On July 6, 2020, Governor Cuomo signed Executive Order 202.48 which affects the validity of many existing executive orders but most notable of which, is that it extends the stay on evictions and foreclosures proceedings to August 5, 2020 for commercial properties, but not for residential properties.

Essentially, Executive Order 202.48 extends the validity of Executive Order 202 up to 202.14, as continued and contained in Executive Order 202.27, 202.28, and 202.38 for another thirty (30) days through August 5, 2020 with some exceptions.

Real estate professionals should be aware that it does not extend the eviction and foreclosure moratorium in place as ordered in Executive Order 202.28 for all residential tenants and mortgagors. However, for commercial properties, an eviction and foreclosure stay is still in place until August 5, 2020.

As such, landlords and lenders should take note of the following:

• Residential evictions may now be commenced but courts are prohibited from awarding warrants of eviction and judgments of possession for tenants experiencing financial hardship for non-payment of rent that accrues or becomes due during the COVID-19 period pursuant to the Tenant Safe Harbor Act. Money judgments may be awarded. For more information, read our blog HERE;
• Residential foreclosure proceedings based on nonpayment due to COVID-19 are prohibited until August 20, 2020 pursuant to Executive Order 202.28;
• Commercial foreclosure proceedings based on nonpayment due to COVID-19 are prohibited until August 5, 2020 pursuant to Executive Order 202.48;
• Commercial evictions based on nonpayment are prohibited until August 5, 2020 pursuant to Executive Order 202.48; and
• Commercial holdover proceedings may be commenced beginning June 21, 2020 pursuant to Executive Order 202.8.

Landlords and lenders are advised to contact counsel to ensure that all laws, executive orders, and court directives in place due to the coronavirus pandemic are followed. As noted in our recent blog HERE, eviction and foreclosure proceedings now require that the petitioner/plaintiff file additional forms with the commencement documents pursuant to recent directives from Administrative Judge Lawrence K. Marks dated June 18, 2020 and June 23, 2020.

• A form plaintiff’s attorney affirmation, indicating that counsel has reviewed the various state and federal restrictions and qualifications on foreclosure proceedings and believes in good faith that the proceeding is consistent with those restrictions and qualifications; and
• A form notice to defendants-tenants (in English and Spanish), informing them that they may be eligible for an extension of time to respond to the complaint in light of legal directives related to the COVID-10 pandemic, and directing them to a website link for further information.

• Foreclosure matters wherein all parties are represented by counsel may be calendared for both initial and follow-up virtual settlement conferences;
• Lenders may move for a judgment of foreclosure and sale on the ground that a property is vacant and abandoned; and
• Lenders may also move to discontinue a pending case.

In Episode 42, Andrew and Lauren breakdown the cost/benefit analysis of whether you deserve a mortgage modification. We discuss foreclosure lawsuits, mortgage terms and what motivates a modification from your lenders perspective.

On March 27, 2020, the historic stimulus package known as the Coronavirus Aid, Relief, and Economic Security or “CARES” Act was enacted into law.

In addition to the relief enumerated in our recent blog (Nuts & Bolts of Stimulus Package - House Passes 2 Trillion Dollar Stimulus Package), the CARES Act also includes mortgage relief in the form of forbearance periods and foreclosure moratoriums for federally backed mortgages on 1-4 family homes and multifamily (5 or more) homes.

Which mortgages are covered?

• Federally backed mortgage loans secured by a first or subordinate lien on residential real property (including individual units of condominiums and cooperatives) for 1- to 4-families and for on multifamily residential real property (5 or more dwelling units) are covered, these include loans:
• insured by the Federal Housing Administration;
• insured under section 255 of the National Housing Act;
• guaranteed under section 184 or 184A of the Housing and Community Development Act of 1992;
• guaranteed or insured by the Department of Veterans Affairs;
• guaranteed or insured by the Department of Agriculture;
• made by the Department of Agriculture; or
• purchased or securitized by the Federal Home Loan Mortgage Corporation (Freddie Mac) or Federal National Mortgage Association (Fannie Mae).

What relief is available? 

Governor Cuomo has consolidated the patchwork of local foreclosure and eviction laws bubbling up in the wake of the COVID-19 quarantines - and it's a big one.

