Safeguard Properties

Appeals Court Reverses Self in Real Estate Case That Spawned Eight Amicus Briefs

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Industry Update
February 6, 2017

A state appellate court reversed itself on the application of Florida’s lis pendens statute after a rehearing supported by eight amicus briefs.

“This is an uncommon event where a court reconsiders a decision,” said Kelley Kronenberg partner Irwin Gilbert, who wrote a brief on behalf of the Florida Bar’s business law section.

This time, the Fourth District Court of Appeal ruled that Florida’s lis pendens statute renders unenforceable all liens placed on a property after a final foreclosure judgment, but before a judicial sale—a reversal of a prior finding that chilled buyers and caused panic among real estate attorneys. Under the statute, a notice of lis pendens, which provides public notice of a pending claim, starts the clock for creditors with unrecorded claims to take action or risk having their interests wiped out. But in a real estate market where the foreclosure process often drags on for years, the appellate court had to consider legislative intent. The question before the panel: When does that window close for recording liens—within the statutory 30 days, with the final foreclosure judgment, or at the foreclosure sale?

The first ruling found liens placed between a final judgment of foreclosure and the judicial sale were enforceable, which meant investors could face new liability from creditors who sat out the foreclosure process but tacked on post-judgment claims.

“Lenders stood to suffer unless they collected from delinquent borrowers, which is always a difficult thing to do,” said Pathman Lewis partner Peter Meltzer.

Some attorneys, like Eric Hockman of Weiss Serota Helfman Cole & Bierman, heralded the first ruling as a victory for claimants looking to preserve claims during the so-called “black hole” period when foreclosures linger.

“It clarifies a huge gap in Florida law that no court has opined on before,” he said.

But others, like the bar’s business law section, described it as “a radical departure from common practice.”

The rehearing garnered unusual interest for a case at the district court level, drawing briefs from two cities, three sections of the Florida Bar and several trade groups. It ended with the judicial panel making a rare 180-degree turn, reversing itself Jan. 25 and remanding the case Ober v. Town of Lauderdale-By-the-Sea.

West Palm Beach real estate attorney Michael J. Gelfand, partner at of Gelfand & Arpe, welcomed the move.

“The decision reinstates the vitality of the lis pendens statute,” he said. “It reinforces expectations that a buyer takes a property free and clear of interest arising after the lis pendens, and before the certificate of sale.”

The rulings stemmed from quiet-title litigation pitting investor James Ober against Lauderdale-by-the-Sea.

Ober purchased a zombie foreclosure—a house abandoned by residents and left unattended and in disrepair—and faced $328,000 in code enforcement liens. The town later imposed three more liens after he purchased the house.

Neither the lender, Bank of America, nor the defaulting homeowner was a litigant in the Ober case. Their suit had dragged on for years, with long lapses between the foreclosure judgment, judicial sale and property transfer to Ober, who was left to bear responsibility for years of neglect. The bank obtained a final foreclosure judgment in 2008, but didn’t sell the property for about four years while the city recorded seven post-judgment liens. After Ober purchased, the town imposed three more liens.

Ober sought to quiet title and strike the liens as invalid, but Lauderdale-by-the-Sea filed a counterclaim to foreclose. Broward Circuit Judge Thomas M. Lynch IV sided with the town and issued a final judgment of foreclosure on all 10 liens. The appellate panel initially affirmed his ruling, but reconsidered last month with a ruling that noted the influence of the amicus briefs.

“The judges corrected an issue that caused great consternation,” Gelfand said. “Though not infallible, they strive to ensure perfection. It’s not easy for folks to correct their course publicly, but the judges did that.”

Source: DBR

Acceleration Clauses in Foreclosure Actions: New Rules

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Industry Update
February 7, 2017

Adam Leitman Bailey and Adam M. Swanson
Attorneys at Law, Adam Leitman Bailey, P.C.
Source: New York Law Journal

The use of an acceleration clause in a mortgage foreclosure action provides an important and expedient tool when foreclosing on a property. This article focuses on recent case law and discusses some of the benefits and pitfalls when using an acceleration clause and how to overcome these obstacles.

