Senate Bill S5241

                                BILL NUMBER:S5241

TITLE OF BILL:  An act to amend the real property actions and
proceedings law, in relation to the failure to raise the defense of
lack of standing in a mortgage foreclosure action

SUMMARY OF PROVISIONS OF BILL:

Section 1: Adds a new section 1302-A to the Real Property Actions and
Proceedings Law (RPAPL) providing that any defense based on a
plaintiffs lack of standing in a foreclosure proceeding related to a
home loan cannot be waived if a defendant fails to raise such a
defense in a responsive pleading or pre- answer motion. It also
provides that a defendant may not raise the defense after a
foreclosure sale, unless the judgment of foreclosure and sale was
issued upon the defendant's default.

Section 2: Provides for the effective date.

JUSTIFICATION:  During the past 4 years (both before and after the
stock market crash of 2008 and the previous and associated meltdown of
the housing market), there has been a nationwide increase in
foreclosures.  However, many of the foreclosure actions initiated by
lenders and trusts to obtain the securitized debt obligation (the
property),"have called into question the inherent legality of the
proceedings, due to the plaintiffs lack of standing" and in many cases
              

it is simply not clear who actually owns the mortgage or debt. Despite
the fact that in order to have an appropriate foreclosure proceeding
the filing party must legally have "standing to commence a foreclosure
action" against a mortgagor or borrower, many lenders and trusts alike
continue to move forward with bringing a legal action against
borrowers when many of these lenders don't even own the debts in the
first place.

In New York, numerous court decisions have held that if the borrower
doesn't raise standing upon answering the foreclosure action, the
defense of standing is waived (see HSBC Bank USA v Dammond, 59 AD3d
679 [2nd Dept 2009]). Unfortunately, often the borrower has no way of
knowing who owns the loan; despite the clear requirement that the
plaintiff own the note, if the defendant borrower does not raise the
issue initially in an answer or pre-answer motion to dismiss, they may
never be able to raise it again. In this situation, an entity can
foreclose on a home on which they have no true legal right to do so.

This bill would provide that the defense of standing is not waivable
and can be raised throughout the foreclosure process. Absent the
clarification provided under this bill, mortgagees will continue to be
able to foreclose solely because an otherwise viable defense was not
timely raised.

LEGISLATIVE HISTORY:  New bill in the Senate. A.9911 of 2014 died on -
Rdg.

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:  None.

EFFECTIVE DATE:  Immediately with provisions.