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NYS Foreclosures - A List of Things to Remember Created 10/29/16 - NOT A COMPLETE LIST
I have been helping foreclosure-threatened homeowners (and commercial property owners) throughout the United States on almost a full-time basis since 2008, more than 3,000 days, and calculate that I have reviewed and discussed with homeowners about 10,000 foreclosure situations, mostly by extended telephone conversation (and often while reviewing foreclosure complaints and exhibits that have been efiled by the bank, servicer or other lender).
Many of these 10,000 homeowners came to me after having been unsuccessful with the attorney(s), paralegals, friends, law professors and sellers of judicial audits have not been able to stop the foreclosure proceeding, and/or the homeowner's own pro se (or in pro per - as used in California) activities coupled with many hours of Internet research have caused the homeowner to be on the verge of losing his/her home).
Unlike major law firms, which can be ranked as 1st tier, 2nd tier, etc., and can be expected to have a very high level of competence (at a price that few homeowners could afford, assuming that a major firm would even think of representing a threatened homeowner because of the major firm's probable representation of lenders, sevicers, purchasers of defaulted mortgages, and persons seeking to borrow money from banks), there is no list of the "best" foreclosure defense attorneys (whatever the word "best" means), and homeowners are very hard pressed to find a suitable lawyer or law firm to represent the homeowner in the homeowner's county (there are 3,100 counties in the United States, each having its own state court system).
Perhaps one thousands times I have though that it is too bad for the newly-calling homeowner that he/she is just now communicating with me about his/her problem, because the ability for a lawyer to help the homeowner has already expired, statistically, as a practical matter, and whatever options are left are expensive and generally non-productive.
With this as a background, let me start listing the things homeowners should know when facing foreclosure in New York State. My observations may also apply to many other "judicial foreclosure states" (21 plus New York State), but I want to focus just on New York, with its 62 counties, and provide information that I believe a homeowner should have when facing a just-filed foreclosure action and before selecting an attorney.
My List, in No Particular Order of Importance
- Finding a suitable attorney may be difficult, but limiting choices to attorneys located 1-10 miles from the Courthouse may be unduly limiting.
- In my opinion, after doing this type of work virtually full time for more than 3,000 days (since 2008), foreclosure defense work requires a lawyer who spends most of his/her time doing this type of work. In many counties, lawyers do not get enough work of any specific type to be able to spend full time in any area of law and for such reason it may be difficult in most counties to find a foreclosure defense attorney with the desired litigation experience and skills.
- I, as a foreclosure defense attorney (and formerly for more than 40 years a full-time antitrust lawyer), represent homeowners throughout many of the 62 counties in NYS and even represent foreclosure defense clients in other states (such as Hawaii, California, Iowa, Maryland, Florida, Massachusetts, New Jersey - to name a few - some states being judicial foreclosure states and the others being non-judicial foreclosure states).
- I am able to work with attorneys in these non-NY states to provide the expertise they need until they get up to speed and can handle the foreclosure issues on their own. In NY, when appropriate, I use local attorneys but I am usually the attorney of record (which is not the case in the non-NY states).
- I find that, when representing foreclosure defense clients, the value of having an experienced foreclosure defense lawyer wherever he/she is located who can work with counsel located in or near the county where the property is located generally produces a far better result than having a substantially less experienced lawyer in the county handle all of the foreclosure defense issues. The problem is, all too often, that an inexperienced defense attorney may not see the issues and deal with them properly.
- Because of the foregoing, it should be easier for any homeowner to retain the legal experience needed to defend the foreclosure because the homeowner should not limit himself/herself to attorneys located within a few miles of the courthouse.
- Most attorneys will not spend a substantial amount of time (say 15 minutes to an hour or more) with a prospective foreclosure defense client especially because such prospective client does not represent repeat business for the firm or attorney, is involved in the possible loss of his home usually because of financial difficulties that cannot be cured in a short period of time; suing a bank on behalf of the homeowner would probably create a conflict as to some actual or prospective clients as well as a conflict with partners in the law firm; the firm will probably have to chase the client for payment at some point; the lawyer may have to spend uncompensated time making a motion to withdraw as counsel - all reasons why the type of legal business being offered to a lawyer or law firm is probably not what the lawyer or law firm is seeking - which causes unknowing homeowners to become frustrated and willing to settle for a lawyer that is willing to represent the homeowner even if the lawyer lacks the important expertise and/or skills. But enough said about retaining a lawyer within the short period of time a homeowner has to answer the complaint (20 days from the date of personal service - or longer in some other instances).