Under New York CPLR §213(4), a mortgagee faces a six-year statute of limitations to foreclose a mortgage. Since a mortgage is payable in installments, the six-year period begins to run on each default. Upon acceleration, the entire unpaid balance becomes due and the six-year period begins to run on the entire unpaid balance of the mortgage debt.1

Depending on the terms of the mortgage, acceleration may be automatic, or at the option of the mortgagee. Generally, in the standard form residential mortgage, acceleration is at the option of the “lender.”2 Where acceleration is optional, an affirmative action must be taken to accelerate. The mortgagee may be required to make its election in compliance with terms within the mortgage. The borrower must be provided with clear and unequivocal notice of the election to accelerate.3

Electing to Accelerate
Notice of election to accelerate may be accomplished informally through written notice to the borrower4 or formally through commencement of a foreclosure lawsuit.5 In Wells Fargo Bank v. Burke (Burke) 94 A.D.3d at 983 (2d Dept. 2012), the court made clear that no acceleration can be effective and the statute of limitations on the whole does not accrue, unless service of process upon the borrower is effected to give the clear and unequivocal notice necessary for acceleration.

A mortgagee should not accelerate until commencement of the foreclosure action to keep the statute of limitations from accruing until the last possible moment. The wording of any notice of default, which is required by the standard form mortgage, is crucial to ensure the notice does not effect an acceleration. The notice of default should state that “failure to pay the total amount past due, plus all other amounts becoming due hereafter [on or before a date certain] may result in acceleration.”6 Stating that failure to cure “will” result in acceleration (or using similar definitive words) may result in a determination that the notice of default itself effected acceleration.7

Dismissed Lawsuits
After acquiring a mortgage or servicing rights, a mortgagee may discover a prior dismissed foreclosure lawsuit, a pending dormant foreclosure lawsuit or a mortgage that was referred to foreclosure but the action was never commenced. Before re-commencing or taking any action, some due diligence is necessary to make sure the statute of limitations has not expired.

Such due diligence did not occur in a recent case on the subject. In Kashipour v. Wilmington Savings Fund Society, 144 A.D.3d 985 (2d Dept. 2016), borrowers commenced an action on Sept. 3, 2015 to discharge their first mortgage, alleging the statute of limitations expired. “As proof that the mortgage debt had been accelerated…plaintiffs submitted a copy of the summons and complaint…commenced by the defendant’s predecessor-in-interest on Aug. 20, 2009.” The prior foreclosure action had been commenced by Greenpoint Mortgage Funding and that case dismissed for failure to serve statutory notices. The lower court found that the prior dismissal was not on the merits and the statute of limitations had not expired. The appellate court reversed, finding that “whether the foreclosure action was dismissed on the merits was not relevant.” The appellate court remanded for entry of judgment cancelling the mortgage of record as a result of the more than six years since the exercise of the acceleration clause.

Pro-Active Strategies
Avoiding an outcome like Kashipour requires pro-active strategies to guard mortgage securities. Many of the strategies may also be followed generally as a best practices when administering any defaulted mortgage loan. The first step is to determine if the mortgage has been accelerated: (a) by its terms, (b) by notice to the borrower, or (c) by the commencement of a foreclosure lawsuit. If the mortgage has been accelerated and is still within the six-year statute of limitations, the mortgagee may revoke acceleration so long as “there is no change in the borrower’s position” in reliance on acceleration.8 Some decisions suggest revocation requires delivering a clear and unequivocal notice to borrower, similar to the requirements for acceleration.9

Parial Payment of Debt
Incorporating terms complying with Sections 17-105(1) and 17-101 of the General Obligations Law into loss mitigation documents could save a mortgage about to be nullified.10 Such language may be included in a (1) loan modification application, (2) temporary payment plan agreement, (3) forbearance agreement, (4) settlement agreement, or (5) loan modification agreement.

The drafter must ensure the borrower: (1) expressly acknowledges the debt and (2) expressly promises to repay the debt. Anything less may create a new obligation which will not save a time-barred mortgage.11

The following provisions must be followed to have an enforceable contract:

Section 17-105(1) of the General Obligations Law provides that:

[A] promise to pay the mortgage debt, if made after the accrual of a right of action to foreclose the mortgage and made, either with or without consideration, by the express terms of a writing signed by the party to be charged is effective…to make the time limited for commencement of the action run from the date of the waiver or promise.

Section 17-101 of the General Obligations Law provides that:

An acknowledgment or promise contained in a writing signed by the party to be charged thereby is the only competent evidence of a new or continuing contract whereby to take an action out of the operation of the provisions of limitations of time for commencing actions under the civil practice law and rules other than an action for the recovery of real property. This section does not alter the effect of a payment of principal or interest.

