Despite protests from the NYSLTA, NY foreclosure law has been amended via bill A5619/S5160, which was signed and chaptered on December 23, 2019 and became effective immediately.
NY Foreclosure Law and Lack of Standing
Prior to this amendment, the plaintiff in a foreclosure action needed to be the owner and holder of the note and mortgage to have standing to commence an action in foreclosure. A defendant needed to make the affirmative defense of “lack of standing” at the time he or she answered the complaint or that defense was deemed waived.
Now, the defense of “lack of standing” can be raised at any time in a foreclosure action and can no longer be waived. It can even be raised after a foreclosure action has concluded and the home has been sold if the defendant defaulted.
This amendment to NY foreclosure law is applicable to foreclosure actions related to “home loans,” a 1-4 family owner occupied property where the debt was incurred for personal, familial or household purposes, as defined in RPAPL Section 1304.
What’s the Impact of the Amended NY Foreclosure Law?
The amendment renders the title derived through a foreclosure sale unmarketable. Consequently, the bona fide purchaser will have to live with the threat of litigation by the foreclosed owner. New York title insurance underwriters likewise will have to determine whether to take on the risk of future litigation when insuring titles purchased from foreclosure sales.
New Underwriting Requirements
As a result, New York title insurance underwriters will require the following to issue policies on transactions coming through the foreclosure of a home loan, either pursuant to a Referee’s Deed or subsequent REO deed:
At closing, if the foreclosure file does not contain both the Certificate of Merit and a supporting affidavit, an exception on the New York title insurance policy will be required.
If you have any questions about how the NY foreclosure law will affect your transaction, don’t hesitate to Contact Us.
World Wide Land Transfer is a NY title company trusted to close everything from refinances and purchases to multimillion dollar commercial transactions and complex reverse mortgage transactions.