- Call attention to your lawyer if you were sued previously on the same note by any bank or lender because you may have an
opportunity to get rid of such note and mortgage under New York's 6-year statute of limitations.
- The worst thing you can do is to fail to answer the complaint (with a proper answer) on a timely basis, which is 20 days
from the date of personal service upon you in NYS, and a longer period if someone else was handed the Summons and Complaint or if service took place outside of NYS.
You have this 20-day window of opportunity to put up a defense in the foreclosure action, but this window slams shut in 20 days and it is
very costly (i.e., thousands of dollars) to make a motion to the court or judge asking the judge to excuse your default and set
aside your default. The judges have strict rules about when relief can be granted, and they frequently deny such motions. So, do
you and your lawyer a favor, and make sure you put in an answer to the complaint on a timely basis.
- If you were not served properly AND DID NOT APPEAR WITH AN ATTORNEY OR AT A PROCEEDING OF ANY KIND, you have a low-cost, often
successful opportunity to set aside what the bank or servicer believes is your default in the lawsuit. Make sure you speak with an attorney before
doing anything because you may wind up waiving your rights without realizing this.
- Make sure your answer includes the affirmative defense of lack of standing, and no possession of original note at the time
of commencement of the action, if true or you have a reasonable basis for believing this is true.
- Real estate attorneys are generally "transactional" (i.e., preparing extensive, often complicated paperwork for real estate
closings, financings, creating condos or co-ops, or creating entities to engage in these activities, and usually go to banks frequently to
look for money for their clients - they are not the type of lawyer willing to litigate against banks, servicers and note owners, and when
retained to do so often have little of the experience that you need.
- Law firms with 3 or more partners are less apt to want your one-shot, poorly financed mortgage foreclosure defense business, and you
probably should not waste your time trying to get a law firm of 3 or more partners to look at your case. You don't represent repeat business, you
probably represent a conflict with other clients, you don't have the financial capacity to pay them what they need to bill, just to name some of
the reasons you would be wasting your time with them. Yet, if a law firm of 5 or 10 or even 50 lawyers claims in its website that it does mortgage
forclosure defense work for homeowners, you should at least make an inquiry to see if they would be interested in taking your case.
- It is very difficult for most homeowners to determine the level of expertise of a foreclosure defense attorney, but if you have the opportunity of
speaking at length with a highly-experienced foreclosure defense lawyer about the issues in your case, you will then be better able to see whether
other lawyers measure up to that level of experience you have received. I promise you that you will be able to eliminate many possible attorneys by
- This gets me to the question about fees. A volunteer lawyer (such as a friend trying to help out) is often a big mistake, because the lawyer is
probably not experienced in mortgage foreclosure defense, and whether you are paying such lawyer $1 per hour or zero per hour, the amount of damage to
you that such lawyer can do is very high, starting with the loss of your home, and the possibility of having sanctions awarded against you in some cases
amounting to thousands of dollars for failure of the lawyer to following the court rules. If a lawyer charges $100 per hour and has little or no foreclosure
defense experience, the cost to you usually will be much higher than you expect. You have a much greater chance of losing your home, and a much great chance of
being billed substantially more in legal fees for the number of hours the lawyer needs to spend on your case to learn what he/she needs to know to defend you
properly. An experienced foreclosure defense attorney already knows these things and spends far less time on your case, so that what may appear to be a high
hourly rate is actually much lower than a $100/hour inexperienced lawyer would need to charge to try to provide the same level of representation. In fact,
during this learning period, you will probably be losing rights and opportunities that you can never get back. So, be careful about selecting a lawyer by the
hourly rate. It doesn't work at the low end. On the other hand, if two highly experienced foreclosure defense lawyers are charging hourly rates that are
substantially different (such as $425 v. $700), I would go with the lower hourly rate. When you speak with a highly-experienced foreclosure defense attorney about
your internet research, you'll find answers to your questions at no cost now (or later, if the lawyer is retained by you) for legal issues that the inexperienced
attorney has to spend time to resolve, because of the lack of experience, and by focusing on the wrong issues the inexperienced lawyer can be expected often not to
see the right issues, and the homeowner pays more but has a higher risk of losing his/her home.
