The Top 5 New York Foreclosure Defenses

The following are the Top 5 New York Foreclosure Defenses as rated by the LeNoir Law Firm.  The rankings are based solely upon the preferences of the LeNoir Law Firm.  This blog post contains no legal advice and should not be relied upon for any purpose.

Top 5 NY Foreclosure Defenses – No. 5: The foreclosing bank failed to comply with federal Home Affordable Modification Program (HAMP) requirements before starting the foreclosure action.

When it applies:   Federal regulations may require a bank to attempt to modify a homeowner’s mortgage under the HAMP program before the bank can start a foreclosure action.   The defense of failure to comply with HAMP requirements applies when a single family home is owner-occupied and the homeowner(s) applied for a HAMP modification but the bank filed a foreclosure action anyway.  If the defense applies, the foreclosure case must be dismissed because the bank failed to satisfy the requirements of HAMP as a “condition precedent” to foreclosure.

A “condition precedent” to foreclosure is anything that a foreclosing bank must do before a homeowner is required to respond to a foreclosure complaint.  If the bank fails to satisfy a condition precedent to foreclosure, the foreclosure action must be dismissed.

Why we like it:  Failure of the bank to comply with HAMP requirements (or any other condition precedent to foreclosure) is a complete defense to foreclosure.  Even if the bank can prove that it has standing to foreclose (see below) and the homeowner defaulted in making mortgage payments, the case still must be dismissed if the bank failed to comply with HAMP requirements.

If the foreclosing bank failed to comply with HAMP before starting the foreclosure action, the foreclosure case must be dismissed and the bank has to start the foreclosure process all over again.  The bank must again satisfy every condition precedent to foreclosure, and if it does not, the case must be dismissed again.

Eventually the time to foreclose may expire and the bank will forever lose its right to enforce the mortgage through a foreclosure action.  At that time, the homeowner may file a quiet title action to have the mortgage discharged (eliminated).  If the homeowner wins the quiet title case, the home may be sold without paying the former mortgage debt.  The homeowner receives the full sale proceeds instead of the bank.

Top 5 NY Foreclosure Defenses – No. 4:  The foreclosing bank failed to properly serve upon each homeowner a Help for Homeowners in Foreclosure Notice in the proper form with all required attachments.

When it applies:  Proper service of a Help for Homeowners in Foreclosure Notice along with the summons and foreclosure complaint is a condition precedent to foreclosure.  The strict standards that apply to the personal service of the summons and foreclosure complaint upon the homeowner also apply to the service of the Help for Homeowners in Foreclosure Notice.

Why we like it:   Failure to properly serve a Help for Homeowners in Foreclosure Notice in the required form with all attachments as a condition precedent to foreclosure is a complete defense to a foreclosure action.  As with the HAMP defense, even if the bank can prove that it has standing to foreclose (see below) and the homeowner defaulted in making mortgage payments, the foreclosure case must be dismissed if the bank cannot prove that the Help for Homeowners in Foreclosure Notice in the prescribed form with all required attachments was properly served upon the homeowner along with the summons and foreclosure complaint.

The Help for Homeowners in Foreclosure Notice must be served according to the strict requirements that apply to the service of the summons and foreclosure complaint.   A crucial difference, however, is that a challenge to the service of the summons and complaint must be made early in a foreclosure case.  If the homeowner’s attorney challenges service of the summons and complaint and the bank cannot prove proper service, the foreclosure action will be dismissed relatively soon after it is started.  The bank can re-start the foreclosure action without losing much time.

In contrast, there is no fixed time limit for the homeowner’s attorney to make a motion to dismiss for the bank’s failure to serve the Help for Homeowners in Foreclosure Notice.  The motion to dismiss could be made years after the case is started.

As with the HAMP defense, if the bank fails to serve the Help for Homeowners in Foreclosure Notice according to the strict requirements that apply to service of a summons and complaint, the foreclosure action must be dismissed for failure to satisfy a condition precedent to foreclosure.  The case will have to be re-started, often more than once, and eventually the time to foreclose may expire and the homeowner may be entitled to quiet title discharging the mortgage lien.

Top 5 NY Foreclosure Defenses – No. 3:    The foreclosing bank failed to mail a Notice of Default to each homeowner a sufficient amount of time before it filed the foreclosure action.

When it applies:  Most mortgages require that each homeowner be served with a Notice of Default at least 30 days before a foreclosure action may be filed.  If a 30-day Notice of Default is required by the mortgage and the bank fails to mail the Notice of Default at least 30 days before filing the foreclosure action, the case must be dismissed because the bank failed to satisfy a condition precedent to foreclosure.

Why we like it:  Service of a Notice of Default, when required by the mortgage, is a condition precedent to foreclosure.  All of the advantages of the 5th and 4th defenses (above) based upon failure to satisfy a condition precedent apply equally to the defense of a bank’s failure to serve a Notice of Default.

We like this defense better than the 4th defense because proving proper service of the Help for Homeowners in Foreclosure Notice is easier for the bank.  The Help for Homeowners in Foreclosure Notice is served along with the summons and foreclosure complaint by a licensed process server who executes an Affidavit of Service to prove that the Notice was served.  The process server is normally available to testify that the Notice was served properly.