There shall be no enforcement of either an an eviction of any tenant, residential or commercial, or a foreclosure of any residential or commercial property for a period of ninety days. 

On March 21, 2020, the Governor issued NYS Executive Order 202.9, which provides, in pertinent part, as follows:

Subdivision two of Section 39 of the Banking Law is hereby modified to provide that it shall be deemed an unsafe and unsound business practice if, in response to the COVID-19 pandemic, any bank which is subject to the jurisdiction of the Department shall not grant a forbearance to any person or business who has a financial hardship as a result of the COVID-19 pandemic for a period of ninety days... The Superintendent of the Department of Financial Services shall ensure under reasonable and prudent circumstances that any licensed or regulated entities provide to any consumer in the State of New York an opportunity for a forbearance of payments for a mortgage for any person or entity facing a financial hardship due to the COVID-19 pandemic. The Superintendent shall promulgate emergency regulations to require that the application for such forbearance be made widely available for consumers, and such application shall be granted in all reasonable and prudent circumstances solely for the period of such emergency. 

While a cursory reading shows that mortgage help is on the way, many uncertainties remain, including:

• What does subject to the jurisdiction of the Department mean in the Order? Specifically, there are two charting systems for banks; federal and state. The Federal Office of the Comptroller of the Currency controls federally chartered banks pursuant to the National Bank Act. Generally, you can tell that a bank is federally chartered because it has the initials N.A. after its name. As a result, NYS doesn't have jurisdiction over federally chartered banks so how does this work if you have a loan through a federal bank like many NYS residents do?
• When is the Superintendent promulgating emergency regulations and how are consumers going to understand those regulations if attorneys at law were not labeled as essential services under the quarantine and therefore are becoming less available by the minute? Yes, some law firms are open and working remotely, but for how long with many clerks' offices closed and all court deadlines tolled (yesterday's Executive Order 202.8), including "any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding."
• By adding the words business & entity, is it intended that this applies to both residential and commercial property?
• Is there a limit on the amount of the mortgage for this to be applicable?
• After the forbearance is over, what happens to the money deferred (i.e., back end balloon, recapitalized, ballooned immediately, something else)?
• Will the Superintendent of DFS be answering these questions or someone else; plus, will the answers be part of a regulation or just advisory? 

Please don't misunderstand this post. We 100% support the quarantine and also support the forbearance. Instead, this blog is designed to prevent further hardship to the vulnerable who take a leap of faith on their mortgage without first researching facts.

Get facts before you act and the facts aren't out yet - so, CONTINUE PAYING YOUR MORTGAGE for now.

On March 19, 2020, Governor Cuomo announced a 90-day Mortgage Relief Plan ("Plan") for New York State mortgage borrowers. New York State mortgage servicers are directed to provide 90-day mortgage relief to borrowers affected by the novel coronavirus (COVID-19). The Plan aims to provide the following relief:

• Waiving mortgage payments based on financial hardship;
• No negative reporting to credit bureaus;
• Grace period for loan modification;
• No late payment fees or online payment fees; and
• Postponing or suspending foreclosures.

On March 18, 2020, the U.S. Department of Housing and Urban Development (HUD) authorized the Federal Housing Administration (FHA) to implement a 60-day moratorium on foreclosures and evictions for single family homeowners with FHA-backed mortgages. Similarly, the Federal Housing Finance Agency (FHFA) also directed Fannie Mae and Freddie Mac to suspend foreclosures and evictions for single family mortgages for at least 60 days. These moratoriums were intended to curb the effects of the coronavirus (COVID-19) on homeowners and in connection with the proclamation of the COVID-19 outbreak as a national emergency.

The 60-day moratorium for FHA, Fannie Mae, and Freddie Mac mortgages took effect on March 18, 2020. For FHA mortgages, the moratorium applies to all FHA Title II Single Family forward and Home Equity Conversion Mortgage (reverse) mortgage programs and covers the initiation of foreclosures up to completion of foreclosures in process. Evictions from properties secured by FHA, Fannie Mae and Freddie Mac single family mortgages are also on hold for 60 days.