Additionally, Section 17-107 of the General Obligations Law provides that after “a payment on account of a mortgage indebtedness,” the statute of limitations begins to “run from the date of payment.” When asserting that a part payment has renewed the statute of limitations, “the burden is upon the creditor to show that it was accompanied by circumstances amounting to an absolute and unqualified acknowledgment by the debtor of more being due.”12

Voluntary Discontinuance
Dismissal of a foreclosure action by the court does not revoke acceleration,13 even dismissal sua sponte.14 Whether voluntary discontinuance of a foreclosure action revokes acceleration is not settled and the subject of pending litigation. If a mortgagee has a pending foreclosure action, but there is some defect that may prevent entry of favorable judgment, it may be best to fail and allow dismissal. After dismissal, the mortgagee may re-commence within six months under CPLR §205.15

If a pending foreclosure suit will be dismissed by stipulation, then the stipulation should include: (1) an express agreement and acknowledgement that mortgagee’s acceleration is revoked and (2) an acknowledgement of debt by the borrower with an affirmative statement that borrower intends to repay the debt.

Emerging Legal Theories
In addition to traditional tools such as equitable estoppel, there are some new and lesser-known defenses to defeat the statute of limitations. Below is a non-exhaustive list of new and lesser-known defenses.

Standing. Standing is re-emerging, but this time in a favorable way for the mortgagee. Where the defaulted mortgage was the subject of prior foreclosure actions commenced by the wrong party (e.g. MERS), acceleration may have been void. If the party commencing the prior foreclosure action was not a holder or assignee of the note then, “it therefore never had authority to accelerate the debt or to sue to foreclose.”16 The prior foreclosure action did not accelerate the debt and the statute of limitations has not even begun to run.

Service of Process on the Borrower. In Burke, the court explained it was service of the complaint that effected acceleration. Where the complaint was not served, one reported decision found acceleration was ineffective.17 Another reported decision found that filing, but failing to serve did not effect acceleration until later when the borrower had notice of the lawsuit.18

Mortgagee in Possession. Authority holds that the statute of limitations does not run against a “mortgagee in possession” of the collateral property. The legal rationale is that the mortgagor’s acquiescence to the mortgagee’s possession of the collateral is a “continuing acknowledgement of the debt.”19 Possession must be actual. Thus, where a mortgagee has taken extensive measures to secure and improve or remediate the property, the mortgagee may claim the statute of limitations was tolled because it was a mortgagee in possession.

Pre-Acceleration Notices. Acceleration must conform with contractual requirements in the note or mortgage.20 The notice of default may be “a condition precedent to the enforcement of the mortgage.”21 At least one reported decision determined that failure to give proper notice of default nullifies acceleration, bringing the mortgage back within the statute of limitations.22 Courts similarly hold that the notices required under RPAPL §§1303 and 1304 are “condition[s] precedent to the commencement of the action” for which “strict compliance” is required.23 A similar argument can be made that failure to provide these notices may also nullify an acceleration.

Bankruptcy Plan. The filing of a Chapter 13 petition in the Bankruptcy Court (personal debt restructuring) and a Chapter 13 plan, may renew the limitations period. Often overlooked, the Chapter 13 plan (which may be a court form) requires that the debtor acknowledge the debt and agree to repay it. Such an express acknowledgement and agreement to repay brings the mortgage within Section 17-105(1) of the General Obligations Law, and renews the limitations period.24

Conclusion
Recent case law gives powerful weapons to borrowers and lenders in this decade-old foreclosure battle. This article attempts to help practitioners and in-house counsel understand the implications of triggering the acceleration clause to foreclose a mortgage.

Endnotes:

1. Wells Fargo Bank v. Burke, 94 A.D.3d 980, 982 (2d Dept. 2012).

2. See Paragraph 22 of the “New York—Single Family—Fannie Mae/Freddie Mac Uniform Instrument,” Form No. 3033, at https://www.fanniemae.com/singlefamily/security-instruments (last visited Jan. 23. 2017 at 10:30 a.m.); www.freddiemac.com/uniform/unifsecurity.html (last visited Jan. 23. 2017 at 10:30 a.m.).

3. Wells Fargo Bank, 94 A.D.3d at 982-83.

4. EMC Mortg. v. Patella , 279 A.D.2d 604, 605–06 (2d Dept. 2001).

5. Clayton Nat. v. Guldi, 307 A.D.2d 982 (2d Dept. 2003).

6. Goldman Sachs v. Mares, 135 A.D.3d 1121, 1122, (3d Dept. 2016).

7. See, e.g. Deutsche Bank v. Unknown Heirs of Estate of Souto, 52 Misc. 3d 1210(A) (N.Y. Sup. Ct. NY C’nty July 5, 2016) (“Those cases would be controlling if the letter warned that plaintiff ‘may accelerate’ but the instant notice said ‘will accelerate'”).

