BILL NUMBER: S3216

SPONSOR: COMRIE
 
TITLE OF BILL:

An act to amend the real property actions and proceedings law, in
relation to foreclosure of mortgages

 
SUMMARY OF PROVISIONS OF BILL:

Section 1: Amends section 1302 of RPAPL to require that foreclosing
plaintiffs plead ownership of the note and mortgage applicable to all
homeowners instead of limited to only homeowners with subprime and high-
cost home loans.

It also ensures that RPAPL 1302 defenses are applicable to all homeown-
ers instead of limited to just homeowners with subprime and high-cost
home loans.

Section 2: Sets the effective date on the first of January after it
shall have become law.

              

 
JUSTIFICATION:

There has been a nationwide increase in foreclosures throughout the
country. 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 for the borrower. See, HSBC Bank USA v.
Dammond, 59 AD3d 679 (2nd Dept 2009). Unfortunately, many times the
borrower often has no way of knowing who owns the loan, and 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 up front, they may never be able to raise it again. In
this situation, an entity foreclosing can foreclose on a home they don't
have any legal right to foreclose on.

The proposed bill would require plaintiffs in a foreclosure action to
plead ownership of the note and mortgage for all home loans and would
enable all homeowners to avail the statutory defenses to protect their
homes, as opposed to just those homeowners with subprime or high-cost
home loans.

 
LEGISLATIVE HISTORY:

2016: A.10373-Rules
2017-18: S.5928/A.1371

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.

 
EFFECTIVE DATE:
First of January after it shall have become law.