GUEST VIEWPOINT: State Law Amended in Foreclosure Proceedings

Section 1302 of the New York State Real Property Actions and Proceedings Law (RPAPL) has been recently amended to include a new sub-section 1302-A. The result of the revised law is to prohibit a defendant from waiving the defense that the plaintiff lacks standing to bring the foreclosure action.

This prohibition extends even after the conclusion of the foreclosure action; however, the defendant may not raise the defense of lack of standing after the foreclosure sale unless the judgment of foreclosure and sale was issued based upon the defendant’s default.

The revised law applies to loans as defined under Section 1304 of the RPAPL (as revised 1/14/2020). The loans are defined as follows:

Home loans including open-end credit plans, and reverse mortgages, where:

1) The principal amount of the original loan does not exceed applicable conforming loan size as established by FHA and FNMA for 1-4 family dwellings situated in New York State.

2) The borrower is a natural person.

3) The debt incurred is for personal, family or household purposes.

4) The secured debt is on a structure intended to be principally used and occupied as a principal residence.

As a result of the revised statute, the following exceptions will be raised where the applicable criteria are met:

A policy excepts the rights of the foreclosed defendant(s) in Action bearing Index No. @, Supreme Court, @ County, to defend the foreclosure action by raising the defense of lack of standing. This exception includes any and all loss, costs and legal expenses incurred defending any such defense, whenever presented.

Currently, some of our underwriters will omit this exception from the owner’s policy of title insurance upon receipt of an affirmation by plaintiff’s counsel confirming that plaintiff was the holder of the Note and the mortgage and was in possession of the original Note and the mortgage at the time of the commencement of the foreclosure action.

Please note that the mere appearance by the defendant does not imply waiver of the standing defense. The answer must include an allegation that the plaintiff lacks standing.