Thursday, May 31, 2012

Foreclosure - Early Certification - Eliminating the Shadow Docket

This past week a proposal was made to change the process of foreclosure litigation in NYS. Lets learn about it now:

Currently, the process for a lender / servicer to foreclose a residential mortgage is as follows:

Currently:
Plaintiff's attorney will file the foreclosure action (summons and complaint), get an index number and serve process, but before the matter is assigned to a Judge or put into the mandatory Foreclosure Settlement Conferences where the parties are instructed to work towards a modification, the lender's / servicer's attorney will be required to swear to the truth of the documents submitted by way of an affidavit. Yet, many attorneys first learn at this stage that they have insufficient facts to permit them to swear to these facts and the matter stays in limbo without assignment to a Judge or access to the Foreclosure Settlement Conferences. As a result, many foreclosure actions exist, but are not moving forward towards resolution - this is called the Shadow Docket.

Amendment:
Recently, the Office of Court Administration has proposed the following amendment to the Civil Practice Law and Rules (CPLR) to eliminate this Shadow Docket & expedite the foreclosure process. Under the amendment, if adopted, the residential mortgage foreclosure process will become as follows:

Proposed Process:
A lender's / servicer's attorney will execute a certificate of merit coupled with their summons and complaint at the time that they first get an index number. This certificate of merit will certify that the attorney has reviewed the facts of the case and that, based on consultation with authorized representatives of the plaintiff and the attorney's review of pertinent documents, including the mortgage, security agreement and note or bond underlying the mortgage executed by the residential defendant and all instruments of assignment, if any, or any other instrument of indebtedness, there is a reasonable basis for the commencement of such action.

Analysis:
If approved, this amendment will result in the elimination of the shadow docket and greatly minimize foreclosure defense tactics by attorneys. The entire effect of the amendment is to place the certification requirement earlier in time as opposed to what currently happens - instead of during the action, the certification will occur as an incident of commencement. Yet, this is a good thing for homeowners because they will not be dragged into foreclosures until the lender / servicer has a reasonable basis to commence the action. Moreover, this will result in more homeowners having access to the Foreclosure Settlement Conferences early in the process avoiding the unnecessary accumulation of excess interest & penalties following default while they remain existing in the shadow dockets.

Lieb School and the Long Island Education Board support this proposed amendment.