Provides for the foreclosure of mortgages of five million dollars or more by power of sale; repealer

Summary of provisions

OF BILL: This bill contains all of the provisions of the current version of Article 14 which was enacted as chapter 231 of the laws of 1998, with the following changes:

Section 1401. When mortgage may be foreclosed. This section has been significantly revised as it now applies only to commercial property with a mortgage of five million dollars or more that does not contain any residential units. Individual cooperative dwellings have been exempted along with property whose owner is deceased when the action is initiated or dies during the pendency of the non-judicial foreclosure. In addition, any mortgage agreement requiring a mortgagor to waive or limit their right to a judicial foreclosure pursuant to Article 13 of this chapter is null and void.

Section 1402. Notice of intent to foreclose. This section contains a requirement to set forth clearly that the mortgagor has a right to opt out of the non-judicial proceeding upon notice to the mortgagee via certified mail or as specified in the mortgage agreement and thereby be subject to proceedings pursuant to Article 13 of the RPAPL.

Section 1403. Notice of pendency of non-judicial proceeding for foreclosure by power of sale. This section, which describes to commencement of a non-judicial foreclosure proceeding by filing the notice of pendency, has not been revised in any way.

Section 1404. Contents of notice of sale. This section, which has not been revised in any way describes the requirements for the notice of sale prior to the auction of the property to be foreclosed.

Section 1405. Notice of sale; how given. This section, which has been adopted verbatim from the original version, describes who should be provided with the notice of sale and publication requirements in the weeks prior to the sale by auction of the foreclosed property.

Section 1406. Notice of sale; how served. This section, which has not changed, explains the timing and method of service required for providing notice of sale.

Section 1407. Sale; how postponed. This section has not been revised in any way.

Section 1408. Sale; how conducted. This section has been revised to provide for addition time depending on the length of notice provided for the sale. If the notice of sale is for four weeks, the sale can take place between the forty-third and fiftieth day after the first publication. If the notice of sale is for five weeks, the sale can take place between the fiftieth and fifty-seventh day after the day of the first publication.

Section 1409. Mortgagee or successor in interest may purchase. This section explains how if the property has not been redeemed, the mortgagee, its assignee or legal representative may bid on the property. This section has not been revised in any way.

Section 1410. Right to redeem of mortgagor, subordinate lienor, or holder of subordinate interests. At any time before the commencement of the bidding at public auction, the mortgagor or record owner or the holder of any subordinate security interest of the commercial property may prevent the sale by payment to the mortgagee of all sums due under the mortgage. This section has not been revised in any way.

Section 1411. Effect of sale. This section has not been revised in any way.

Section 1412. Conveyance. This section has not been revised in any way.

Section 1413. Distribution of proceeds of sale. This section has not been revised in any way. Section

1414. Report of sale. This section has not been revised in any way.

Section 1415. Filing of report of sale. This section has not been revised in any way.

Section 1416. Multiple collateral; designation of order of sale of parcels. This section has not been revised in any way.

Section 1417. Costs and expenses allowed. This section has not been revised in any way.

Section 1418. Application for surplus. This section which has not been revised in any way explains the procedure for individuals to apply for surplus.

Section 1419. Deficiency judgment. This section, which has not been revised in any way, describes procedure for creditors if, after the sale of the property, money is still owed to a party to the non-judicial proceeding.

Section 1420. Receiver. This section, which has not been revised in any way, describes the role that a receiver plays in a non-judicial foreclosure, and other related topics.

Section 1421. Right to seek judicial intervention; mortgagee's liability for failure to comply with this article. This section has been revised to allow the Mortgagor to opt out of a non-judicial foreclosure action by providing notice via certified mail or according to the requirements of the mortgage agreements, However, such notice must be postmarked not later than forty days after receipt of notice to foreclose.

Section 1422. Data collection and report. This section creates a mechanism for the superintendent of banks to collect information related to non-judicial foreclosure actions. Information will be provided by mortgagees at three different times during proceedings under this article. When the notice of pendency is filed the mortgagee will file a form listing information about the property and the county clerk will forward this information to the superintendent of banks. When an action under this article is discontinued, a form listing the reason for the discontinuance will be filed by the mortgagee and forwarded by the county clerk to the superintendent of banks. Finally, upon a filing a report of sale, the mortgagee will fill out a form providing information about the auction price of the property and whether any additional funds were available or a deficiency. After collecting this information the superintendent of banks will create a report on or before June 1, 2010 and provide the information to the Governor, Temporary President of the Senate and the Speaker of the Assembly.

Justification

There is a need to provide commercial mortgage lenders with an economical, non-judicial alternative to foreclose on real property. This is especially true when there is no dispute between the mortgagee and mortgagor and both parties seek a quick and inexpensive way to transfer ownership. However, in these times of financial hardship it is important to ensure that foreclosure actions occur under the watchful eyes of the court when residences are involved or disputes are present.

Legislative history

2009: A.8993-A- Assembly Calendar.

Fiscal implications for state and local governments

None.

Effective date

This act shall take effect July 1, 2009; provided that if this act shall not have become a law on or before July 1, 2009, this act shall take effect immediately and shall be deemed to have been in full force and effect on and after July 1, 2009; article 14 of the real property actions and proceedings law, as added by section one of this act, shall expire and be deemed repealed July 1, 2010, but such article shall continue to apply to any non-judicial proceeding in which the notice of pendency was filed before July 1, 2010,