair market value of the property and the amount owed under the note.
A deficiency judgment can result in the creditor filing restraining notices against the borrower's bank accounts, executing on other assets and garnishing a percentage of the borrower's employment income.
There are ways to minimize the chances of being personally liable for a judgment and and consulting with an experienced attorney can potentially save a judgment debtor from the wrath of a judgment creditor.
The New York State Court of Appeals decided in Aurora Loan Services, LLC v. Taylor that a foreclosing plaintiff only needs to show that it has possession of the note at the time the foreclosure complaint is filed. Thus, if the foreclosing Plaintiff has possession of the note, the mere fact that it does not have an assignment of mortgage is essentially meaningless. The mortgage is merely incidental to the promissory note and the mortgage naturally follows the note; hence, whoever has possession of the promissory note will be entitled to foreclose even if an assignment of mortgage is in a different entity.
Notwithstanding, the promissory note secured by a mortgage is a negotiable instrument and is governed by the Uniform Commercial Code (UCC).
UCC 3-202 provides: [n]egotiation is the transfer of an instrument in such form that the transferee becomes a holder. If the instrument is payable to order it is negotiated by delivery with any necessary indorsement; if payable to bearer it is negotiated by delivery (emphasis added).
Based on this requirement that the note be physically delivered, the foreclosing plaintiff must demonstrate that the subject note was physically delivered, and it will do this by typically submitting an affidavit by someone with knowledge attesting to the circumstances surrounding the delivery of the note. If the affidavit is not thorough enough then it may not serve as sufficient evidence to support the claim of possession and or delivery.
Typically, the note is transferred more than once and the foreclosing plaintiff will usually provide allonges to prove the chain of ownership. There are many technical issues that come into play with allonges, and if the foreclosing plaintiff is not careful, the action could be dismissed for lack of standing.
Always seek out the advice of an experienced foreclosure attorney before it's too late!
Recently, one of my clients advised that she was contacted by someone claiming to be a bank servicing representative with the mortgage company servicing her loan and further claimed that the bank was offering a modification and requested that my client immediately tender the new mortgage payment. My client was excited to hear this especially since the "new mortgage payment" was less than what she was previously paying. Unfortunately for my client, her excitement got the best of her and after she sent in the check which was quickly cashed, she realized that she had been taken advantaged of since the "servicing representative" had disappeared as quickly as she cashed my client's check. There are other types of scams to be on the outlook for, such as, an offer made by an alleged bank representative who states that the bank is going to "write off" the loan if you send in one lump sum payment. It is very tempting to think that the bank will write off the loan for pennies on the dollar, and in rare situations banks have been known to do this, but it is unlikely and before you rush to send out a check to make your mortgage obligation go away, think again and make sure you investigate to see if it's the real deal. Don't be fooled by any scam. This is another reason to entrust your foreclosure matter in the hands of an experienced foreclosure attorney who can minimize this kind of risk while at the same time fighting the foreclosure action.
In New York, a mortgage is a contract between the bank, as mortgagee and the homeowner/borrower, as mortgagor. The promissory note is also a contract as well as a personal guarantee by the person receiving the funds, the borrower/obligor. The mortgage is an agreement whereby the obligor permits the real property to be used as security for the repayment of the promissory note. If there is a default under the terms of the note and or mortgage, say for example nonpayment, then the bank can elect to sue on the note or instead, elect to foreclose on the real property securing the note. This is called an "election of remedies". Thus, the bank, as mortgagee, could elect to commence a mortgage foreclosure action, or commence an action on the promissory note. The bank can only choose one of the two remedies; therefore, if the bank commences a foreclosure action, it cannot later commence an action on the note and vice versa.
