Updates on foreclosure practice
Summary: NY Law requires the foreclosure plaintiff's attorney must file a "certificate of merit" attesting to his or her knowledge that the foreclosure plaintiff is the "creditor entitled to enforce rights" under the subject loan documents, and that the foreclosure suit has a "reasonable basis."
In a bipartisan legislative effort, the State legislature passed Senate Bill S4530-2013 requires that at the commencement of every new foreclosure action on owner-occupied residential property, the foreclosure plaintiff's attorney must file a "certificate of merit" attesting to his or her knowledge, information and belief that the foreclosure plaintiff is the "creditor entitled to enforce rights" under the subject loan documents, and that the foreclosure suit has a "reasonable basis."
This seems like a pretty obvious requirement, but it has a very specific reason for becoming necessary. Due to the overwhelming number of “robo-signed” mortgages in the run-up to the foreclosure crisis, the New York Courts must now force lenders to prove that they ACTUALLY own the home they are putting into foreclosure.
However, according to a report by State Senator Jeff Klein in the New York Daily News, a state investigation uncovered many large financial institutions were simply ignoring this requirement as a means of stalling thousands of foreclosure cases — allowing interest fees to escalate on mortgages, even against homeowners who could afford to pay down their debt.
This predatory practice enables banks to demand even larger checks from homeowners who have already seen their credit decimated by a foreclosure action filed years earlier.
The law, will be codified in the new Section 3012-b of the New York Civil Practice Law (“CPLR”) and Rules. It also requires the foreclosure attorney to attach to his or her certificate (1) a copy of the note or bond, (2) copy of the actual mortgage, and all assignments of mortgage, modifications, or extension and/or consolidation agreements (which have sometimes been lost by the banks). “If such documents have been lost or destroyed, the law requires the foreclosure attorney to attach to his or her certificate a supplemental affidavit from the attorney or a representative of the foreclosure plaintiff "attesting that such documents are lost whether by destruction, theft or otherwise."
The intent of this requirement is a good one… to uncover false affidavits filed by banks, and thus protect homeowners from wrongful foreclosure proceedings. The law is designed to address the "shadow” foreclosure dockets of cases that have been commenced but which the foreclosure plaintiffs have not yet pursued.
According to Senator Klein, “[t]his legal limbo is currently holding nearly 14,000 families statewide hostage, and standing in the way of homeowners scheduling settlement conferences, attracting free legal representation and negotiating loan modifications — all of which New York homeowners are entitled to under laws [..] ushered through the Legislature in 2009. Simply put, the banks have to prove that they have the right to foreclose on a home the moment they decide to take action. If they refuse, they lose. It’s as simple as that.”
The certificates of merit are designed to replace the previously required “Lippman Affirmations” where the foreclosure plaintiff's attorney was required to state that, to the best of his or her knowledge, the foreclosure plaintiff had legal standing to foreclose.
The new law also amends CPLR Rule 3408 requiring the foreclosure plaintiff to file with the court proof of service of its papers (including its attorney's certificate of merit) on the borrower within 20 days of such service, however service is made.
The law applies to those foreclosure actions commenced on or after the law's effective date of August 30, 2013.
(Originally Published on September 3, 2013 at http://cracolicilaw.blogspot.com/2013/09/in-recent-foreclosure-news-on-july-31.html)
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