8. Federal Natl. Mtge. Assn. v. Mebane , 208 A.D.2d 892, 894 (2d Dept. 1994).

9. Bank of N.Y. Mellon v. Slavin , 54 Misc. 3d 311, 41 N.Y.S.3d 408, 411 (Sup. Ct. N.Y. Nov. 21, 2016) (“the revocation should be clear, unequivocal, and give actual notice to the borrower of the lender’s election to revoke in sum, akin to the manner plaintiff gave notice to exercise the option to accelerate”).

10. Possible regulatory restrictions that may be presented are beyond the scope of this Article.

11. Petito v. Piffath , 85 N.Y.2d 1, 8 (1994).

12. Id. at 9

13. Clayton Nat. v. Guldi, 307 A.D.2d 982 (2d Dept. 2003).

14.F ed. Nat. Mortg. Ass’n v. Mebane , 208 A.D.2d 892, 894 (2d Dept. 1994).

15. N.Y. CPLR §205 (“If an action is timely commenced and is terminated in any other manner than by a voluntary discontinuance, a failure to
obtain personal jurisdiction over the defendant, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits, the plaintiff…may commence a new action upon the same transaction or occurrence or series of transactions or occurrences within six months after the termination provided that the new action would have been timely commenced at the time of commencement of the prior action and that service upon defendant is effected within such six-month period.”).

16. EMC Mtg. v. Suarez, 49 A.D.3d 592, 593 (2d Dept. 2008).

17. See, e.g. MSMJ Realty v. DLJ Mortgage Capital, 52 Misc. 3d 314, 317 (N.Y. Sup. Ct. Kings C’nty Mar 7, 2016) (after borrower successfully established she was not served in the prior foreclosure action and a new action seeking to discharge the mortgage was commenced, the court said “[t]here is no possible interpretation of the law under which the court could find that the mortgage which is held by DLJ has been accelerated.”).

18. 21st Mortg. Corp. v. Osorio , 51 Misc.3d 1219(A) (N.Y. Sup. Ct. Queens C’nty May 9, 2016).

19. Ernst v. Lange , 190 A.D. 917, 917 (2d Dept. 1919) (“she was a mortgagee in possession, and the statute of limitations did not run against the debt”); LaPlaca v. Schell, 68 A.D.3d 1478, 1479 (3d Dept. 2009) (“the statute of limitations will not run against a mortgagee in possession”).

20. Wells Fargo Bank, N.A., 94 A.D.3d at 983.

21. GMAC Mortg. v. Bell , 128 A.D.3d 772 (2d Dept. 2015).

22. Mejias v. Premium Capital Funding, 23 Misc. 3d 1115(A) (N.Y. Sup. Ct. Richmond C’nty Apr. 7, 2009) (“the requisite notice of default issued to the borrowers on July 6, 2008 was a nullity” because it was sent before the loan was assigned to Wells Fargo.)

23. Aurora Loan Services v. Weisblum , 85 A.D.3d 95 (2d Dept. 2011).

24. See P SP-NC v. Raudkivi, 138 A.D.3d 709 (2d Dept. April 6, 2016).

Zombie Property Act Introduced in New York

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Updated 6/20/18: NY AB 1563 (Zombie Property Remediation Act of 2017) has advanced in the New York Assembly and has been referred to the Assembly Codes Committee.

Link to full text

Legislation Update
January 12, 2017

A01563 Summary:

BILL NO A01563 
 
SAME AS No Same As
 
SPONSOR Magnarelli
 
COSPNSR McDonald, Fahy, Buchwald, Miller MG, Jaffee, Brindisi, Gunther, Otis, Steck, Ortiz, Skoufis, Joyner, Blake, Jean-Pierre, Galef, Walker, Hyndman
 
MLTSPNSR Cook, Englebright, Magee, Skartados, Thiele
 
Add §1392, RPAP L
 
Permits a municipality to compel a mortgagee to either complete a mortgage foreclosure proceeding or to issue a certificate of discharge of the mortgage for any property which has been certified abandoned pursuant to section 1971 of the real property actions and proceedings law.

Source: New York State Assembly (AB 1563 full text)

Under-$30K Earners Denied TARP Assistance in Droves

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Industry Update
January 13, 2017

Though the Hardest Hit Fund was established to act as a safety net for unemployed or underemployed working class Americans, a recent audit of the program found it’s not helping as much as it could.