In New York, the promissory note and mortgage are contracts and the six-year statute of limitations is applicable. There is much confusion as to how the six-year statute of limitations applies in mortgage foreclosure cases. In order to know how to apply the statute, we need to know if the loan was accelerated or not. Acceleration occurs when the bank declares the entire loan balance immediately due and payable. Once the loan is accelerated, the bank has six years to sue and failure to commence an action within the six year time period may result in a bar to recovery. If, however, during the six year period the borrower or his/her spouse filed for bankruptcy, the statute of limitations would be tolled, meaning stayed during the bankruptcy along with an additional time period tacked on in favor of the bank. Additionally, if the borrower filed for mortgage assistance during the six year period, the bank may assert that the borrower reaffirmed the debt and that the six year statute of limitations should run from the date of reaffirmation, i.e., the date the mortgage assistance application was made.
If, however, the bank did not accelerate the loan but has merely demanded that the borrower pay the loan arrears (missed payments and/or escrow charges, late fees, etc.), then each month that goes by is deemed a continuous loan default. Under this scenario, if the bank waited longer than six years from the date of the first default to commence its foreclosure, the bank would still be able to foreclose since in this situation the six-year statute of limitations applies only to missed payments that accrued more than six years. Since the loan balance was never accelerated, the bank can still foreclose and demand payment for the unpaid principal balance and all charges that accrued less than six years prior to filing the action. It is therefore likely that banks will decide not to accelerate their loan balances until they commence suit. If the bank does commence suit more than six years after the first missed payment, it only forfeits missed mortgage payments and charges that accrued more than six years. As discussed above, if the bank declared the entire loan due and payable (acceleration) then the bank MUST commence suit within the six years, unless of course the statute was tolled by a bankruptcy filing.
Additionally, if an action is timely commenced, but later dismissed before trial and at time of dismissal, the statute of limitations has expired or has less than six-months remaining then the aggrieved party, the bank, would be permitted an extension of six months from the date of dismissal to re-file the same action and serve process on the homeowner. Thus, just because the action was dismissed prior to a trial and at a time when the statute of limitations had expired does not necessarily bar the bank from commencing a new action. However, there are exceptions to this rule: the dismissal was on the merits or dismissal was due to the voluntary discontinuance by the bank, or the dismissal was based on the bank's failure to prosecute. See CPLR Section 205 (a). The attached link below will upload this section: http://codes.lp.findlaw.com/nycode/CVP/2/205
So, let’s assume the bank accelerated the loan three years prior to commencing foreclosure and the action has been inactive in court for another three years. If the borrower's attorney is able to have the action dismissed on the merits of the case then the bank may be barred from commencing a new foreclosure since the six year statute of limitations would apply. "On the merits" generally refers to substantive issues as opposed to procedural issues. For example, if an action is dismissed because the court determined that the homeowner was not properly served, this would not be deemed a trial on the merits of the case, and the bank would be permitted to recommence the same action within six months from the date of dismissal so long as it served process on the homeowner within that time period. If, however, the action was dismissed due to lack of standing then this would be on the merits, and the bank may be prohibited from refiling a new action so long as the borrower raises the statute of limitations defense in the answer.
Additionally, if the mortgage maturity date has passed, then the bank has six years from the maturity date to sue. This is not something we see often since most mortgages have a maturity date greater than 15 yrs, but it is something to consider.
Ultimately, the issues involving the statute of limitations in mortgage foreclosure actions are very complex and should only be handled by an experienced attorney.
Many times, either before or during the foreclosure process, the homeowner's insurance policy lapses, and the bank usually sends notification that unless the policy is renewed or replaced, it will purchase forced placement insurance to protect the bank's interest in the property. More often than not, such notices are ignored and the bank buys such insurance which is usually much more than the cost of the homeowner's original policy. In addition to the significantly higher cost in the premium, the cost is passed to the homeowner. Additionally, this forced placement insurance may not protect the homeowner from personal liability. For instance, if an injury were to occur on the mortgaged property then the forced placement policy may not insure the homeowner against a potential lawsuit. Furthermore, if there is any damage to the mortgaged property, the homeowner also may not be entitled to anything since the s/he may not be deemed an insured under the policy. Homeowners should seriously consider keeping the insurance current otherwise they may have big problems down the road. Homeowners in foreclosure should review their insurance policies and make sure they are covered. Recently, there have been some class actions against banks for purchasing forced placement insurance that did not insure the homeowners. Some of these class actions have resulted in large settlements and many affected homeowners have received notifications to join in the class action; however, these homeowners should seriously consider speaking with an experienced attorney before deciding to join the class. Joining the class in return for a small monetary award could backfire. This recommendation applies to any class action involving a bank. Speak to an experienced attorney before making any decision.
