New York to Introduce a Law Ending Habit of Pausing Foreclosure Proceedings

The state of New York’s Legislature is likely to enact a bill that mortgage financiers and servicers expect to make it nearly impossible to sanction foreclosure proceedings successfully.

Last week the state assembly passed The New York Foreclosure Abuse Prevention Act, which is likely to pass the state senate this week. It is expected that Governor Kathy Hochul will approve the legislation into law.

As per the bill, an appellate court ruling in the Freedom Mortgage vs. Engel case pushed lawmakers to act. The ruling gave mortgage lenders and servicers the power to arrest, control, halt, and recommence restrictions timeline at will, at the disadvantage of New York house owners.

Consequently, legislators say that courts across the state have been inundated with motions from lenders seeking to restart previously dismissed foreclosure suits due to limitation period issues. In the Engel case, the court’s ruling allowed lenders to voluntarily suspend the state’s 6-year statute of limitations timeline on foreclosures, with the option to resume the action in six years.

According to the legislators, this resulted in foreclosure moves not being time-restricted anymore, trapping countless homeowners in a judicial purgatory state with their homes’ fate suspended in limbo.

The proposal claim’s opponents say that it will severely restrict mortgage holders’ ability to reach a decision on the facts of foreclosure claims and encourage mortgage holders to defer the foreclosure process and reject loss remediation and debt restructuring attempts.

Opponents of the legislation also claim that it punishes lenders for possible procedural faults that could lead to a plaintiff getting a free home as a windfall in some instances.

Since most lending institutions throughout the country have a substantial portion of their investments in New York, said attorney Brian McGrath of Hinshaw & Culbertson, the legislation’s impact reaches beyond the state.

McGrath said he acknowledges why bill supporters think it will keep homeowners and help stop predatory lending, but that might not be the case. He said that the law doesn’t prevent that and is likely to work against clients.

Also, McGrath predicts a slew of negative consequences if the bill passes. He says lenders will quit originating loans in New York since foreclosing is too tricky, but he anticipates them raising income thresholds if they keep going on with business in New York. He says people most likely to be affected more will be first-time owners and low-income mortgagors.

To avoid following through or filing out a foreclosure, McGrath believes lenders would no longer attempt to cooperate with borrowers that have fallen behind on loan payments by giving debt forgiveness, deferring payments, or slashing monthly costs.

Finally, because the law will apply retroactively to ongoing foreclosures, McGrath anticipates legal action claiming that the act violated lenders’ due process rights assured by the 14th Amendment to the United States Constitution.

from lawyers.buzz https://lawyers.buzz/new-york-to-introduce-a-law-ending-habit-of-pausing-foreclosure-proceedings/1306/
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