A new law intended to provide additional protections to homeowners facing foreclosure is already adding to New York’s onerous foreclosure process and making it more difficult to sell and purchase foreclosed properties.
At the end of last year, Gov. Andrew Cuomo signed into law legislation that creates a new section of the Real Property Actions and Proceedings Law. As previously reported in The New York Minute, the new law makes amendments related to the failure to raise the defense of lack of standing in a mortgage foreclosure action. Further, the new law states “any defense based on a plaintiff’s lack of standing in a foreclosure proceeding related to a home loan cannot be waived by a defendant’s failure to raise such a defense in a responsive pleading or pre-answer motion.”
Specifically, the law poses new complications for those buying a foreclosed property subject to a default judgment or a foreclosure proceeding in which the lack of standing defense was not raised, because the previous owner could — in some circumstances — contest the purchase of the home even after the sale is final.
The New York Credit Union Association and OwnersChoice Funding have learned in recent days that the title insurance industry has also expressed concerns with the law and is taking steps to minimize their exposure to its potential legal pitfalls.
As the New York’s State of Mind blog pointed out, two prominent title insurance companies that do business in New York plan to either refuse to insure the sale of any property where the title is being conveyed by virtue of a judgment rendered in an action to foreclose a mortgage securing a home loan, or they may choose to insure the property with an exception accounting for this new loophole.
“This new law could radically and fundamentally alter mortgage, foreclosure and title insurance processes in New York,” said Angela Hoag, director of loan acquisition at OwnersChoice Funding. “Make no mistake, it’s not just the mortgage industry that will be negatively affected; with borrowers unable to obtain mortgages for these properties, homes will now languish even longer in the foreclosure process and neighborhoods will continue to suffer from blight and dilapidation. It’s paramount that the Legislature takes a hard look at this law and makes necessary amendments this legislative session.”
The Association is exploring all avenues for amending the law to make it more favorable to credit unions and credit union organizations.