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). The mortgage company will likely find out that your dad, the mortgagor, has passed and his passing will entitle the mortgage company to demand that the entire outstanding balance be satisfied. The first thing they will do is determine if an estate proceeding has been commenced and if so, they 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. Once the administrator or estate representative is served with the default notice, the estate will have the right to have the mortgage company undertake to have an appraisal done (must be a HUD certified appraiser). If the appraisal shows the value of the property less than the amount owed on the mortgage then the estate is entitled to pay the amount owed the bank or 95% of the appraised value, whichever is less. Generally, if the default is not cured within 30 days, then the mortgage company can move to commence foreclosure proceedings. However, if your dad was married and living with his wife at the house, then his wife 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, and I recommend that you speak with an experienced foreclosure lawyer who is also familiar with the HUD regulations and contract provisions pertaining to reverse mortgages.
An interesting case has come down where a New York State Supreme Court Judge has ruled in favor of HSBC which was accused by the NYS Attorney General to have purposefully delayed filing foreclosures in New York. The NYS Attorney General has yet to decide to appeal the decision. See: http://www.bloomberg.com/news/articles/2015-03-31/hsbc-wins-dismissal-of-new-york-foreclosure-practices-lawsuit
Many homeowners have war stories about how their individual foreclosure cases have dragged on for years. Sometimes, the delays are welcomed by homeowners who have no viable way to make affordable mortgage payments. Others, however, are more than qualified and willing to resume making mortgage payments, but due to a long delay in the bank filing for foreclosure, the outstanding loan balance has increased significantly which has the effect of increasing the amount of the mortgage payment and thereby potentially preventing these homeowners from being granted an affordable loan modification later down the road. These homeowners may want to save their money and put it aside so that they can pay down the arrears later on so that they increase their chances to receive an affordable mortgage modification; however, this approach may not work in every case since each case is different. What is true in every case is finding an experienced foreclosure attorney who can navigate the homeowner through the murky waters of a New York mortgage foreclosure. As for the HSBC case referenced above, it will be interesting to see if the attorney general appeals to the appellate division. Stay tuned!
Many homeowners are denied a mortgage modification, mainly due to insufficient monthly income; however, sometimes the lenders deny a modification in error. It is difficult to comprehend, but the bank employees are not always 100 percent knowledgeable when it comes to knowing all the rules and regulations. There are numerous programs and each has its own set of rules and regulations. Without knowing your situation, I can only speculate that your application was declined due to insufficient income; however, I will be happy to review your matter should you wish to meet with me. You only have thirty days to appeal the denial, and you should contact a experienced New York Foreclosure/Loan Modification attorney ASAP to determine if the denial was improper.
