Foreclosure Defenses: New York's Produce the Note Law

A law in New York aims to make the process fair for homeowners and reduce delays in processing foreclosures.

If you're facing a foreclosure in New York, state law ensures that the foreclosing party has the correct documents in place, and that the foreclosure doesn't remain in limbo for years. Under this law, the foreclosing party has to “produce the note” to prove that it owns the loan at the beginning of the foreclosure. Additionally, the law takes steps to reduce the extremely long amount of time that it takes to foreclose in New York as well as the backlog of foreclosure cases in the courts.

New York Foreclosure Process

In New York, foreclosures are judicial, which means the lender (the plaintiff) must file a lawsuit in state court. The lender initiates the foreclosure by filing a complaint with the court. The complaint is served to the borrower, along with a summons.

New York Law: Banks Must Produce the Note

On July 31, 2013, New York Governor Andrew M. Cuomo signed a new foreclosure bill into law that requires banks to produce the note at the beginning of the foreclosure. The law applies to foreclosure actions started on or after August 30, 2013.

Promissory Notes and Mortgages

When you took out your loan, you likely signed both a mortgage and a promissory note. The promissory note establishes your liability to repay the loan. The mortgage creates a lien on the property. The holder of the note is the only party that has the right to enforce the debt by foreclosing on the property. If the foreclosing party does not hold the note, it doesn't have standing to foreclose.

Why the Law Was Needed

Following the 2008 financial collapse, law firms and loan servicers signed off on foreclosures without thoroughly reviewing the documentation. This law is designed to reduce fraudulent filings and deter robosigning by requiring creditors to produce the note at the beginning of the action, which ensures that the lender has legal standing to file the foreclosure action.

Foreclosure Requirements Under the Law

The law requires that at the start of every new foreclosure action on owner-occupied residential property, the plaintiff's attorney must file copies of the following documents with the court:

  • the note (or the attorney must file a lost note affidavit if the document has been lost or destroyed)
  • the mortgage
  • any modification agreements, and
  • all assignments. (N.Y. C.P.L.R. § 3012-B)

New York Law: Reducing Foreclosure Timelines

New York has historically had one of the longest foreclosure timelines in the country. One reason for the extended process is that, in many cases, after filing the foreclosure action, the attorney held off on filing a mandatory affirmation (where the attorney certifies, among other things, that the plaintiff is the creditor entitled to enforce the rights under the loan documents). Delaying a filing prevents a case from moving forward.

Procedure Prior to August 30, 2013

Previously, the plaintiff's attorney was supposed to file a Request for Judicial Intervention (RJI) and an attorney affirmation along with the proof of service after the complaint was served to the homeowner. This step moved the case to a judge who would then schedule the mandatory settlement conference.

But attorneys sometimes dragged their feet when it came to filing the RJI or attorney affirmation. As a result, thousands of cases stalled—in what is referred to as a “shadow docket”—and never got to the mandatory court-supervised mediation stage. These lengthy delays deprived homeowners of timely access to settlement conferences and made it much more difficult for homeowners to eventually obtain an affordable modification to avoid foreclosure because interest and fees continued to accrue while the case sat in limbo.

Procedure On or After August 30, 2013

To remedy this problem, New York law now requires that the foreclosure plaintiff's attorney file a "certificate of merit" immediately at the beginning of the foreclosure, rather than an affirmation later in the process. Because the certificate of merit must be filed along with the complaint, this enables cases to move on to the settlement conference process within 60 days of the filing of the affidavit of service (which must be filed within 20 days of service).

In the past, the failure of plaintiffs’ attorneys to file the RJI and attorney affirmation was one of biggest causes for the large backlog of foreclosures in New York. Now, the plaintiff’s attorney must complete the necessary due diligence prior to filing a foreclosure action rather than filing a complaint and then letting the case linger while completing the due diligence needed to file an affirmation.

Getting Help

If you have questions about the foreclosure process in New York or want to learn about potential defenses to a foreclosure, consider talking to a foreclosure attorney. It’s also a good idea to talk to a HUD-approved housing counselor if you want to learn about different loss mitigation options.

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