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New Program Instituted In Supreme Court To Expedite Qualifying Residential Mortgage Foreclosure Actions

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  • Posted on: Aug 10 2018

Prosecuting a mortgage foreclosure action in New York can be an arduous and time-consuming process.  This is particularly so for residential mortgage foreclosures since the promulgation of a host of rules by the New York State Legislature stemming from the mortgage crisis of the late 2000s.  Some of the new rules have been addressed previously in this Blog (“Appellate Division, Second Department Tells Foreclosing Residential Lender to ‘SHOW ME THE EVIDENCE,’”The Second Department Denies Summary Judgment to Another Foreclosing Mortgagee Due to the Insufficiency of Evidence Presented on the Motion” and “The Second Department Reverses Another Grant Of Summary Judgment To A Foreclosing Lender On A Home Loan Due To The Insufficiency Of Proof Of Mailing Statutorily Required Notices To The Borrower”).

The Supreme Court of the State of New York, Suffolk County, has recently (November 27, 2017), promulgated “Rules for Expedited Proceedings in Certain Foreclosure Actions” to streamline the foreclosure process in eligible residential mortgage foreclosure actions (the “Program”).  (Other courts may have instituted similar programs and practitioners with cases pending in other jurisdictions should check for the availability of similar programs.)  While the Program will be discussed further herein, as an introductory matter, a very general discussion of some, but not all, of the steps necessary to maintain a foreclosure action follows.

Generally, there are numerous steps that must be followed in order to prosecute a mortgage foreclosure action; some of which are discussed herein.  The action is commenced by the filing of the Summons and Complaint.  In certain residential foreclosure actions, and under certain circumstances, at or about the time the action is commenced, the attorney for the foreclosing mortgagee must file a “Certificate of Merit” certifying that, inter alia, after reviewing the facts and related documents and after speaking with representatives of the lender, there is a good faith basis to proceed with the foreclosure.  (See CPLR § 3012-b.)  Thereafter, the defendants are served with process and are afforded time to answer.  In many instances, however, defendants in residential foreclosure actions default in appearing and/or answering.

In certain residential foreclosure actions, at the time the affidavits of service are filed, the foreclosing mortgagee must file a Request for Judicial Intervention to trigger the scheduling by the court of a foreclosure settlement conference (the “Conference”).  (See CPLR  § 3408 and the §202.12-a of the Uniform Rules of New York State Trial Courts.)

At the Conference, the mortgagee and mortgagor, both with and without a referee, attempt to negotiate a resolution of the matter through loan modification or otherwise.  “A defendant who appears at the [Conference] but who failed to file a timely answer…shall be presumed to have a reasonable excuse for the default and shall be permitted to serve and file an answer, without any substantive defenses deemed to have been waived within thirty days of initial appearance at the [Conference]” and “[t]he default shall be deemed vacated upon service and filing of an answer”.  (See CPLR § 3408(m).)

If the mortgagor defaults in appearing at the Conference, the mortgagor would not receive the benefit of the additional time to answer if they were previously in default.  (While any defendant could appear at the Conference, if an appearance is made, it is typically by the mortgagor.)

After the time for all of the defendants to answer the complaint has expired (whether or not a Conference was necessary), the foreclosing mortgagee would then move, inter alia: for summary judgment (to the extent that an answer was interposed by one or more of the defendants), a default judgment (to the extent that some or all of the defendants failed to appear and/or answer) and for the appointment of a referee to compute the sums due to the mortgagee under the note and mortgage being foreclosed (collectively, the “S/J Motion”).  After the S/J Motion is submitted to the court, the parties await a decision, which, in many situations, could take between two and ten months.

