THE COVID-19 EMERGENCY EVICTION AND FORECLOSURE PREVENTION ACT OF 2020 (EFFECTIVE DECEMBER 28, 2020) PROVIDES SIGNIFICANT PROTECTIONS TO, AMONG OTHERS, RESIDENTIAL MORTGAGORS SUFFERING FINANCIAL HARDSHIP DUE TO THE PANDEMIC

• Posted on: Jan 29 2021

In late December 2020, Governor Cuomo signed into law the “COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020” (the “Act”), which has an effective date of December 28, 2020.  While the Act covers certain residential eviction proceedings and tax lien foreclosures too, this BLOG will focus on the provisions of the Act that relate to residential mortgage foreclosures.  A copy of the bookmarked December 31, 2020, memorandum from Chief Administrative Judge Lawrence K. Marks (the “Memorandum”), which attaches as Exhibits a copy of the Act (Exhibit “A”), a related Administrative Order (AO/341/20) (Exhibit “B”) and the “Notice to Owner or Mortgagor and Hardship Declaration” (the “Hardship Declaration”) (to be discussed further herein) in English and Spanish (Exhibit “C”) can be found [HERE].

As related to residential mortgage foreclosures, the Act generally applies to “any action to foreclose a mortgage on residential real property, provided the owner or mortgagor of such property is a natural person, regardless of how title is held, and owns ten or fewer dwelling units whether directly or indirectly.”  See the Act at Part “B” Subpart “A” § 1.  Pursuant to the Act “real property” also includes “shares assigned to a unit in a residential cooperative.”  See the Act at Part “B” Subpart “A” § 1(a).  

Pending residential mortgage foreclosure actions, including actions filed on or before March 7, 2020, and those commenced within thirty (30) days of the effective date of the Act, are stayed for at least sixty (60) days from the Act’s effective date.  See the Act at Part “B” Subpart “A” § 3.  As will be further discussed below, the stay could be extended to such later date as the chief administrative judge deems appropriate “to ensure that courts are prepared to conduct proceedings in compliance with this act and to give mortgagors an opportunity to submit the hardship declaration pursuant to this act.  The court in each case shall promptly issue an order directing such stay and promptly mail the mortgagor a copy of the hardship declaration in English, and, to the extent practicable, the mortgagor’s primary language, if other than English.”  See the Act at Part “B” Subpart “A” § 3.  

The required text for the Hardship Declaration appears in Part “B” Subpart “A” § 2 of the Act and a hard copy of the form appears at Exhibit “C” to the Memorandum.  In sum, the Notice portion of the Hardship Declaration advises a mortgagor that if the Hardship Declaration was provided by the mortgagee and is signed by the mortgagor and returned to the mortgagee, the mortgagor “cannot be foreclosed on until at least May 1, 2021.”  If foreclosure proceedings have already commenced and the mortgagor received the Hardship Declaration from the court, the mortgagor can return the executed Hardship Declaration to the court.

By signing the Hardship Declaration, the mortgagor is attesting, under the penalties of perjury, that payment of the underlying mortgage in full cannot be made because, due to the COVID-19 pandemic: there was a significant loss in household income; there was an increase in necessary expenses related to COVID-19 health impacts; the need to care for children or elderly, disabled or sick family members made employment difficult or caused an increase in necessary out of pocket expenses; moving expenses or difficulty in finding alternative housing make relocation a hardship; and/or, one or more tenants have defaulted in paying rent since March 1, 2020, and the added burdens were not made up by various assistance programs.  See the Act at Part “B” Subpart “A” § 2 and Exhibit “C” to the Memo.  

The Act requires that defendants in pending mortgage foreclosures receive a Hardship Declaration.  In pending residential mortgage foreclosure actions, the court is directed to mail Hardship Declarations to defendants.  See the Act at Part “B” Subpart “A” § 3.  If actions have not yet been commenced, the Hardship Declaration is to be included “with every notice provided to a mortgagor pursuant to sections 1303 and 1304 of the real property actions and proceedings law.”  See the Act at Part “B” Subpart “A” § 4.  

If a Hardship Declaration is returned to the mortgagee, a mortgage foreclosure action shall not be commenced until at least May 1, 2021 and “in such event any specific time limit for the commencement of an action to foreclose a mortgage shall be tolled until May 1, 2021.”  See the Act at Part “B” Subpart “A” § 5.  

New residential foreclosure actions will not be accepted for filing unless the mortgagee files an affidavit of service demonstrating that a compliant Hardship Declaration was served on the mortgagor and attesting that a Hardship Declaration was not returned by the mortgagor.  See the Act at Part “B” Subpart “A” § 6.  

The stay includes actions in which “a judgment of sale has been issued prior to the effective date of this act but has not yet been executed as of the effective date of this act, including actions filed on or before March 7, 2020.  See the Act at Part “B” Subpart “A” § 8.  In such cases “the court shall stay the execution of the judgment at least until the court has held a status conference with the parties.”  See the Act at Part “B” Subpart “A” § 8.  If a hardship Declaration is returned to the mortgagee or the court “prior to the execution of the judgment, the execution shall be stayed until at least May 1, 2021.  See the Act at Part “B” Subpart “A” § 8.  

Further, a “hardship declaration shall create a rebuttable presumption that the mortgagor is suffering financial hardship, in any judicial or administrative proceeding that may be brought, for the purposes of establishing a defense under an executive order of the governor or any other local or state law, order or regulation restricting actions to foreclose a mortgage against a mortgagor suffering from a financial hardship during or due to the COVID-19 pandemic provided that the absence of a hardship declaration shall not create a presumption that a financial hardship is not present.”  See the Act at Part “B” Subpart “A” § 10.  

Part “B” Subpart “A” § 12 of the Act provides that the Act “shall take effect immediately and sections one, two, three, four, five, six, seven, eight, nine and eleven [thereof] shall expire May 1, 2021.