According to an audit by the Office of the Special Inspector General for the Trouble Asset Relief Program (SIGTARP), more than 80 percent of those denied assistance earned less than $30,000 a year. In fact, in 12 out of the 19 HHF-eligible states, almost three out of every four homeowners assistance denied made less than $30,000 annually.

Denial rates were highest in Michigan and Ohio—especially in cities where General Motors or its suppliers closed plants or laid off workers. Denial rates for under-$30K earners in these cities were: 91 percent in Dayton, Ohio; 89 percent in Cleveland; 85 percent in Flint, Michigan; 83 percent in Saginaw, Michigan; and 82 percent in Detroit.

As GM has announced the expected layoff of another 2,000 workers in early 2017, these numbers could stand to jump even higher.

“When we see that nearly everyone turned down for TARP’s Hardest Hit Fund unemployment assistance earned less than $30,000 in cities where GM or its suppliers laid off workers, we know that the program can do more to open up funding to these and other hard hit workers,” said Christy Goldsmith Romero, Special Inspector General for the Trouble Asset Relief Program.

Ultimately, SIGTARP was unable to determine why denial rates for under-$30,000 earners were so high, as many necessary state agency records were missing or incomplete. Many agencies were also unable to provide specific reasons for denials.

“That needs to be immediately remedied so appropriate analysis on the people denied can be conducted to help working Americans most affected by the financial crisis and the recession,” SIGTARP’s announcement said.

The larger problem, SIGTARP concluded, is that state agencies needs to remove unnecessary restrictions on HHF eligibility—particularly ones that don’t exist in other states or ones that don’t accurately reflect the working class American’s situation.

“In Michigan, workers are ineligible for HHF if they received unemployment benefits or saw their paycheck cut more than 12 months ago,” the announcement said. “Most HHF states do not have this restriction, which is inconsistent with the new normal of unemployment: it often lasts a long time.”

Leveling the playing field is key, the announcement continued.

“Someone in Detroit shouldn’t face more restrictions than someone in another state,” it stated.

Ultimately, SIGTARP hopes to keep improving the program to better serve America’s hardest hit workers.

“With billions of dollars remaining, the full potential of this valuable program can be unlocked,” Romero said. “Removing unnecessary program criteria, making state agencies track why each person was turned down, and letting workers facing an upcoming layoff be eligible now before they fall behind on their mortgage can go a long way to help save homes in these communities until full-time jobs return. Even good programs like HHF can be better, and that’s a goal worthy of pursuit.”

In response to SIGTARP’s report, Mark McArdle, Deputy Assistant Secretary for the Office of Financial Stability with the U.S. Department of Treasury, said, “The Hardest Hit Fund (HHF) has helped more than 280,000 homeowners that have experienced economic hardship. Approximately 80 percent of homeowners approved for HHF programs have received assistance due to a hardship resulting from either unemployment or underemployment, and more than 80 percent of homeowners who have received assistance have an income of less than $50,000 per year.”

Click here to view the complete SIGTARP report.

Click here to view Treasury’s response letter.

Source: DS News

The Cost of Fighting Community Blight

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Industry Update
January 16, 2017

The blight inflicted on communities by vacant properties is undeniable; in fact, a new white paper suggests just one year of vacancy causes around $150,000 in damages—namely due drops in property value, increases in crime, and increases in costs to police and fire departments that service the area.

In a white paper titled “Understanding the True Costs of Abandoned Properties: How Maintenance Can Make a Difference,” Aaron Klein, a former U.S. Treasury Department Deputy Assistant Secretary for Economic Policy, studies the impact vacant and abandoned properties have on their communities, as well as what steps property owners and policymakers can take to prevent these unwanted effects.

The white paper was commissioned by Robert Klein (no relation to Aaron Klein), the Founder and Chairman of Community Blight Solutions based in Ohio, which recently became the first state to ban the use of plywood in securing vacant homes.

“The reason why we commissioned the report was to show hard data of the direct correlation between vacant and abandoned properties and community blight,” said Robert Klein.

In just the first year of a property’s vacancy, Aaron Klein said there are around $150,000 in financial losses. If a fire occurs on the property—something twice as likely in vacant properties than inhabited ones—that tacks on yet another $30K.

It doesn’t even matter if the home was foreclosed on—simply if the property is vacant or abandoned.

“We know that the majority of these costs are not simply derived from the property’s status as being foreclosed,” Klein wrote, “but rather from its position as being vacant. Abandonment drives the loss of property value and is the cause of increased crime and likelihood of fire.”

Overall, the underlying cause of abandonment-caused financial losses is deterioration of the property, as well as the boarding up of windows and doors on the home.