A deed in lieu of foreclosure is when the homeowner (mortgagor/borrower) conveys the mortgaged property to the bank and then the homeowner vacates the house. In return the bank discontinues the foreclosure and the mortgage is cancelled out. This method will typically work if there are no other liens against the property. If the homeowner has a judgment lien or a second mortgage against the property then the bank holding the first mortgage will likely not agree to a deed in lieu but may however consider a short sale. Typically a short sale is done when the mortgage amount exceeds the fair market value of the property, and as a result, the homeowner will need to have the bank agree to take an amount less than the full amount owed on the mortgage. The bank is under no obligation to consent to accepting a lesser amount in satisfaction of its mortgage. If it will consider taking less then it will order an appraisal to determine the value of the property and then decide what the sale price of the property shall be. At this point, the homeowner will typically retain a real estate broker to list the house at the price set by the bank. If the homeowner gets offers less than the listing price, the Bank will have to be notified, and it will have to agree to accept a lower amount. This is usually time consuming since the banks are slow to respond and the delay can result in losing the offer. Most homeowners are not aware of the deed in lieu option and real estate brokers typically will not mention this option since they will not receive a commission. Incidentally, any homeowner considering a short sale should have an attorney review the listing agreement before it is signed. Brokers will usually try and get the homeowner to commit to a one year or more listing agreement when in fact the time period is negotiable and the homeowner is better served by having a much shorter listing period, say for a few months. The broker commissions, attorney fees and other costs associated with the sale of the property will likely be netted from the gross sale proceeds at time of closing and the balance would go to the bank in return for it issuing a satisfaction or a release. Typically, the borrower will not receive any part of the net proceeds at closing; however, it is possible to push the bank for a payment that will help the homeowner find alternative housing after the closing, and this is usually a few thousand dollars. This type of payment may also apply in the deed in lieu of foreclosure situation. With respect to both the deed in lieu of foreclosure and the short sale options, the bank will likely forgive the portion of the unpaid mortgage debt, but it is recommended that this be put in writing so that there is no issue later on; however, if the bank agrees to issue a satisfaction as opposed to a mere release of the mortgage lien then the borrower should be protected. Since a short sale and a deed in lieu will almost always involve situations where the mortgage sum is greater than the value of the property, the homeowner must be mindful that the IRS and NYS Department of Finance may deem the forgiveness of part of the mortgage debt by the bank as income and that must be carefully considered before moving ahead with either option. I have addressed this issue previously in my blog under the heading: Mortgage Forgiveness Debt Relief Act and Debt Cancellation or Discharge of Indebtedness.
Many clients have come to me and tell me about their terrible experiences dealing with the aftermath of Superstorm Sandy and how it drove them into foreclosure. It's bad enough to have a home severely damaged and then get swept up in red tape with insurance companies and home improvement contractors, but then have to move out and seek temporary housing so that the home can be rebuilt or renovated all along while paying rent and still having to pay the home mortgage is too much for anyone to bear. Although the government did impose a one year moratorium on foreclosures, many homes are still caught in the storm of red tape and delay in getting the home restored or rebuilt. Faced with this situation, what does one do? Is there a defense in the foreclosure action whereby one can claim that the storm was an act of nature and therefore, the court should excuse the mortgage default? Perhaps and maybe it should be a defense. However, the individual circumstances regarding each case will be of utmost importance in asserting this defense. It is equally of utmost importance to seek out advice and guidance from an experienced attorney who can navigate through the levels of complexity in such inexorable circumstances.
Some homeowners who have successfully modified their mortgage may decide later on to transfer property to another family member, such as a son or a daughter for estate purposes. Any transfer, even if merely a transfer of a part interest may trigger a due on sale/transfer clause in the modified mortgage which would mean that as soon as the property has been transferred, the bank can declare that the entire unpaid balance is immediately due and payable. For example, if you own the mortgaged house outright and decide to convey to your grandchild or perhaps decide to convey the house to your sibling then you may be unwittingly triggering the due on sale/transfer provision in the mortgage and the bank can demand that you pay the unpaid balance. However, the due on sale/transfer clause is preempted by the Garn-St. Germain Depository Act of 1982 (see U.S. Code section 1701j-3(d)). The act specifically provides that due on sale/transfer provisions are not enforceable under the following situations:
(1) the creation of a lien or other encumbrance subordinate to the lender’s security instrument which does not relate to a transfer of rights of occupancy in the property;
(2) the creation of a purchase money security interest for household appliances;
(3) a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
(4) the granting of a leasehold interest of three years or less not containing an option to purchase;
(5) a transfer to a relative resulting from the death of a borrower;
(6) a transfer where the spouse or children of the borrower become an owner of the property;
(7) a transfer resulting from a decree of a dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property;
(8) a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property; or
(9) any other transfer or disposition described in regulations prescribed by the Federal Home Loan Bank Board.
