S697A-2011 Actions

• Jan 4, 2012: REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT
• May 25, 2011: PRINT NUMBER 697A
• May 25, 2011: AMEND AND RECOMMIT TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT
• Jan 5, 2011: REFERRED TO HOUSING, CONSTRUCTION AND COMMUNITY DEVELOPMENT

S697A-2011 Memo

BILL NUMBER:S697A

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

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.

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
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, numerous court decisions have held that if the borrower
doesn't raise standing upon answering the foreclosure action, the
defense of standing is waived for the borrower. See, HSBC Bank, USA v
Dammond, 59 AD3d 679 (2nd Dept 2009). Unfortunately, many times the
borrower often has no way of knowing who owns the loan, and 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 up front, they may never be able to
raise it again. In this situation, an entity foreclosing can
foreclose on a home they don't have any legal right to foreclose on.

The proposed bill language does several things, inter alia:

1. In order to foreclose, the mortgagee must allege and prove
ownership of the note and mortgage.

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.

While there exists some case law which requires plaintiffs in
foreclosure actions to adhere to some or all of these measures, a
statutory clarification is required in order to eliminate the
possibility of any ambiguity or confusion for either bench or bar as
to applicable law. See, Countrywide Home Loans, Inc. v Gress, 68
AD3d 709 (2nd Dept 2009). Absent further clarification in the law
which this bill provides, mortgagees will continue to be able to
foreclose solely because an otherwise viable standing defense was not
timely raised.

LEGISLATIVE HISTORY:
2010: A.11465/S.8174-PA/S. Cal

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.

EFFECTIVE DATE:
Immediately with provisions.

S697A-2011 Text

 S T A T E   O F   N E W   Y O R K
 
 697--A
 2011-2012 Regular Sessions
 I N  SENATE
 (PREFILED)
 January 5, 2011
 
 Introduced  by  Sens. KLEIN, GRISANTI, KRUEGER -- read twice and ordered
 printed, and when printed to be committed to the Committee on Housing,
 Construction and Community Development -- committee  discharged,  bill
 amended,  ordered reprinted as amended and recommitted to said commit
 tee
 

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

THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM
 BLY, DO ENACT AS FOLLOWS:

 

Section 1. Subdivision 1 of section 1302 of the real property  actions
 and  proceedings  law, as amended by chapter 472 of the laws of 2008, is
 amended to read as follows:

 1. Any complaint served in a proceeding  initiated  pursuant  to  this
 article  relating  to  a high-cost home loan or a subprime home loan, as
 such terms are defined in section six-l and six-m of  the  banking  law,
 respectively,  must  contain  an affirmative allegation that at the time
 the proceeding is commenced, the plaintiff[:
 (a) is the owner and holder of the subject mortgage and note,  or  has
 been  delegated the authority to institute a mortgage foreclosure action
 by the owner and holder of the subject mortgage and note; and
 (b)] has complied with all of the provisions of section  five  hundred
 ninety-five-a  of  the banking law and any rules and regulations promul
 gated thereunder, section six-l or six-m of the banking law, and  SUBDI
 VISION  TWO  OF  SECTION  THIRTEEN  HUNDRED  TWO-A  AND section thirteen
 hundred four of this article.
 

S 2. The real property actions  and  proceedings  law  is  amended  by
 adding a new section 1302-a to read as follows:

 

S  1302-A.  STANDING  TO  COMMENCE  AN ACTION. 1. NO PERSON SHALL HAVE
 STANDING TO COMMENCE AN ACTION PURSUANT TO THIS ARTICLE UNLESS IT IS THE
 OWNER AND HOLDER OF THE SUBJECT MORTGAGE AND NOTE, OR HAS BEEN DELEGATED
 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
 [ ] is old law to be omitted.
 LBD03116-07-1
 
       S. 697--A                           2
 THE AUTHORITY TO INSTITUTE A MORTGAGE FORECLOSURE ACTION  BY  THE  OWNER
 AND  HOLDER  OF  THE  SUBJECT  MORTGAGE  AND  NOTE.  NOTWITHSTANDING THE
 PROVISIONS OF SUBDIVISION (E) OF RULE THIRTY-TWO HUNDRED ELEVEN  OF  THE
 CIVIL  PRACTICE LAW AND RULES, ANY DEFENSE BASED ON THE PLAINTIFF'S LACK
 OF STANDING IN A FORECLOSURE PROCEEDING SHALL NOT BE WAIVED IF A DEFEND
 ANT FAILS TO RAISE THE DEFENSE IN A RESPONSIVE  PLEADING  OR  PRE-ANSWER
 MOTION TO DISMISS.
 2.  EVERY SUMMONS AND COMPLAINT TO COMMENCE A FORECLOSURE ACTION SHALL
 INCLUDE AN AFFIRMATIVE ALLEGATION THAT AT THE  TIME  THE  PROCEEDING  IS
 COMMENCED, THE PLAINTIFF IS THE OWNER AND HOLDER OF THE SUBJECT MORTGAGE
 AND  NOTE,  OR  HAS BEEN DELEGATED THE AUTHORITY TO INSTITUTE A MORTGAGE
 FORECLOSURE ACTION BY THE OWNER AND HOLDER OF THE SUBJECT  MORTGAGE  AND
 NOTE.   IN ADDITION, THE PLAINTIFF SHALL PLEAD IN ITS COMPLAINT THAT THE
 ORIGINALS OF THE SUBJECT MORTGAGE AND NOTE ARE  IN  ITS  POSSESSION  AND
 CONTROL,  AND  THAT  SUCH PLAINTIFF IS OTHERWISE ENTITLED TO ENFORCE THE
 SUBJECT MORTGAGE AND NOTE PURSUANT TO LAW.
 3. THERE SHALL BE FILED WITH EVERY SUMMONS AND COMPLAINT TO COMMENCE A
 FORECLOSURE ACTION:

 (A) A COPY OF THE ORIGINAL SUBJECT MORTGAGE AND NOTE, AND PROOF OF THE
 OWNERSHIP THEREOF INCLUDING ALL ORIGINAL ENDORSEMENTS,  ASSIGNMENTS  AND
 TRANSFERS OF SUCH MORTGAGE AND NOTE; AND
 (B) IF APPLICABLE, PROOF OF DELEGATION OF AUTHORITY FROM THE OWNER AND
 HOLDER OF THE SUBJECT MORTGAGE AND NOTE TO INSTITUTE A MORTGAGE FORECLO
 SURE ACTION ON BEHALF OF SUCH OWNER AND HOLDER.
 4. THE COURT SHALL MAKE AN AFFIRMATIVE FINDING OF STANDING WHICH SHALL
 BE INCLUDED IN THE JUDGMENT OF FORECLOSURE AND SALE.
 

S  3.  This act shall take effect immediately, except that section one
 of this act and subdivisions 2 and 3 of section 1302-a of the real prop
 erty actions and proceedings law, as added by section two of  this  act,
 shall take effect on the ninetieth day after it shall have become a law.

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