“Within abandoned properties, we know that the main driver is the deteriorating condition of the house,” Aaron Klein said. “A large driver of this is when the property is boarded shut.”

Boarding up a property tells the community—and potential criminals and squatters—that the home is going to remain vacant for the foreseeable future, Klein said.

“Simply put, no one boards a property that they are going to have vacant for a few weeks during maintenance before renting or selling,” Klein wrote in the paper. “Instead it is a longer-term signal that no one will be home for months or even years.”

Boarded-up properties, as Klein put it, are “hubs for crime and criminal activity.” In light of this and the damage simply looking vacant can inflict, Klein proposes a solution for property owners: Make properties appear inhabited even when they’re not.

“Given that more than $85,000 of these costs are driven by the property’s status as vacant,” Klein said, “a solution that obscured that condition—that is, made the home appear to the external viewer as occupied, would reduce and potentially eliminate these costs.”

Not only would efforts like these reduce the damages done to the community, it would also help stabilize property values and prevent foreclosures and other area homes. And that’s why, Klein said, foreclosure prevention programs must make addressing vacant and abandoned properties a major goal.

“Programs and policies created with foreclosure mitigation in mind must turn their attention to ways to better secure vacant properties,” Klein wrote. “Realizing the potential economic savings, value creation, the opportunity to reduce future foreclosures, and to combat crime, fire damage, and all of the other additional non-economic value that is destroy by vacant properties, researchers and policymakers can and should incorporate smarter methods to secure vacant and abandoned buildings into their analysis, foreclosure research, and foreclosure mitigation and prevention strategies.”

To read the full white paper, click here.

Source: DS News

Tenant Protection Bills Proposed in Several States

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Legislation Update
February 9, 2017

Tenant Protection

Indiana

HB 1294

  • HB 1294 was introduced and had its first reading and referred to the Committee on Judiciary on January 10.
  • Bill Digest:
    “Tenant eviction upon foreclosure. Provides that if real property subject to a judgment of foreclosure is occupied by a tenant on the date a deed of conveyance is executed following the foreclosure judgment, the immediate successor in interest to the property must provide to the tenant any notice to vacate the premises at least 90 days before the date on which the tenant must vacate the premises. Specifies that this provision does not affect the requirements for termination of a rental agreement or for a tenant’s occupancy of the premises under: (1) any federal or state subsidized tenancy; or (2) any federal, state, or local law or regulation that provides for longer periods of occupancy or other additional protections for tenants.”

Source: Indiana General Assembly (HB 1294 full text)

New York

A2803

  • A2803 was introduced and referred to the Committee on Judiciary on January 23. The bill would “Expand(s) the definition of “tenant” for the purposes of required notice during a mortgage foreclosure action”.

Source: The New York State Senate (A2803 full text)

S02443

  • S02443 was introduced and referred to the Committee on on Housing, Construction and Community Development on January 13. The bill would “Grant(s) tenants relocation costs from the proceeds of a foreclosure sale”.

Source: New York State Assembly (S02443 full text)

Virginia

HB 1623E

  • HB 1623E passed the Senate with substitute on February 9.
  • Summary as Passed House:
    Residential rental property. Provides that if a residential dwelling unit is foreclosed upon and there is a tenant living in the dwelling unit at the time of the foreclosure, the foreclosure shall act as a termination of the rental agreement by the landlord. The bill provides that in such case, the tenant may remain in possession of the dwelling unit as a month-to-month tenant on the terms of the terminated agreement until the new owner gives notice of termination of such month-to-month tenancy. The bill also requires a current owner of rental property who has entered into a written property management agreement with a managing agent and who has subsequently entered into a purchase agreement with a new owner to give written notice to the managing agent requesting payment of security deposits to the current owner prior to settlement with the new owner. The bill requires the managing agent to transfer the security deposits to the current owner and provide written notice to each tenant that his security deposit has been transferred.

Source: Virginia State Assembly (HB 1623E full text) 

States Introduce Vacant Property Bills

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Updated 3/21/18: NE LB256 (Adopt the Vacant Property Registration Act) has been signed by Governor Pete Ricketts.

Link to bill info

Updated 2/22/18: NE LB256 (Adopt the Vacant Property Registration Act) was advanced to Enrollment and Review for Engrossment.

Link to bill info

Updated 2/9/18: The Omaha World-Herald published an article titled Editorial: Bill can strengthen municipalities ‘ ability to address problems with vacant properties.

