Many mortgage servicers subscribe to services which update them on the laws in the various states affecting mortgage lending and mortgage servicing. A recent change in a New York law has elicited inquiries to us from a number of servicers so this is a good time to address the subject in an alert.
Mortgage servicers should know that non-judicial foreclosure exists in New York (and has since 1998 believe it or not) and has been renewed as of July 1, 2005 to be in effect until July 1, 2009 – via statute which has caught the attention of servicers; Assembly Bill 4847. (There is reason to believe it will be renewed yet again at that time.) In addition to renewal, there is a minor procedural change not especially relevant to this discussion.
While this is certainly news, it is hardly a startling revelation. The mortgage servicing industry has long been dismayed about the often slow, tortuous progress of foreclosure actions in the Empire State, particularly when a borrower is dedicated to delaying the case. Indeed, a frequent servicer inquiry is, why can’t New York be like so many of the non-judicial foreclosure states where the duration of a mortgage foreclosure is but a very few months?
Such was precisely the goal of a New York State Bar Association task force convened to draft this statute back in 1997 and recommend it to the legislature for passage. (This writer was pleased to be a member of that task force.) The version that later emerged from the legislature, however, was different from the one presented and ultimately achieved only a small portion of the goal.
In short, the statute did not apply to residential properties, thereby confining it to solely to commercial cases. Even then, there were enough ways out of the process that a borrower opposed to a quick non-judicial proceeding (designed to consume about three months) could likely force the case back into court for judicial disposition. (For any readers interested in the details of the procedure’s shortcomings, contact us to get copies of alerts and articles where we have explored the issues in depth.)
In the end, non-judicial foreclosure in New York is efficiently used for a commercial foreclosure on consent. Beyond that, its employment can be problematic. So, while its renewal is welcome, it is not quite as meaningful as the mortgage industry might prefer.
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.