Non-Judicial Foreclosure In New York Repealed


1 September, 2009


Mortgage Lender and Servicer Alerts

It is quite remarkable.  New York is one of the most difficult and time consuming states in which to prosecute a mortgage foreclosure action.  Yet, the law which allowed some foreclosures to proceed rapidly has been taken off the books.  It became official on July 1, 2009

Ill-advised though we believe this is, it is not so devastating and a quick background review will enlighten the point.

Mortgage servicers are typically dismayed at the length of time consumed by a foreclosure in New York (judicially, of course).  Nowadays, one and a half years is almost standard, two years or well more not uncommon given delays, new statutes and borrowers= dilatory tactics.  In contrast, almost half the states in the nation employ non-judicial foreclosure which allows the case to proceed to a conclusion in a relative few number of months.

This contrast had hardly escaped the New York legal community B even in the mid 1990=s.  It was then that a task force was convened by the New York State Bar Association to draft a non-judicial foreclosure statute.  Your writer was pleased to be a part of that group and the draft which emerged was quite useful and potentially effective.  But when it went to the New York State legislature (passed in 1998) its application to residential foreclosures was removed so that it applied solely to commercial cases.  In addition, multiple Aopt-outs@ were included which reduced the effectiveness of the law.

In its final version, its best use was probably for commercial foreclosures on consent, not an inconsequential role.  Sometimes, commercial borrowers realize that the best thing is for a foreclosure to proceed to a conclusion, thus keeping interest to a minimum and reducing deficiency liability (if it exists).  The non-judicial foreclosure which can be accomplished in just under three months serves that goal quite well.

For whatever reason, though, the statute was written so that every three years it would sunset (expire) unless the legislature renewed it.  It was renewed every three years until July 1, 2009.  Absent the renewal it was deemed repealed and is no longer in effect.

We suggest that this was not at all an indictment of the existing statute but was simply a result of certain political maneuvering in the New York State assembly.  In fact, a far different non-judicial foreclosure bill was passed in the assembly, applying again to commercial cases only and even then, above $15,000,000 dollars only.  It has not been passed by the senate and when or if that might happen is unknown.

So this remains open ended with nothing especially meaningful likely to occur for the moment.  We will keep you posted

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.