BILL NUMBER:  S6093

 TITLE OF BILL :

An act to amend the real property actions and proceedings law, in
relation to the failure to raise the defense of lack of standing in a
mortgage foreclosure action

 SUMMARY OF PROVISIONS OF BILL :

Section 1: Adds a new section 1302,A to the Real Property Actions and
Proceedings Law (RPAPL) providing that any defense based on a
plaintiffs lack of standing in a foreclosure proceeding related to a
home loan cannot be waived if a defendant fails to raise such a
defense in a responsive pleading or pre- answer motion. It also
provides that a defendant may not raise the defense after a
foreclosure sale, unless the judgment of foreclosure and sale was
issued upon the defendant's default.

Section 2: Provides for the effective date.

 JUSTIFICATION :

During the past 4 years (both before and after the stock market crash
of 2008 and the previous and associated meltdown of the housing
market), there has been a nationwide increase in foreclosures.
              

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 (see HSBC Bank USA v Dammond, 59 AD3d
679 (2nd Dept 2009)). Unfortunately, often the borrower has no way of
knowing who owns the loan; 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, they may
never be able to raise it again. In this situation, an entity can
foreclose on a home on which they have no true legal right to do so.
This bill would provide that the defense of standing is not waivable
and can be raised throughout the foreclosure process. Absent the
clarification provided under this bill, mortgagees will continue to be
able to foreclose solely because an otherwise viable defense was not
timely raised.

 LEGISLATIVE HISTORY :

2016 - died in Housing, Const. and Comm. Devel. Committee; P-Assembly
100-39.
2015 - died in Housing, Const. and Comm. Devel. Committee; died on 3rd
Rdg. in Assembly.
2014 - No Senate bill; died on 3rd Rdg. in Assembly.

 FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS :

None.

 EFFECTIVE DATE :
Immediately with provisions.