In addition to HUD and FHFA moratoriums, all evictions and foreclosures are indefinitely suspended in the counties of Nassau County and Suffolk County.

With quarantine, foreclosures are next.

We are heading for a recession and possibly a depression the likes of which we haven't seen before.

Jobs are going to be lost, tenants aren't going to pay rent, mortgage payments are going to be missed and banks will have no choice but to start to pursue foreclosure.

If you are currently in a foreclosure proceeding, you should know that the courts have just rescheduled (adjourned) all foreclosure settlement conferences (CPLR 3408) for at least 45 days while they work on new orders and directives for the process.

This is going to be a mess.

If you are concerned about your mortgage, you need to act immediately and negotiate a forbearance (i.e., banks often agree to refrain from pursuing a foreclosure for a period of time for no or reduced payments) with a lender before going into default.

Get ready - the next foreclosure crisis is here.

On December 20, 2019, Public Law No: 116-94 extended 26 USC 108(a)(1)(E) to 1/1/2021. 

According to the IRS, this law "allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief."

Short sales, modifications with debt forgiveness, and deeds in lieu of foreclosure are now viable options for many more distressed homeowners for the remainder of 2020.

On December 23, 2019, S5160 was enacted and "the defense, in a mortgage foreclosure action, of the plaintiff's lack of standing is not waived because of the defendant's failure to raise such defense in his or her responsive pleading."

A standing defense is utilized to argue that the plaintiff is not the right party to sue in that it's not the owner of the mortgage or debt and has not been appointed the power by such owner to pursue the lawsuit. This is one of the most significant changes to the foreclosure litigation practice since the Great Recession and will impact litigation for years to come.

Real Property Actions and Proceedings Law section 1302-a is an early Christmas present to defendants in ongoing litigation as it took effect immediately and appears to apply up until sale even if a Judgment of Foreclosure has already been ordered. Specifically, the new section states that "[a] defendant may not raise an objection or defense of lack of standing following a foreclosure sale." As such, it appears the defense of standing can be raised at any time before the sale.

If you are defending a case that is post-Judgment of Foreclosure and Sale and pre-auction sale, you may want to consider bringing an Order to Show Cause with a Motion to Renew pursuant to Civil Practice Law & Rules Rule 2221-e immediately.

On December 6, 2019, A5626 was signed into law to regulate reverse mortgages. The new law takes effect on March 5, 2020. 

A reverse mortgage means "[a] loan which is secured by a first mortgage on real property improved by a one- to four-family residence or condominium that is the residence of the mortgagor(s) the proceeds of which are advanced to the mortgagor(s) during the term of the loan in equal installments, in advances through a line of credit or otherwise, in lump sums, or through a combination thereof."

The new law has the following features at new Real Property Law section 280-b:

1. Marketing & offering of reverse mortgage loans are regulated to avoid unfair or deceptive practices;
2. Consumer protection materials are required to be included in marketing such loans & the Superintendent is authorized to promulgate rules & regulations to protect consumers;
3. Loans that pay taxes, mortgage insurance, homeowners insurance, or other property obligations must provide the borrower with periodic account statements & a required warning notice;
4. When the escrowed money for payments of obligations are depleted to 10% or less, the borrower will get a telephone & mailed notice about the borrowers obligations; 
5. Restricts lenders from paying borrowers obligations on the property (taxes, mortgage insurance, homeowners insurance, etc.) as advance payments & only permits lenders to pay when there are arrears;
6. Restricts foreclosures based on primary residence restrictions; 
7. Requires both the lender & the borrower to be represented by an attorney at the closing of the loan; 
8. Borrowers who are injured from a violation by a lender have a private right of action for treble damages & reasonable attorneys' fees; & 
9. Violating this statute by a lender works a complete defense for a borrower in a foreclosure action.

Most importantly, a Lis Pendens does not necessarily mean that there is a foreclosure on the property. Instead, a Lis Pendens simply means that a lawsuit has been filed against the property. This lawsuit could be a foreclosure, but it could also be a lawsuit for partition, adverse possession, prescriptive easement, constructive trust, specific performance, as well as many other topics.

So, first and foremost don't assume that there is a foreclosure on the property, but instead make inquiry as to the Lis Pendens.