Link to article 

Legislation Update
January 25, 2017

Vacant Property Registration

Missouri

  • SB 137 was first read on January 4, had a second reading on January 11 and was subsequently referred to the Local Government and Elections Committee.
  • Summary
    “Under current law, any city and St. Louis County may establish a semiannual registration fee of up to $200 for vacant properties. This act provides that the current law shall not preempt Kansas City from adopting an ordinance requiring the registration of vacant properties or any parcel in the process of mortgage foreclosure and the payment of a registration fee in an amount determined by the city if the fee is approved by a majority of the city’s registered voters.

Source: Missouri Senate (SB 137 full text)

Nebraska

  • LB256 (Adopt the Vacant Property Registration Act) was introduced on January 11, referred to Urban Affairs Committee on January 13 and issued a “Notice of hearing for January 31, 2017” on January 23.
  • The “Introducer’s Statement of Intent” is as follows:

    The purpose of LB 256 is to promote the health, safety and welfare of Nebraskans by giving communities statutory authority to enact Vacant Property Registration Ordinances. Such ordinances will allow communities to identify and register vacant properties, collect fees to compensate for the public costs of property vacancy, plan for the rehabilitation of vacant properties, and encourage the occupancy of such properties.

    Under LB 256, a municipality may adopt a Vacant Property Registration Ordinance, or a VPRO, which may apply to residential or commercial building, or both. The VPRO will create a city wide vacant property registration database, administered by a city employee.

    Owners of vacant property subject to the VPRO will be required to register their properties within six months of the properties becoming vacant, and may provide for fines for failure to comply with the ordinance. VPROs will require a plan for occupancy of the property, may allow the program administrator to inspect the property upon registration, and at one year intervals thereafter. A VPRO may require the payment of a fee within one year of the vacancy of the property, and may require the payment of supplemental registration fees at intervals no more frequently than every six months thereafter, for as long as the property remains on the vacant property registration database.

    A VPRO may provide for exemptions to the fee requirement.

Source: Nebraska Legislature (LB256 full text) 

Post-Hurricane Sandy Bill Grants Homeowners Mortgage Forbearance

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Updated 3/31/17: nj.com released an article titled Help on the way for Sandy victims struggling to fend off foreclosure.

Link to article

Updated 2/10/17: ABC News published an article titled Chris Christie Signs Bill to Stop Sandy-Related Foreclosures.

Link to article

Legislation Update
January 2, 2017

New Jersey homeowners who were victims of Hurricane Sandy will no longer have to fear about facing foreclosure thanks to the latest bill that is waiting for approval from New Jersey Gov. Chris Christie on December 19.

The bill, named S2300, will help homeowners affected by Hurricane Sandy avoid foreclosure by allowing them to apply for a forbearance period on existing mortgages, and homeowners will be allowed to stop making mortgage payments but will be responsible for maintaining and insuring their properties as well as paying property taxes. Sponsored by Senators Jennifer Beck (R-Monmouth) and Brian Stack (D-Hudson), the bill was passed by the Assembly and the New Jersey State Senate before going to Gov. Christie.

Homeowners who have been approved for assistance through New Jersey’s Reconstruction, Rehabilitation, Evaluation, and Mitigation (RREM) program; the Low-to-Moderate Income (LMI) program; and the Tenant-Based Rental Assistance program will be offered temporary protection against mortgage forbearance through S2300. The bill will also assist those who have received rental assistance from the Federal Emergency Management Agency (FEMA) as a result of property damaged caused by the storm.

Senator Beck told Press of Atlantic City that the new bill will provide a safety net for families who are struggling to pay for their mortgage. “The process of securing state and federal recovery funds is long and complex,” she said. “It has been four years, and yet we still have 3,200 Sandy victims eager to complete elevation and construction projects, including some that have just begun.”

The forbearance period will be effective up until one year after the home is awarded a certificate of occupancy, or to July 1, 2019, depending on which comes first.

Source: DS News

New York Proposes Foreclosure Action Law

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Legislation Update
January 25, 2017

S3640 – SPONSOR MEMO

BILL NUMBER:  S3640

TITLE OF BILL :  An act to amend the real property actions and proceedings law, in relation to requiring a plaintiff in a mortgage foreclosure action to maintain the subject property in good faith.

PURPOSE :

To require plaintiffs in mortgage foreclosure actions to Act in good faith at the commencement of a foreclosure action and throughout the
foreclosure process.

SUMMARY OF PROVISIONS :

Section 1307 of the real property, actions and proceedings law is amended to require plaintiffs from the commencement of foreclosure proceedings to obtain a mortgage foreclosure in ‘good faith’ and defines ‘good faith’ as honesty in fact and the observance of reasonable standards of fair dealing.

