On August 30, 2013, a new law went in effect in New York State concerning foreclosures. The purpose of this new law is to prevent delays in foreclosure proceedings, to streamline court procedures, and to see to it banks and the attorneys representing banks provide proper documentation before they initiate new foreclosure proceedings.
The new foreclosure statute requires a document called Certificate of Merit to be filed with the Court. The Certificate of Merit must be signed by the attorney for the plaintiff (the financial institution). In this document, the plaintiff’s attorney must certify “that the attorney has reviewed the facts of the case and that, based on consultations with representatives of the plaintiff identified in the certificate and the attorney’s review of pertinent documents, including the mortgage, security agreement and note or bond underlying the mortgage…there is a reasonable basis for the commencement of such action and that the plaintiff is currently the creditor entitled to enforce rights under such documents.”
The law in addition to the Certificate of Merit requires the attorney for the plaintiff to attach a copy of the note and the mortgage with the Summons and Complaint. In addition, the attorney for the plaintiff must submit evidence of the transfers leading from the originator of the loan to the plaintiff (the first bank who gave the loan and all subsequent banks) in either the Complaint or to the Certificate of Merit. If the bank or its attorneys do not comply with providing all of these additional documents, the court shall have authority to dismiss the foreclosure proceeding. In addition, the court can deny the accrual of interest and other financial charges that lead to increases in the mortgage debt during the entire foreclosure process.
Plaintiff’s attorneys currently have an obligation to file with the court the appropriate paperwork causing the scheduling of mandatory Foreclosure Settlement Conferences. The purpose of the Settlement Conferences is to provide the homeowner with a method where he or she can negotiate with the financial institution to remain in their home and not lose it in the foreclosure process. Currently, mortgage interest continues to accrue during the course of the settlement conferences which are sometimes delayed for years by the lack of the proper paperwork being submitted by the financial institution.
Standing to bring the foreclosure lawsuit is a significant issue in every foreclosure case. This issue is, is the plaintiff the right person to bring this lawsuit? Morever, and more importantly has the proper filings been completed by the financial institution that originated the mortgage giving authority to the financial institution bringing the lawsuit to be the proper party to the lawsuit? If the proper documents have not been filed with the County Clerk’s office, the financial institution bringing the lawsuit may not have standing to bring this lawsuit. Without the proper standing, legal action can be taken by defense counsel to dismiss the foreclosure proceeding.
The purpose of this new legislation is to give New York homeowners a better understanding of where their case is going, the potential for obtaining a mortgage modification without accruing significant late fees and penalties during the pendency of the case in the Foreclosure Conference Part. Hopefully this statute will pressure banks to grant homeowners mortgage modifications to levels that are affordable by them, thereby allowing the homeowners to continue to live in their homes.
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