In contrast, the person who mails the Notice of Default never (in our experience) executes an Affidavit of Service because until recently most New York judges did not require an Affidavit of Service to prove service of a Notice of Default.  This made no legal sense and many New York judges now require an Affidavit of Service of any notice that must be served as a condition precedent to foreclosure.  When the judge requires an Affidavit of Service of a Notice of Default, the case must be dismissed because the bank never has it.  This is a fantastic defense to foreclosure that can set a foreclosing bank back many years and pave the way for an eventual quiet title action to discharge the mortgage.

Top 5 NY Foreclosure Defenses – No. 2:  The foreclosing bank failed to serve two copies of a 90-Day Pre-Foreclosure Notice upon the homeowners by regular and certified mail at least 90 days before filing the foreclosure action.

When it applies:  Service of two copies of a 90-day Pre-Foreclosure Notice by regular and certified mail is required when (1) the home is owner-occupied, and/or (2) the mortgage loan is a “high cost”, “subprime” or “nontraditional” home loan.  If a bank is required but fails to mail the 90-day Pre-Foreclosure Notices by regular and certified mail at least 90 days before filing the foreclosure action, the foreclosure action must be dismissed because the bank failed to satisfy a condition precedent to foreclosure.

Why we like it:  All of the advantages of the defense of failure to serve a Notice of Default as a condition precedent to foreclosure apply equally to the defense of failure to serve two copies of a 90-Day Pre-Foreclosure Notice.  However, we prefer the defense of failure to properly serve 90-Day Pre-Foreclosure Notices for two reasons.  First, service of the 90-Day Pre-Foreclosure Notice is required by law, whereas a Notice of Default is only necessary if required by the mortgage.

Second, judges have begun to require banks to prove that a loan is not a “high cost” loan according to a complicated formula set by law.  If the bank cannot apply this formula and prove that the loan is not a “high cost” loan, the 90-Day Pre-Foreclosure Notice is required.   If the home is not owner-occupied, the bank may have neglected to serve the 90-Day Pre-Foreclosure Notices and the foreclosure action should be dismissed due to failure to satisfy a condition precedent to foreclosure.

Furthermore, after serving the 90-Day Pre-Foreclosure Notices the bank must file a report of the service with the New York State Department of Financial Services as a condition precedent to foreclosure.  If the bank properly serves the 90-Day Pre-Foreclosure Notices but fails to file the required report, the case should be dismissed for failure to satisfy a condition precedent.  Additionally, the content of the report may be inaccurate, either by mistake of the filing bank (actually the mortgage servicer) or the Department of Financial Services.  The inaccuracies may provide a basis to challenge the service of the 90-Day Pre-Foreclosure Notices and/or the truthfulness of the report that the bank filed.

Top 5 NY Foreclosure Defenses – No. 1:  The foreclosing bank lacks standing to foreclose.

When it applies:    In every foreclosure action, the foreclosing bank must have standing to foreclose.  A bank only has standing to foreclose if it is the owner of the mortgage loan on the date that the foreclosure action is filed.  If the homeowner’s attorney asserts lack of standing to foreclose as a defense in the Answer to the foreclosure complaint, the bank must prove that it has standing to foreclose.  If the bank cannot prove that it has standing, the foreclosure action should be dismissed.

Why we like it:   The defense of lack of standing to foreclose is unique because the homeowner’s attorney does not have to prove the defense.  If the homeowner’s attorney properly raises the defense of lack of standing in the Answer to the foreclosure complaint (or in a motion to dismiss) the bank has the burden to prove standing to foreclose as part of its foreclosure claim.  However, if the homeowner’s attorney does not properly raise the defense of lack of standing, the defense is lost and the bank can foreclose and sell the home without ever owning the mortgage loan.

If a bank loses a foreclosure case because the judge determines that it lacks standing to foreclose, the judge’s findings cannot be successfully challenged in a future foreclosure action.   The finality of the judge’s findings may make it impossible for any business entity to prove standing no matter how many foreclosure actions are brought.  In that event, the time to foreclose will eventually expire and the homeowner can sue for quiet title to discharge the mortgage.

Standing to foreclose is the most litigated issue in foreclosure law.  The mortgage foreclosure fraud crisis (“foreclosure-gate”) centered around the issue of whether certain business entities had standing to foreclose.  The complex issue of standing to foreclose will be discussed extensively in a future blog post.

After receiving foreclosure papers a homeowner should retain a foreclosure defense attorney as soon as possible to ensure that each defense to the foreclosure case is asserted properly and on time.  If a defense to foreclosure is not properly asserted, the home may be lost to a bank that may not own the mortgage loan.

LENOIR LAW FIRM, PLLC
2753 Broadway, Suite 251
New York, New York 10025
Office: 212-531-0284
Email: info@DebtInversion.com
Web: www.DebtInversion.com
Blog: www.DebtInversion.com/blog

Important information:  This is legal advertising.  It contains no legal advice and makes no representation as to the outcome of any legal matter. The information on this blog and website may not apply to your individual situation and should not be relied upon for any purpose.

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