It was inevitable: a defaulting borrower on a co-op loan would try to invoke the mandatory conference requirement. They tried and they lost. [DiCosta-Harris v. Aurora Bank, FSB, 131 A.D.3d 1095, 17 N.Y.S.3d 156 (2d Dept. 2015).] This is not to be confused, though, with the 90-day notice requirement which does apply to the co-op loan as well as to a mortgage – because it is a matter of statute.
Candidly, the host of borrower friendly statutes in the foreclosure arena have led to much liberal construction so where there was any doubt about applicability, the courts tended to find applicability. But here it is a matter of clear statute.
To explain, New York’s practice act (CPLR §3408) requires a settlement conference in any residential foreclosure action involving a home loan. A home loan, appropriately, is specifically defined (in RPAPL §1304) but does not include in its definition of a home loan a loan secured by shares of stock and a proprietary lease from a corporation formed for the purpose of cooperative ownership in real estate, that is, what is commonly referred to as the co-op loan.
Clearly then, because the conference mandate is a requirement only for a home loan, and a co-op loan cannot be defined as a home loan, then the mandatory conference is inapplicable.
None of this is to say that co-op borrowers will now refrain from endeavoring to invoke the conference mandate, but when they try they will be wrong. At least this is one less obligation that a lender holding a defaulted loan needs to be concerned about.
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.