- your foreclosure defense attorney, if he/she is doing this full time, probably has a full-time loan processor in the law firm assisting homeowner clients with
their applications for loan modification agreements, deeds in lieu of foreclosure and short sales. It is an important part of the work in my firm because the loan
processor is able to explain to the attorney before each appearance in the "Conferencing" part (more about this to be said below) about the status of the application,
any missing documents, and whether or not the bank or servicer is acting in bad faith when rejecting an application, and also to recognize when a bank or servicer is
making a mistake and to work with the lender in correcting the mistake, to enable a loan modification to be granted, which if accepted would end the
- Many of the defenses you read about in Internet can be corrected by the bank or servicer, so that raising these defenses only buys time (i.e., stretches out
the foreclosure action, giving the homeowner more time to try to qualify for a loan modification, hopefully). For example, robo-signing. The bank or servicer
usually can go back and get a "live" signature, to overcome the objection. Splitting of the mortgage from the note used to be a serious problem for banks and
servicers, but bank-friendly courts and judges have come up with a new rule, that "the mortgage follows the note" even though they have been separated along the way.
- Speaking of separating mortgages from notes, you undoubtedly have heard about MERS (Mortgage Electronic Registration Systems, Inc. or MERSCorp., or MERSCorp Holdings,
Inc. This is a corporate entity (meaning a certificate of incorporation holding millions of mortgages for the benefit of whoever winds up with the note when it's
time to foreclose, and has almost no employees. Each of the thousands of bank and servicer users of MERS has the authority to execute assignments in the name of
MERS and file these assignments in the county where the property is located. For those people familiar with the concept of stock or other securities held in
"Street Name" (to make it easy to deliver the stock certificates after they have been sold), MERS was created by the same Wall Street law firms that have been
using Street Name for the holding of stocks and other securities. Thus, there is an active market of persons buying and selling defaulted notes and
mortgages, and when a purchaser of a defaulted note finally decides to commence a foreclosure action, the attorney for the investor (or the institution selling the defaulted
note) executed an assignment of mortgage by MERS and files this assignment in the County where the property is located, and then files a foreclosure action
in such county. This way hundreds of billions of dollars of recording fees are not paid to the 3,100 county clerk's offices throughout the U.S., and this money then
is split up among banks, servicers and investors in the securitized mortgage loans.
- The bank, note owner or servicer generally has no duty of acting towards the homeowner in good faith (setting aside the implied covenant of good faith and
fair dealing doctrine), except when the foreclosure action is in "Conferencing". This means the period when Conferencing takes place, not limited to the few hours of
actual conferencing in the courthouse. The period starts on the 1st day of conferencing, the "initial conferencing" and lasts until the action is released from the
Conferencing Part, usually because of denial of a loan modification application by the bank, or the failure of the homeowner to apply or complete his/her application,
or the homeowner's refusal to accept an offered loan modification agreement. The lender or servicer is required under CPLR 3408(f) to negotiate in good faith as to
the homeowner, and the homeowner has a duty to negotiate in good faith as to the lender or servicer. The law is purposely vague as to the meaning of good faith, but
it is clear that the Judge cannot order either side to accept an offer from the other side. However, a judge can make it clear that failure to offer or accept a loan modifiction
might result in an adverse decision by the court later.
- Conferencing is a very valuable period of time and should be protected. No motions are allowed during this time and to make a motion by the homeowner would be
construed as giving up the protection of the Conferencing Part. The protection is that no motions or discovery can take place during Conferencing, so that the parties
are not spending time and money to litigate, but are given the time to negotiate a satisfactory settlement, if possible. However, because no discovery or motions are allowed, the homeowner
is not permitted to find out whether the plaintiff actually owns or has possession of the original note before having to decide whether to accept an offered loan
modification agreement, and in the agreement the homeowner will be agreeing that the Plaintiff owns the note (even if the Plaintiff does not).
- It is vital that the homeowner provide each document requested by the attorney's loan processor, who is only asking for documents that the lender or servicer
requires. If the homeowner fails to get the documents to the loan processor quickly, a deadline set by the court (judge, law clerk, mediator or referee) may and very often does
cause the action to be dismissed from Conferencing and turned over to the litigation part, at which point the Plaintiff and its lawyers are usually going to make a
summary judgment motion right away (first for an "Order of Reference" to determine how much is owed and whether the property should be sold in a single piece or in pieces) and thereafter
for an order for judgment and sale of the property.
- Thus, keeping the case in Conferencing stops litigation, but adds to the amount owed, and may make it less possible to obtain a loan modification. You have to
remember this. The longer you don't pay the mortgage the more difficult it becomes for the Plaintiff to provide the homeowner with an affordable loan modification
- Immediately after the action is dismissed from conferencing (unless there is a settlement), the homeowner's attorney should be preparing discovery requests, to try
to prove one or more of the affirmative defenses (such as whether the Plaintiff owns or has possession of the original note).
