Mortgage servicers know all too well that New York is a tough, litigious state in which to prosecute a mortgage foreclosure action. Beginning on February 1, 2007, the potential for more difficulty will increase when the “Home Equity Theft Prevention Act” becomes effective.
Sadly, there are scam artists out there who approach people in foreclosure and find ways to purchase the property and take the equity for themselves – outrageous and despicable of course. In an attempt to prevent these events which occur in only a small minority of cases, the new law creates obligations upon someone buying the property to give warnings and disclosures as well as opportunities to rescind the contract of sale. (The statute is lengthy and detailed.) While all this presents major title company issues, the part relating to foreclosures comes at the end with creation of a new provision of the foreclosure statute (RPAPL §1303).
Here is the imposition and the problem. The foreclosing party is mandated to provide a notice to the mortgagor regarding certain information and assistance about the foreclosure process. This notice must be delivered with the summons and complaint and must be in bold fourteen-point type. Still further, it must be printed on colored paper that is other than the color of the summons and complaint. In addition, the title of the notice must be in bold twenty-point type.
This notice must be on its own separate page and the language to be included is recited in the statute. (It includes mention of consultation with governmental agencies.)
How certain denominated governmental offices are going to be of help to people in foreclosure (which may violate the Fair Debt Collection Practices Act in any event) is puzzling. Why this notice is even necessary when the statute already requires other notices is likewise perplexing – but there it is. The real difficulty, and servicers can see this one coming, is that borrowers bent on slowing up or defeating the foreclosure will now be empowered to claim (either during the course of the foreclosure action or after the foreclosure sale) that they never got any such notice. Or they will say that while they got a notice, the type was too small or the page was not of a different color and so they were confused.
Although it seems doubtful that a court would void a foreclosure for such an inconsequential irregularity, one can never be sure. At the very least the statute will provide a basis for yet another attempt to slow-up a foreclosure action. It is certainly unwelcome but it is a statute which obviously must be complied with.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.