Based on the aforementioned situations, the examples I gave above where the owner conveys the mortgaged property to a grandchild or to a sibling may not be protected under the act.
Before making any transfer of mortgaged property, speak to an attorney who specializes in mortgage litigation.
A process server must always comply with the service of process rules as contained in section 308 of the CPLR (Civil Practice Law and Rules). Generally, a process server will serve a homeowner as a named defendant in a foreclosure summons and complaint by way of three means: 1. In hand delivery (the preferred choice), 2. substituted service on a person of suitable age and discretion (a person residing with you) or 3. nail and mail (the least preferred choice of the three). There are other less common methods of service which I will not discuss for purposes of simplicity. Each of the three methods of service mentioned require the process server to file an affidavit of service with the county clerk's office. Nail and mail service generally means that the process server tried to serve you or someone of suitable age and discretion at the property where your reside, but was unable. The standard generally requires that if the process server cannot effectuate in hand service or substituted service after three attempts, usually on three separate days and at various and reasonable times of day and/or evenings, then the process server can serve you utilizing the nail and mail method of service. This essentially means that if the process server made three reasonable attempts at serving you, but was unsuccessful then s/he can tape the foreclosure summons and complaint to your front door or leave it somewhere conspicuous near the door and within 20 days s/he must mail an additional copy of the foreclosure summons and complaint to your residence. The envelope containing the foreclosure summons and complaint must not indicate it is from an attorney's office and only indicate "personal and confidential" on it. The process server must then file the affidavit of service within another 20 days from the date of mailing. In your case, it appears that the process server may have chose the nail and mail approach, but I can't be sure until the affidavit of service is reviewed. If the affidavit of service indicates that the summons and complaint were served personally on you, via in hand delivery or via substituted service on someone residing with you, then it would appear that the service may be what is commonly referred to as "sewer service". If this is the case then you would be able to contest the service. An experienced New York foreclosure attorney can review your service and provide guidance on the best way to proceed. Call my office, and I will be happy to provide you with a free consultation. Best regards, Arnold M. Bottalico, Esq.
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence-sorry no investment properties! Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. This law applies to modifications with principal reductions and to short sales. Unfortunately, this law only applies to debt forgiven in calendar years 2007 through 2017. More information can be found in IRS Publication 4681 or see: http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation-
So let's say on or after January 1, 2018, you are granted an affordable home mortgage modification that includes a significant principal reduction or that you are granted a short payoff and your loan servicer sends notification 1099-C to the IRS that it has cancelled part of the mortgage debt. Unless the government extends the sunset provisions of the Mortgage Debt Relief Act, you will have to include the cancelled amount as income-so much for an affordable home mortgage modification or for a short sale! So you may have thought you hit the jackpot to only learn that you have to pay some of it back, this time to Uncle Sam. Fortunately there are some exceptions that can prevent this cancellation of debt from being deemed income.
The major exception is if you are deemed insolvent at the time of the cancellation of the debt. Insolvency is essentially when your debts exceed the value of your assets. For example, if you have $100,000 in assets but have $150,000 in debt then you are deemed insolvent by $50,000. Assume further that at the time of this insolvency, the bank is waiving $60,000.00 of debt; consequently, you would have to include $10,000.00 in your gross income for the year the discharge occurred ($60,000-$50,000).
Another exception is a discharge in bankruptcy. A debt discharged in bankruptcy has no income tax consequences to an individual debtor since it is excluded from the debtor's gross income [IRS Code Section 108 (a)(1)(A)]. If you received a discharge in bankruptcy and received subsequently a 1099-C from the mortgage holder or the loan servicer, you will need to file with the IRS form 982 with your tax return. This will notify the IRS that the debt was discharged in bankruptcy.
