Provides that only the owner and holder of a mortgage and note, or its agent, shall have standing to commence a mortgage foreclosure action

1 Co-sponsor

• Liz Krueger

BILL NUMBER:S8174

Title of bill

An act to amend the real property actions and proceedings law, in relation to standing to commence an action to foreclose a mortgage

Purpose

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 throughout the country. 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 plaintiff s 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, a recent court decision stated that if the borrower doesn't raise standing up front when they first answer the foreclosure summons, then the defense of standing is waived for the borrower. Unfortunately, many times the borrower often has no way of knowing who owns the loan and if they don't raise it up front, they can never raise it again. In this situation, an entity foreclosing could potentially foreclose on a home they don't have a right to foreclose on.

The proposed bill language does several things:

1. If you are going to foreclose, attach proof that you own the loan.

2. Asserts that defense of standing is not waivable and can be raised throughout the foreclosure process.

3. Requires all documents that prove ownership be filed with summons and complaint.

Summary of provisions

Section 1: Amends Subdivision 1 of section 1302 of RPAPL to require the plaintiff to adhere to the regulations set forth in the new section 1302 a with regards to commencing a foreclosure action.

Section 2: Adds anew section 1302-a which states that

(1) no person shall have standing to commence an action unless it is the owner and holder of the mortgage and note and any defense based

on a plaintiff's lack of standing cannot be waived if a defendant fails to raise such a defense in a responsive pleading or pre answer motion

(2) Every summons and complaint to commence a foreclosure action shall include an affirmative allegation at the time of the proceeding that the plaintiff is the owner and holder of the note

(3) That every summons and complaint filed to commence a foreclosure action shall be accompanied by a copy of the note with all original endorsements, assignments and transfers.

Section 3: Sets the effective date on the 90th day after it shall have become law

Legislative history

This is a new bill.

Fiscal implications

None.

Effective date

This bill would be effective immediately, with provisions.