If the S/J Motion is denied, the parties may have to go to trial.  More typically, however, the S/J Motion is granted, and the court appoints a referee to ascertain and compute the amounts due to the mortgagee.  (See RPAPL § 1321.)  While the referee is supposed to conduct a hearing to determine the amounts owed to the mortgagee, the hearing is typically waived (if any of the defendants have appeared) or otherwise determined without a hearing (if the defendants defaulted).  The “Report” of the referee (the “Referee’s Report”) and the related calculations are typically prepared by the mortgagee’s counsel and submitted to the referee for review, comment and signature.  A draft copy of the Referee’s Report can be circulated to the appearing defendants for review, along with a stipulation waiving the calculation hearing.  Depending on the Judge, the Referee’s Report may also contain a calculation of attorney’s fees and expenses due to the mortgagee under the note and/or mortgage if the mortgagee is so entitled.  Sometimes, the court itself undertakes the determination of attorney’s fees and expenses through a separate hearing and/or based on the submission of papers.

Once the Referee’s Report is signed by the Referee and returned to the mortgagee’s counsel, the mortgagee must then make a motion: to confirm the Referee’s Report and for a Judgment of Foreclosure and Sale (the “JF&S Motion”).  After the JF&S Motion is submitted to the court, the parties await a decision, which, again, could take between two and ten months.  Among other things, the Judgment of Foreclosure and Sale is the document that fixes the amounts due to the mortgagee, permits the subject property to be sold at public auction, and “cuts-off” any interest that subordinate lienors (named as defendants in the foreclosure action) that may previously have held in the property being foreclosed.  (See RPAPL § 1351.)

The foreclosure sale of the property is supposed to take place within ninety days of the date of the Judgment of Foreclosure and Sale.  (See RPAPL § 1351.)  Public advertising of the sale in a publication set forth by the court in the Judgment of Foreclosure and Sale must take place.  Depending on the manner in which the sale is advertised, the auction can take place between twenty-one and thirty-five days after the sale notice is first published.   (See RPAPL § 231.)

There are additional proceedings that may need to take place, including, but not limited to, motion practice to: confirm the referee’ report of sale; obtain a deficiency judgment against the mortgagor (if the proceeds of the foreclosure sale are insufficient to satisfy the mortgagor’s obligations to the mortgagee); and, to distribute any surplus monies that may become available (if the proceeds of the foreclosure sale are more than sufficient to satisfy the mortgagor’s obligations to the mortgagee).

THE PROGRAM

A foreclosure action is eligible for the Program, where: (1) it involves residential property (but does not relate to a reverse mortgage); (2)the mortgagor failed to answer or move with respect to the complaint and, therefore, is in default; (3) the mortgagor failed to appear at the first scheduled conference in the Settlement Conference Part and the case was released to an IAS Part; (4) there is no pending loan modification application pending with the foreclosing mortgagee; (5) PLAINTIFF WAIVES THE RIGHT TO PURSUE A DEFICIENCY JUDGMENT; (6) an answer filed by any other defendant does not contain a request for relief other than protecting its position in surplus money proceedings or being notified of a sale; (7) foreclosing mortgagee “must meet all legal requirements and proof required for a default pursuant to CPLR § 3215, RPAPL § 1321 and for a judgment of foreclosure and sale pursuant to RPAPL § 1351, including but not limited to proof of service of the summons, complaint, notice of pendency and other statutory required; and the filing of any affirmation/affidavit required by statute (CPLR 3012-b) or Administrative Order”; and (8) the application to participate in the Program is made within 180 days after release from the Settlement Foreclosure Part.

Participation in the Program would permit the foreclosing mortgagee to combine the S/J motion and the JF&S motion into a single (the “Combined Motion”).  Also, the need for a referee to calculate the sums due to the mortgagee would be rendered moot because, as part of the Combined Motion, the court itself, and not a referee, would ascertain and determine, inter alia, the amounts due.  Voluntary participation in the Program would eliminate one of the two main motions that must be made during a residential mortgage foreclosure proceeding and, accordingly, would result in a significant saving of time in the overall process.  One of the drawbacks is that the mortgagee, to participate in the Program, would have to waive the right to obtain a deficiency judgment against the mortgagor. Quinlan-Expedited-Proceedings-1

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