• Step 1 - Ask the homeowner the nature of the lawsuit on the property.
• Step 2 - Inquire if you can talk to the homeowner's attorney to learn whether the lawsuit will be an impediment to selling the property (e.g., a specific performance lawsuit by a prior purchaser can make it impossible to sell the house whereas a foreclosure lawsuit with a house with equity remains a viable sale and a foreclosure lawsuit with a house without equity can be sold as a short sale).
• Step 3 - Assuming the lawsuit is a foreclosure, determine when the lawsuit was filed with the county clerk because if it was years ago its going to be very hard to sell the house before the auction (i.e., you can sell up until the auction as long as the seller can payoff the loan or if the lender takes a short payoff) and the homeowner likely defaulted on the lawsuit (i.e., they lost for inaction).
• Step 4 - If it is a foreclosure, help the homeowner to order payoff letters from their lenders in order to ascertain the precise amount owed (i.e., its not just the loan, but also the penalties, interest and attorneys' fees that are owed when the property is in foreclosure).  
• Step 5 - Workup a brokers' price opinion for the house as a distressed sale.
• Step 6 - Calculate closing costs for your seller.
• Step 7 - Determine if the seller has enough equity to close without dipping into their own pocketbook (i.e., compare the BPO with the payoffs and the closing costs). 
• Step 8 - If there is enough equity, list the house fast; if not, advise the seller that you can only list the property as a short sale (i.e., subject to bank approval with a short payoff).

Foreclosure litigation involves much more than simply enforcing a contract. Follow this top 10 checklist when representing private lenders to successfully navigate the nuances of foreclosure practice.

Read the full article by Andrew Lieb, Esq. and Jay Sheryll, Esq. here. 

In Plotch v. Citibank, decided on May 10, 2016, the Court of Appeals clarified issues of lien priority between a consolidated mortgage and a condominium’s common charge lien pursuant to RPL §399-z. Specifically, the court addressed whether the exception to a common charge lien’s priority for “all sums unpaid on a first mortgage of record,” as set forth in RPL §399-z, applies to a consolidated mortgage recorded prior to the recordation of such common charge lien. The court held that a consolidated mortgage constitutes only one first mortgage of record for purposes of lien priority under the Condominium Act. However, the court limited its holding by emphasizing that the consolidated mortgage was recorded prior to the common charge lien, and therefore the court expounded that “[t]he consolidation agreement […] did not interfere with any rights of the condominium board.” In such, it is envisioned that a subsequently recorded consolidation agreement to a common charge lien will not be given first lien priority pursuant to RPL §399-z.

Read the full article, published in The Suffolk Lawyer by Andrew Lieb, Esq. Here. 

Governor Andrew Cuomo signed into law an amendment to CPLR Rule 3408, which, at new subsection (m) thereof, effectively eliminates defaults in foreclosure actions as currently understood. Interestingly, the amendment is made to CPLR Rule 3408, which is the CPLR Rule titled “Mandatory settlement conference in residential foreclosure actions,” and not to CPLR Rule 320, which is the CPLR Rule titled “ Defendant’s appearance,” or to CPLR Rule 5015, which is the CPLR Rule titled “Relief from judgment or order,” or to CPLR §3012(d), which is the CPLR subsection titled “Extension of time to appear or plead.” This choice of placement raises questions about how the amendment will be effective in practice. Further questions are raised because the amendment includes superfluous language in expressly stating that the “default shall be deemed vacated” while also referencing the “reasonable excuse” language from both CPLR Rule 5015 and CPLR §3012(d). Still further, the new subsection does not eliminate the need for a defendant to formally answer, but only extends the time to answer, which presumptively will remain a problem for a foreclosure defendant to accomplish at a later date. These question marks need to be ironed out by practitioners and the courts after new subsection (m)’s effective date of December 20, 2016.

Read the full article published in The Suffolk Lawyer by Andrew Lieb, Esq. and Jay Sheryll, Esq. here. 

Recently Governor Andrew Cuomo signed into law a comprehensive piece of legislation, which makes sweeping changes to New York’s requirement that Lenders and Borrowers negotiate in “good faith” during Mandatory Foreclosure Settlement Conferences.