JUSTIFICATION :

Due to New York State’s struggling financial situation a financial crisis emerged causing citizens to fall behind on their mortgages and in many instances leave or abandon their homes. In some instances the foreclosing institution will commence the process but not follow
through or delay taking control of the property which in some instances can cause the property to become unmaintained and blighted
in the surrounding neighborhoods. This law would obligate mortgage foreclosure plaintiffs to act in good faith when it commences a foreclosure and throughout the foreclosure process. Financial institutions cannot delay in taking action in controlling and providing upkeep on the vacant dwelling itself.

LEGISLATIVE HISTORY :

2015-16: S.1779/A.335 – Referred to Housing Construction and Community Development
2013-14: S.4055/A.7027 -Referred to Housing Construction and Community Development

FISCAL & LOCAL IMPLICATIONS :

None.

EFFECTIVE DATE :
Immediately after the bill has become law.

Source: The New York State Senate (S3640 full text)

Governor Cuomo Announces 5th Proposal of 2017 State of the State: Comprehensive Plan to Protect Seniors from Financial Exploitation and Foreclosure

Posted on by Safeguard

Legislation Update
January 8, 2017

Elder Abuse Certification Program Will Launch for Banks Across the State
 
New Legislation Will Strengthen Protections Against Fraudulent Transactions and Protect Senior Homeowners from Reverse Mortgages  and Foreclosure

Governor Andrew M. Cuomo today unveiled a comprehensive plan to better protect senior citizens throughout New York from financial exploitation and foreclosure. The plan includes establishing an Elder Abuse Certification Program for banks located in New York State, amending the banking law to empower banks to place holds on potentially fraudulent transactions, and strengthening legislation that will protect senior homeowners with reverse mortgages.

“Exploitation of seniors is a particularly heartless and heinous crime and this administration is committed to doing everything in its power to stop this abuse and ensure these New Yorkers receive the protections they deserve,” Governor Cuomo said. “These proposals will help seniors keep their finances and assets from being vulnerable to thieves and unscrupulous practices, and stop those who seek to exploit them right in their tracks.”

Protecting Seniors from Financial Exploitation
Financial exploitation of seniors is a national issue and Governor Cuomo has made it a top priority to deter unlawful actions against New Yorkers and put an end to senior financial abuse. A study was conducted in New York State in 2013 that found the statewide impact of financial exploitation to be at least $1.5 billion.

To help ensure New York seniors are protected, Governor Cuomo proposes a comprehensive approach that includes:

  • Launching an Elder Abuse Certification Program: This program will be available for all banks located across New York. The State Department of Financial Services will design the Certification Program, which will include training bank employees on how to recognize the signs of financial abuse. Upon completion of this certification, banks may display their certificate so consumers are aware of the special services they offer.
  • Bank Enforcement: Currently, banks are insufficiently using their power to place holds on, or prevent suspicious transactions involving elder financial abuse. The Governor proposes new legislation further empowering banks to place holds on potentially fraudulent transactions in order to protect their consumers, and be immunized for doing so in good faith.
    Reporting Abuse: Once potential fraud is identified and a transaction hold is applied, banks will be required to report to the appropriate state agencies to take action. ‎

Preventing Homeowner Foreclosures
Many New Yorkers over the age of 62 utilize lending products known as reverse mortgages. Misled and misinformed by advertisements, seniors often choose reverse mortgages for an additional income without fully understanding that payments are still required for all taxes, insurance, and home maintenance. As a result of these deceptive practices, many senior citizens face foreclosure because of a missed tax or insurance payment.

Under current law, consumer protections available to homeowners are not provided to homeowners with a reverse mortgage. These protections include settlement conferences, which are provided to New Yorkers facing foreclosure. In order to safeguard seniors from the risks of reverse mortgages and provide equal protections to all homeowners, Governor Cuomo will take the following actions:

  • Close Consumer Protection Loopholes: The Governor proposes amending the Real Property Actions and Proceedings Law and Civil Practice Laws and Rules to include reverse mortgages. This will require that the same consumer protections be provided to all homeowners, regardless of the lending product they utilize.
  • Launch Review of Regulations: The Governor will direct the Department of Financial Services to revisit and revise any rules and regulations pertaining to reverse mortgages. This will help to prevent future foreclosures and further protect New York homeowners.

Source: Office of Governor Andrew M. Cuomo

Additional Resource:

HousingWire: (New York proposes new rules for reverse mortgages)