FRAUD STOPPERS Empowers Homeowners Facing Foreclosure with Comprehensive Mortgage Audits and Legal Support

For homeowners looking for foreclosure defense the New York State Senate has passed a foreclosure abuse prevention bill aimed at addressing manipulative tactics used by lenders in mortgage foreclosure cases. The bill, known as the New York Foreclosure Abuse Prevention Act, had already passed the assembly and is now awaiting Governor Kathy Hochul’s signature.

The issue arose from a 2021 court decision that allowed lenders to pause the statute of limitations on foreclosure actions and restart them within six years. This led to a flood of motions from lenders to reopen foreclosure cases that had been previously dismissed. As a result, homeowners found themselves trapped in a state of uncertainty regarding the fate of their homes.

Proponents of the bill argue that certain lenders have exploited the statute of limitations, leaving homeowners in foreclosure for extended periods, especially in communities of color. The legislation aims to restore the law around statutes of limitations to its previous state and prevent lenders from unilaterally manipulating the timeline.

On the other hand, opponents of the bill argue that it restricts the rights of mortgage holders and incentivizes borrowers to delay foreclosure proceedings. They claim that it penalizes lenders for procedural errors and may result in some borrowers receiving free houses.

Some opponents also believe that the bill will deter lenders from doing business in the state, leading to potential financial losses. They predict that lenders may choose to walk away from uncertain and costly court cases rather than comply with the new foreclosure rules.

Overall, the bill is seen as a significant step toward foreclosure reform and providing relief to homeowners. However, its potential impact on lenders and ongoing foreclosure actions is a point of contention, with opponents vowing to challenge the legislation.

In the midst of the foreclosure abuse prevention bill’s passage in New York, homeowners facing foreclosure can benefit from the services provided by FRAUD STOPPERS mortgage audits. FRAUD STOPPERS is an organization that specializes in assisting homeowners in challenging fraudulent and predatory lending practices.

Through their comprehensive mortgage audits, FRAUD STOPPERS examines the loan documents, disclosures, and servicing records to identify potential violations of federal and state lending laws. This includes scrutinizing the statute of limitations and other relevant legal aspects related to foreclosure cases.

By leveraging the findings of these audits, homeowners can present a stronger case in court and challenge lenders who have engaged in abusive and manipulative foreclosure practices. FRAUD STOPPERS provides expert guidance and support throughout the legal process, empowering homeowners to level the playing field and fight for their rights.

With the passage of the foreclosure abuse prevention bill, FRAUD STOPPERS’ mortgage audits can serve as a valuable resource to help homeowners navigate the complexities of foreclosure actions and ensure they are treated fairly under the new legislation.

N.Y. Senate Passes Foreclosure Abuse Prevention Bill

Steven Goode

MAY 04, 2022

Gov. Kathy Hochul is expected to sign the controversial bill into law.

As expected, the New York State Senate on Tuesday easily passed a controversial bill aimed at foreclosure reform.

The vote was 52 to 10 in favor of the measure.

The New York Foreclosure Abuse Prevention Act passed the assembly in March and is expected to be signed into law by Gov. Kathy Hochul.

Lawmakers have said the bill is intended to eliminate abusive and unlawful litigation tactics that have been adopted and pursued by lenders in mortgage foreclosure actions. They say the tactics have been used to manipulate the law and the courts to yield to the convenience of mortgage bankers and servicers.

The issue arose out of a 2021 New York appeals court decision in the Freedom Mortgage Corp. vs. Engel case, which some legislators said had given mortgage lenders and their servicers the ability to “unilaterally manipulate, arrest, stop, and restart the limitations period at will,” to the detriment of New York homeowners dealing with foreclosure actions.

As a result, lawmakers have said, courts throughout the state have been bombarded with a flurry of motions from lenders to reopen foreclosure cases that had been dismissed years ago on statute of limitations grounds.

The court’s decision in the Engel case allowed for lenders to voluntarily pause the state’s six-year statute of limitations countdown on foreclosures and reserve the right to restart the action again as long as it’s done within six years.

The result, according to law makers, was that foreclosure actions were no longer time-barred and countless homeowners were trapped “in a state of judicial purgatory with the fate of their homes suspended in incertitude.”

Proponents of the bill have said that some lenders in the state have a longstanding reputation for marginalizing the statute of limitations through stopping and restarting actions that can leave homeowners in foreclosure for a decade or more. They also claimed these practices have disproportionately harmed communities of color.

“Jacob Inwald, Director of Foreclosure Prevention at Legal Services NYC, said the bill will restore the law around statutes of limitations in foreclosure cases to where it was before the aberrational decision of the court of appeals last year in Engel. The legislation makes it clear that foreclosing financial institutions are not free to manipulate the statute of limitations unilaterally, and that they are bound by the same statute of limitations principles that apply to every other litigant, he said.

“The Engel decision created chaos in the markets, permitting long-dead foreclosure cases that had been adjudicated to be barred by the statute of limitations to be exhumed, flooding the courts with hundreds of motions to revive such long-dead foreclosure actions and placing clouds on title to countless properties on which enforcement of such mortgages was barred by the statute of limitations, Inwald said.

Sen. James Sanders Jr. said Monday that homeowners who are in foreclosure are the biggest winners with the passage of “this significant foreclosure bill.”

“This bill will go a long way in helping homeowners save their homes from foreclosure by leveling the playing field by eliminating certain abuses lenders have used in courts, to the detriment of the homeowners,” Sanders said.

Opponents of the bill countered that it would severely limit the mortgage holders right to reach the merits of a foreclosure claim and encourages borrowers to to delay foreclosure proceedings and ignore loss mitigation and debt restructuring efforts made by lenders.

The bill, they maintained, also penalizes lenders for any procedural errors that, in some cases, could result in a defendant receiving a free house in a windfall.

They said it also harms lenders because, with limited exceptions, the bill did not “grandfather” or exclude foreclosure proceedings that are already close to or beyond the six-year statute of limitations.

Brian McGrath, a partner at the New York City law firm Hinshaw and Cullbertson and an opponent of the bill, said Tuesday that the senate’s action amounts to solving a problem that doesn’t exist.

McGrath estimated that about 2% of all mortgage loans in the state fall under the new rules laid out in the bill, but those 2% of loans represent a lot of money, he said — likely well over $1 billion — in a state where real estate continues to be a goldmine for lenders even in tough times.

McGrath said he expects that those lenders will, in some cases, walk away rather than go through uncertain, lengthy, and costly court cases that could result in a lien loss, in which a delinquent borrower ends up with a free house because of something as minor as a missed court date by the plaintiff’s attorney.

He also believes lenders will stop doing business in the state because it won’t be worth the risk, given the new foreclosure rules.

Proponents of the legislation have said that has happened when other legislative actions aimed at leveling the playing field between borrowers and lenders have taken effect.

Ultimately, McGrath said, the new law will be challenged, specifically on the grounds that the legislature has changed the rules for lenders already involved in foreclosure actions.

“Applying it backwards is the most dishonest part of the legislation,” he said. “It’s fundamentally unfair.”