Under New York foreclosure law, in a residential foreclosure action, commenced on or after February 13, 2010, involving a 1-4 family owner occupied property, it is required that a Mandatory Foreclosure Settlement Conference be held within sixty (60) days of service of the foreclosure summons and complaint. The purpose of the Mandatory Foreclosure Settlement Conference is to provide a venue for Borrowers and Lenders to settle the foreclosure action without further court action, via a loan modification, deed-in-lieu, short sale or other loss mitigation option. At this settlement conference, it is required that both parties negotiate in “good faith.”

However, the implementation of New York’s Mandatory Foreclosure Settlement Conference and its “good faith” negotiations requirement, has had its fair share of complications. To mitigate these complications, this recently enacted legislation, which takes effect on December 20, 2016, places stringent guidelines on the documentation and information that both parties must come to the conference with and requires that both parties, or representatives thereof, appear at the conference with full authority to settle the case.

Additionally, the legislation imposes more stringent penalties upon both parties should they fail to negotiate in “good faith.” Where it is found that a Lender has failed to negotiate in “good faith,” one or more of the following penalties may be imposed:

• A toll of the accumulation and collection of interest, costs and fees during any undue delay caused; 

• A civil penalty of up to twenty-five thousand dollars ($25,000.00); 

• Actual damages, fees (including attorney’s fees) and expenses incurred by the homeowner as a result of the Lender’s failure to negotiate in good faith; or 

• Any other relief that the Court deems just and proper. 

On the other hand, where it is found that a Borrower has failed to negotiate in “good faith,” the Court is required to remove the case from the conference calendar, meaning that the Lender will then be permitted to move forward towards obtaining a Judgment of Foreclosure and Sale. 

The U.S. Department of Treasury (Treasury) recently released Supplemental Directive (SD) 16-03 (MHA Program Termination and Borrower Application Sunset II) to the Making Home Affordable (MHA) handbook, containing “sunset” provisions for its MHA program. The release of this Supplemental Directive signals that there will be no further extensions of the program.

The Making Home Affordable program was announced in 2009, by the Obama Administration, as a relief to distressed homeowners. The MHA program’s objective is to provide guidelines to lenders to modify the terms of eligible mortgages so that “at-risk” homeowners would be able to reduce their monthly mortgage payments and to avoid foreclosure. According to the most recent MHA Program Performance Report, during the last 7 years, the MHA program has only helped 2.5 million of the 7 to 9 million homeowners that were identified as “at-risk” by the Obama Administration in 2009. This means that the remaining 4.5 to 6.5 million “at-risk” homeowners who do not submit their request for borrower assistance by December 31, 2016, will be faced with foreclosure.

SD 16-03 provides the following modifications to the MHA handbook for winding down the program:

• All borrower requests for assistance under MHA must be submitted by December 31, 2016;
• On December 1, 2017, MHA Help and the Home Affordable Modification Program (HAMP) Solution Center will no longer accept new cases, nor escalate cases to servicers;
• All cases that have been escalated prior to December 1, 2017 must be resolved by May 1, 2018;
• After December 30, 2016, servicers will no longer be required to assign relationship managers to borrowers;
• Effective May 1, 2018, servicers will no longer be required to follow Section 3 of Chapter 1 of the MHA Handbook; however, the Treasury suggests that servicers continue to follow the best practices that have been established by MHA;
• After September 1, 2016, servicers are no longer required to satisfy the Reasonable Effort standard set forth in Section 2.2.1 of Chapter II of the MHA handbook; and
• Servicers will not be required to suspend a scheduled foreclosure sale if a borrower submits an Initial Package after December 30, 2016.

After continuously developing and expanding the MHA program over the last 7 years, it is surprising that Congress has refused to extend its life. Since 2009, the Treasury has issued 5 versions of its MHA handbook and has issued over 80 Supplemental Directives, including SD 16-03, refining the guidance it has provided to participating servicers. Congress’ decision to abandon the MHA program seems misguided because of the time and resources it has invested in the program. Most importantly, the termination of the program on December 31, 2016, leaves up to 6.5 million “at-risk” homeowners scrambling to submit requests for assistance or face the possibility of foreclosure.