On June 23, 2016, Governor Andrew Cuomo signed into law Chapter 73 of the Laws of New York 2016, an omnibus bill that addresses vacant and abandoned properties, establishes timelines for the sale of post-foreclosure judgment and REO properties and updates and enhances protections for homeowners in default and foreclosure. The law was passed as Part Q in the final bill of the session and includes provisions and intentions that were part of several bills introduced to address the foreclosure crisis and the problem of vacant and abandoned properties throughout New York State. All provisions of the law went into effect on December 20, 2016.
From a title insurance perspective, perhaps the most important area of the changes is in a new timeline structure relating to the sale of the properties and the notice provisions set forth below.
A. Chapter 73 amends RPAPL § 1351, the provision that directs a judgment in a mortgage foreclosure, to require that a property be sold within 90 days of the date of the foreclosure judgment. Current law contains no timeline. RPAPL 1351 was amended to provide that the foreclosure sale must occur “within ninety days of the date of the judgment.” The date of the judgment is not necessarily the day that the judgment was entered; the amendment does not specify whether this means the date the judgment is executed or the date the judgment is entered. Additionally, bankruptcies and various orders to show cause can delay the foreclosure sale, as well as the fact that the sale itself must be advertised for a 28 day period. Strict attention must be paid to this time period.
B. Chapter 73 amends RPAPL § 1353, the provision that states after a foreclosure sale the deed must be transferred to the purchaser, to require that if the purchaser is the plaintiff from the foreclosure action (“REO”), the purchaser must place the property on the market for sale within 180 days, or if repairs are being made, within 90 days from the date the repairs are completed, whichever comes first. A court may grant an extension for good cause.
C. Amendments to RPAPL Sections 1303 and 1304-Enhanced Protection for Homeowners in Default/Foreclosure
Since 2009, RPAPL § 1303 has required a prescribed notice to be sent to homeowners by the lender at the time the foreclosure is filed. The notice must be sent in a separate envelope from the foreclosure and must be on a different colored piece of paper. The original purpose of the notice was to warn homeowners about scams and solicitations for assistance and inform them about protections under New York State law
Chapter 73 amends the notice, adding language to let homeowners know they have the right to remain in their home until the foreclosure and sale are completed.
The new notice reads (emphasis added, new language is in bold):
Help for Homeowners in Foreclosure
New York State Law requires that we send you this notice about the foreclosure process. Please read it carefully.
Summons and Complaint
You are in danger of losing your home. If you fail to respond to the summons and complaint in this foreclosure action, you may lose your home. Please read the summons and complaint carefully. You should immediately contact an attorney or your local legal aid office to obtain advice on how to protect yourself.
Sources of Information and Assistance
The State encourages you to become informed about your options in foreclosure. In addition to seeking assistance from an attorney or legal aid office, there are government agencies and non-profit organizations that you may contact for information about possible options, including trying to work with your lender during this process. To locate an entity near you, you may call the toll-free Hope Now Hotline maintained by the New York State Department of Financial Services at 888-995-HOPE (888-995-4673). or visit the Department's website at http://www.dfs.ny.gov/consumer/mortg.htm.
Rights and Obligations
YOU ARE NOT REQUIRED TO LEAVE YOUR HOME AT THIS TIME. You have the right to stay in your home during the foreclosure process. You are not required to leave your home unless and until your property is sold at auction pursuant to a judgment of foreclosure and sale. Regardless of whether you choose to remain in your home, YOU ARE REQUIRED TO TAKE CARE OF YOUR PROPERTY and pay property taxes in accordance with state and local law. (This is the new language)
Foreclosure Rescue Scams
Be careful of people who approach you with offers to "save" your home. There are individuals who watch for notices of foreclosure actions in order to unfairly profit from a homeowner’s distress. You should be extremely careful about any such promises and any suggestions that you pay them a fee or sign over your deed. State law requires anyone offering such services for profit to enter into a contract which fully describes the services they will perform and fees they will charge, and which prohibits them from taking any money from you until they have completed all such promised services.”
D. Ninety Day Pre-Foreclosure Notice (amends RPAPL § 1304) Since 2009, lenders have been required to send a prescribed notice to borrowers with home loans at least 90 days prior to the initiation of a foreclosure lawsuit. A list of at least five non-profit housing counseling agencies serving the geographic region (now county) of the borrower must be attached to the notice.
