Provides that 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

1 Co-sponsor

• Kevin S. Parker

BILL NUMBER:S5241

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 of bill

Section 1: Adds a new section 1302-A to the Real Property Actions and Proceedings Law (RPAPL) providing that any defense based on a plaintiffs lack of standing in a foreclosure proceeding related to a home loan cannot be waived if a defendant fails to raise such a defense in a responsive pleading or pre- answer motion. It also provides that a defendant may not raise the defense after a foreclosure sale, unless the judgment of foreclosure and sale was issued upon the defendant's default.

Section 2: Provides for the effective date.

Justification

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. 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 plaintiffs 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, numerous court decisions have held that if the borrower doesn't raise standing upon answering the foreclosure action, the defense of standing is waived (see HSBC Bank USA v Dammond, 59 AD3d 679 [2nd Dept 2009]). Unfortunately, often the borrower has no way of knowing who owns the loan; despite the clear requirement 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, they may never be able to raise it again. In this situation, an entity can foreclose on a home on which they have no true legal right to do so.

This bill would provide that the defense of standing is not waivable and can be raised throughout the foreclosure process. Absent the clarification provided under this bill, mortgagees will continue to be able to foreclose solely because an otherwise viable defense was not timely raised.

Legislative history

New bill in the Senate. A.9911 of 2014 died on - Rdg.

Fiscal implications for state and local governments

None.

Effective date

Immediately with provisions.