Another exception is when the debt is a non-recourse loan, which means that you are not personally liable for the debt and the creditor can only enforce his or her rights against the property used to secure the debt. Home mortgages, however, are typically recourse loans and the bank can sue you personally for what is owed over the value of the security assuming the debt is greater than the value of the property. Not everyone fits into the aforesaid exceptions; there are other ways to prevent a cancellation of debt from being deemed taxable income, but this must be done with great care.
As for a deed in lieu or short sale, the IRS treats these as sales, not as a discharge of indebtedness. Generally, speaking, you may have a gain if the amount realized from the sale exceeds your adjusted basis (amount you originally purchased the property for plus any capital improvements made). Conversely, you may experience a loss if the amount realized is less than your adjusted basis. This simple determination of gain or loss also applies to when the property is sold at a foreclosure auction, but there may be additional rules that apply when the fair market value exceeds the amount realized at the foreclosure sale, and in such cases, it is recommended that you speak with a licensed tax professional. Different rules do apply to investment properties such as recapture of depreciation deductions that were previously taken, determination of one's adjusted basis in a Section 1031 like kind exchange, etc. It should be noted that when there is a gain, you may be eligible for the Home Sale Gain Exclusion. This tax break permits you to exclude up to $250,000.00 in capital gains and up to $500,000.00 if married and filing jointly. In order to be eligible, you must own and occupy the property as your primary residence for at least two years during the last five years prior to conveying the deed in lieu or closing on the short sale. See IRS Publication 523 for a detailed explanation: http://www.irs.gov/publications/p523/ar02.html
Below is an excellent article written by the creators of Turbo Tax: https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/How-to-Avoid-Taxes-on-Canceled-Mortgage-Debt/INF12033.html
Consulting with an experienced New York foreclosure lawyer and tax consultant are highly recommended.
Many times when a homeowner is granted a loan modification on the first mortgage, there may be a second mortgage or home equity loan that remains in default. The big question is what to do about this second mortgage? Typically the second mortgage has been in default for sometime and there is a resulting arrears. Many times when the first mortgage company agrees to modify, it usually will require the homeowner to start making trial payments soon thereafter so there is not much time to get the second modified. Notwithstanding, the second mortgage company typically will only modify after the first mortgage is modified anyway. Usually then the homeowner will start the trial period with the hope that the second will modify its mortgage favorably to the homeowner. If, however, the newly modified mortgage payment on the first mortgage combined with ordinary household expenses consumes most of the homeowner's monthly income then there may be nothing left over for the second mortgage, making a modification of the second mortgage unlikely. If the second mortgage company is unwilling to settle for much less than what is owed it then the second mortgage may just hang in limbo with its arrears increasing by the day--an unsettling feeling to any homeowner. However, under this situation, the second mortgage company probably won't foreclose if the first mortgage is owed an amount near the value of the house, but if the amount owed on the first mortgage is significantly less than the value of the house then the second mortgage company would need to seriously consider its right to foreclose on its second mortgage.
It is worth mentioning that if the amount owed on the first mortgage exceeds the value of the property, the homeowner may have the ability in bankruptcy to have the second mortgage lien stripped off the property. This is the case in the 11th Circuit, but as of now, it is not the case in New York, well at least not in the Eastern District of New York.
I do not believe that NY has a "wrongful foreclosure" defense per se; however, if the bank has commenced a wrongful foreclosure in a New York court, then you will need to give specifics as to why you believe the foreclosure is wrongful. The facts supporting a wrongful foreclosure are case sensitive. For example, if the bank knowingly or negligently claimed to be the owner of the mortgage when it really wasn't, then one could assert that the bank's actions are wrongful and unconscionable; this defense must be raised or it will be lost. This would not only be a defense but could serve additionally as a counterclaim which would serve as a basis for damages. But again, they must be raised in the answer or be lost. There are some exceptions to this general rule, like if you could not have learned of the bank's wrongful conduct at the time the answer was due. In such cases, you would have to raise the defense and or counterclaim via motion soon after you discovered the wrongful conduct.