Chapter 73 includes a number of technical and substantive amendments to the 1304 90 day pre-foreclosure filing notice:
- Requires lender to send the notice to the borrowers at any other address on record, in addition to the property address as formerly required.
- Shifts the responsibility for maintaining the list of approved housing counseling agencies serving each county (to be included with the notice) from the NYS Division of Housing and Community Renewal to DFS.
- Clarifies language to make clear that a lender is not required to send the notice “if the borrower has filed for bankruptcy protection under the law.”
- Clarifies that the notice must be sent one time, per loan, in a twelve month period in connection with a delinquency, but if a borrower cures and then re-defaults, even within a twelve month period of the first notice being sent, the lender is obligated to send a new 1304 notice in connection with the new delinquency.
- Adds a requirement that for borrowers with limited English proficiency (LEP), the notice must be sent in the native (or proficient) language of the borrower if that language is one of the top six most common non-English languages in New York State. DFS must determine and post those languages on its website.
- Amends and updates the prescribed notice, including:
i. adding language regarding the borrower’s right to remain in the home until a court orders them to leave and that they remain responsible for the home until such time;
ii. listing the NYS Office of the Attorney General’s Homeowner Protection Program toll-free consumer hotline.
The above-referenced sections are important as they relate directly to the insurability of the title.
E.RPAPL Section 1308-Abandoned and Vacant Property
A new Section 1308 was added to the RPAPL entitled “Inspecting, securing and maintaining vacant and abandoned residential real property.” This section applies to first mortgage lienholders. State or federally chartered banks or credit unions that have a small market share (as defined by the statute) are exempt from the law. In a nutshell, it imposes upon these first mortgagees the following:
- Duty To Inspect During Delinquency: The mortgagee must inspect the mortgaged premises within 90 days of a borrower’s default to determine whether the property is occupied. The mortgagee must inspect the property monthly during the period of delinquency.
- Duty To Post Notice: Within 7 days after having determined that the mortgaged property is vacant or abandoned, the mortgagee must post a notice on the property stating that it is maintaining the property.
- Duty To Secure and Maintain: If there is no response to notice within 7 days and the servicer has a reasonable basis to believe the property is vacant/abandoned, the mortgagee must secure and maintain the property pursuant to the guidelines set forth in the statute.
- Protection of Mortgagor’s Personal Property: The mortgagee cannot remove personal property unless it poses a significant risk to health and safety
A mortgagee that peacefully enters a vacant and abandoned property in order to comply with RPAPL 1308 shall be immune from liability as long as there are reasonable efforts to comply with the statute. Penalties can be severe, for if it is determined by the Department of Financial Services (DFS) or the municipality that a mortgagee or its agent has violated section 1308 a penalty of up to $500/day may be imposed.
F.RPAPL Section 1309-Expedited Application for Judgment of Foreclosure of Sale
New RPAPL 1309 allows a mortgagee to move for an immediate judgment of foreclosure and sale on the grounds the property is vacant and abandoned. However, be advised that this remedy is not available if the defendant gives “an intention to contest the foreclosure action.”
The application cannot be made until the defendant’s time to answer the complaint has expired. Also, the motion must be served on the defendant, regardless of whether the defendant has defaulted in appearance and pleading. The motion must be supported by an affidavit and other proof, including but not limited to: proof of ownership of the mortgage and the note; proof that the property is vacant and abandoned (photographs); the amount due and owing to the foreclosing mortgagee; the court will send a separate notice to the defendant letting them know that the plaintiff has filed an application to expedite the foreclosure and sale on the ground that the property is vacant and abandoned.
G.RPAPL Section 1310-Statewide Vacant and Abandoned Property Electronic Registry
New RPAPL 1310 requires the DFS to maintain a statewide vacant and abandoned property registry. DFS may adopt regulations regarding the manner and frequency of registration, as well as the information to be provided by the mortgagee. DFS must also establish a toll-free hotline for residents to report vacant and abandoned properties.
In conclusion, strict attention must be paid to the foreclosure sale and REO sale timelines, as well as strict compliance to all statutorily required notice provisions.
If a time period has been exceeded court approval must be sought.
If you have any questions regarding this bulletin please contact Stewart Title Insurance Company Legal Services at 212-922-0050.
Related Bulletins: 459; 465; 583