- Because the homeowner has to prove a negative, which is difficult, I find that the best way to attempt to do this is by taking a deposition of the Plaintiff (who usually will be represented by someone who knows a lot less than he/she believes). If a homeowner is considering an attorney, it might be useful for the homeowner to ask whether the attorney has taken a deposition of the lender or servicer in a foreclosure defense matter, and what questions he/she might ask. An experienced foreclosure defense attorney would have some interesting things to relate, but attorneys without that experience may not understand the situation.
- I can't prove this but it seems perfectly clear to me that homeowners who are represented by an attorney well experienced in foreclosure defense are far more apt to obtain
an affordable loan modification agreement than homeowners who are not so represented (or who are representing themselves pro se - i.e., without an attorney). The reasons for this
- The homeowner's Answer to the Complaint, which ordinarily is required to be filed prior to the initial Conferencing date, will be of much higher quality than most Answers served by other homeowner attorneys, which will give the Plaintiff an opportunity to settle the action through grant of an affordable loan modification agreement even when the homeowner is not qualified under the rules. This doesn't mean that the Plaintiff would give the loan modification offer to a homeowner with no income, no job, no assets, no arms and no legs, but the Plaintiff would be more inclined to overlook a 5% or 10% of the financial requirements, just to get rid of what I am going to describe below
- The possibility that my antitrust defense (which I did not discuss above) might be upheld in a written decision that could have an adverse impact on the Plaintiff to the extent of many hundreds of millions of dollars.
- The knowledge from dealing with the attorney in many instances that the attorney will not give up when there are still litigation openings to explore.
- The recognition that the mortgaged property will remain non-performing for much longer than the 3-year average that it takes in NYS, on the average, for a foreclosure to take place, with the homeowner finally evicted from the sold premises by the Plaintiff or a new intended resident of the newly-purchased property.
- The prospects for one or more appeals and their costs.
- The awareness that the attorney will use discovery tools (such as depositions, interrogatories, notices to produce documents including the original note, requests to admit the truth of various facts, even deptions out of state) in order to try to prove some of the defenses to the foreclosure action and especially whether the Plaintiff has standing;
- a Vulture-fund Plaintiff seeking a quick turnover (so it can make a 100% profit on its investment in the defaulted note in 6 months or so) and its attorneys run the risk of having a bad-faith motion being made and decided against them for refusing to give a loan modification agreement - remember, the vulture fund is not in the business of waiting 30 years for its money, unlike banks, and would wind up with holding and servicing an occasional 30-year mortgage if it gave any loan modifications at all - this attitude towards loan modifications is illegal under CPLR 3408(f), which requires both parties to negotiate in good faith.
- The Plaintiff and its attorneys may be ordered to appear in person at a bad-faith hearing or to speak with an angry judge who wants nothing more than getting a loan modification agreement for a homeowner entitled to one so the case can be dismissed and the overworked judge and his/her staff can devote their time to other cases.
- The Plaintiff's personnel including one or more high ranking officials will have to spend valuable time on this case, which the officials especially will not want to do because this is negative time (as distinguished from time for which the Plaintiff might show increased profits).
- Any sale of the property might be reversed by the Appellate Division.
- The Plaintiff might have to post a bond of 200% of the amount it claims the homeowner owns if the Plaintiff cannot find the original Note.
- The total legal costs might wind up at $50,000 to $100,000 or more, which probably cannot be recovered from the homeowner.
- A parting Warning: Bankruptcy issues need to be considered by bankruptcy lawyers, and often bankruptcy lawyers fail to provide the needed foreclosure representation (in an adversary proceeding commenced as a lawsuit within the bankruptcy proceeding to challenge the validity of the bank's or servicer's claims against the homeowner), and perhaps the best thing a homeowner can do is to speak with an experienced bankruptcy attorney and also with an experienced foreclosure defense attorney to try to resolve what may be conflicting legal advice caused at least in part by the lack of awareness by one lawyer of what the other lawyer knows, and vice versa. It is difficult enough for me to do what I do, and I cannot also become a highly experienced bankruptcy attorney at the same time, and the reverse is true for a bankruptcy attorney. We do different things, and have different systems. Bankruptcy requires far more use of non-lawyers to do the repetitive work required in bankruptcy cases, and it takes legal and loan processor time to do the work required in foreclosure defense. Separate systems can be expected to produce different results, so try to get advice from both types of lawyers, and hope that you can figure out what to do.