BTW, defenses that are not waived in New York even though not raised in the answer are: the defense asserting that the complaint fails to state a cause of action, failure to name a necessary party defendant, the defense that the court lacks subject matter jurisdiction, and RPAPL 1303/1304 notice requirements---these defenses even though not raised in the formal answer can still be raised later in the litigation, but generally must be raised before judgment with the exception of the court lacks subject matter jurisdiction defense, which defense can be raised anytime even after judgment. In the above example, even if the defense of standing was not timely raised in the answer, one may still be able to argue later in the litigation that the bank's complaint fails to state a cause of action based on the fact that the bank's cause of action cannot be satisfied if it is not the holder of the subject note and mortgage.
In a foreclosure action, a plaintiff generally has standing where it is both the holder or assignee of the mortgage and the holder or assignee of the underlying promissory note at the time the foreclosure action is commenced.
Sometimes, however, the mortgage may have been assigned to the foreclosing bank, but the promissory note was assigned to a different bank. In such cases, the courts generally deem that the mortgage passes with the promissory note despite the assignment into a different bank. The mortgage is deemed an inseparable incident to the note (see MERS, Inc. v. Coakley, 41 AD3d 674, 674 [2d Dept 2007]. Thus, an assignment of a mortgage without the underlying debt is a nullity ( see Deutsche Bank National Trust Co. v Barnett, 88 AD3d 636, 637 [2d Dept 2009].
Today, it is common for foreclosing plaintiffs to commence a New York Foreclosure action as trustee which was named in a pooling servicing agreement. These agreements add layers of complexity to the already complex law regarding standing. This is a separate matter that will be discussed in a future post by me. Always consult with an experienced New York foreclosure defense attorney.
My neighbor is moving off Long Island, NY and wants me to acknowledge that his fence is 1 ft over the property line. Should I sign anything stating that 1 ft beyond the fence belongs to my neighbor?
When I handle these type of cases, I will usually get a copy of the client's survey and a copy of his/her neighbor's survey along with copies of the deeds to both properties. I then review these documents against each other for discrepancies. If there are discrepancies then that opens up a whole set of issues for a later discussion. If we are dealing with property on Long Island, then it is likely that the property lots are on a subdivision map and more likely than not there is no real boundary dispute. It may just be a fence that is not properly placed on the record boundary line and the surveys may show this assuming the fence in its current location existed at the time the survey(s) were commissioned. Sometimes neighbors will agree that if the fence does encroach onto adjoining property then the fence can remain so long as it is standing and when it is replaced the new fence will be installed on the record line. This would likely apply in your situation. If, however, your neighbor wants you to acknowledge that the property line is to be where his fence is then that could be problematic. Signing a boundary agreement could potentially result in serious zoning law issues. Also, if there is a mortgage on your property, signing a boundary agreement with your neighbor could create issues with the bank. Lastly, depending on the circumstances, your neighbor may have a basis to assert adverse possession. I recommend that you speak with an attorney experienced in real estate litigation. My firm handles these situations, and I would be happy to help you.
It absolutely does NOT! I can't begin to count the number of times I've heard clients say to me that a bank representative told them that they don't need to worry or do anything until the bank makes a final decision regarding the loan modification. Well, yes you do need to do something about the New York foreclosure lawsuit which is separate and distinct from the mortgage loan modification--they are two different animals. If you don't do anything about the foreclosure lawsuit, you will be in default which makes it easy for the bank to foreclose on its mortgage. This is especially true if you are ultimately denied a mortgage modification or fail to make payments pursuant to a mortgage modification. Before you decide what action to take, consult with an experienced Long Island, NY foreclosure attorney.
Arnold M. Bottalico is an experienced Long Island, NY foreclosure attorney with over 25 years of experience, and he welcomes your questions and comments.