BILL NUMBER: S5160

SPONSOR: KAVANAGH
 
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:

Section 1 amends the Real Property Actions and Proceedings Law by adding
a new section 1302-a, which would provide that any defense based on a
plaintiff's lack of standing in a foreclosure proceeding related to a
home loan cannot be waived by a defendant's failure to raise such a
defense in a responsive pleading or pre-answer motion.  A defendant
would not be able to raise the defense after a foreclosure sale, unless
the judgment of foreclosure and sale was issued upon the defendant's
default.

Section 2 sets forth the effective date.

 
JUSTIFICATION:
              

Beginning with the financial crisis in 2007 and in the subsequent
decade, there has been a significant nationwide increase in foreclo-
sures. However, in foreclosure actions initiated by lenders and trusts
based upon securitized debt obligations, some have called into question
the legality of the proceedings due to the plaintiffs' lack of standing
and, in many cases, the ambiguity regarding who actually owns the mort-
gage 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 a legal action
against borrowers when they don't even own the debt.

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 for the borrower. See, HSBC Bank USA v
Dammond, 59 AD3d 679 (2nd Dept 2009). Unfortunately, the borrower often
has no way of knowing who owns the loan, and despite the clear require-
ment 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
up front, they may never be able to raise it again. In this situation,
an entity can foreclose on a home they lack any legal right to foreclose
on.

The proposed bill provides that the defense of standing is not waivable
and can be raised throughout the foreclosure process. Absent the clar-
ification provided under this proposal, mortgagees will continue to be
able to foreclose solely because an otherwise viable standing defense
was not timely raised.

 
LEGISLATIVE HISTORY:  2018: S6093 (Savino)/A1498 (Weinstein)- Referred
to Housing, Construction, and Community Development/Passed Assembly
2017: S6093 (Savino)/A1498 (Weinstein)- Referred to Housing,
Construction, and Community Development/Passed Assembly
2016: S5241 (Savino)/A247 (Weinstein)- Referred to Housing,
Construction, and Community Development/Passed Assembly
2015: S5241 (Savino)/ A247 (Weinstein) - Referred to Housing,
Construction, and Community Development/Passed Assembly
2014: A9911 - Ordered to third reading rules cal.108

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.