New York's Amended Foreclosure Laws

New York law now requires the lender to assert that it is the loan owner when starting a foreclosure and gives homeowners the chance to raise certain defenses to protect their homes.

By , Attorney · University of Denver Sturm College of Law

A foreclosure in New York begins when the lender files a lawsuit asking a court for an order allowing a foreclosure sale. The lender gives you (the borrower) notice of the suit by serving you a summons and complaint, along with information about the foreclosure process. (N.Y. Real Prop. Acts. Law § 1303, § 1320).

As of January 1, 2022, SB 5785-A amended the state's foreclosure laws. Under the amended law, any foreclosure complaint initiated on a residential mortgage covering a one- to four-family dwelling after the law's effective date must contain an affirmative allegation that the plaintiff (the party initiating the lawsuit, which is usually the lender or loan servicer in a foreclosure) has "standing."

SB 5785-A also requires the plaintiff to state in the complaint that it has complied with certain provisions of New York's existing foreclosure laws.

New York Lenders Must Affirmatively Say They Have Standing to Foreclose

New York's amended law requires the plaintiff to say in the complaint for foreclosure that it is the owner and holder of the subject mortgage and promissory note or that it has been delegated the authority to start a mortgage foreclosure action by the owner and holder of the mortgage and note. (N.Y. Real Prop. Acts. Law § 1302).

So, the foreclosing party must specifically assert that it has standing to proceed with the case. Previously, this requirement applied only to high-cost home loans and subprime home loans.

What Is "Standing" in a Foreclosure Case?

Mortgage loans are often bought, sold, and, in some cases, securitized. As a result, confusion sometimes arises over who owns the mortgage and note. But only the loan holder (the loan owner) or someone acting on the holder's behalf may foreclose. So, if the party filing the lawsuit can't prove it owns the loan, then it doesn't have the legal right to foreclose.

A homeowner can raise this issue, called "lack of standing," as a defense to a foreclosure along with any other relevant defenses, such as improper service of the summons and complaint, a faulty 90-day notice (see below), or a defense based on the Servicemembers Civil Relief Act, for example.

Other Requirements Under New York's Amended Foreclosure Law

SB 5785-A also requires the plaintiff to state in the complaint that it has complied with certain provisions of New York's existing foreclosure laws, like sending the borrower a preforeclosure notice.

90-Day Preforeclosure Notice Requirement in New York

If the property is an owner-occupied, one- to four-family dwelling or a condominium unit, New York law requires the lender or servicer to send a notice to the borrower 90 days before starting the foreclosure that provides, among other things:

  • information about how to cure the default, and
  • a list of government-approved housing counseling agencies located near the homeowner. (N.Y. Real Prop. Acts. Law § 1304).

If the lender or servicer started the foreclosure but didn't send the 90-day notice when required by law or didn't strictly comply with notice requirements, you could have a powerful defense that might result in a dismissal of the foreclosure action. In fact, in March 2022, New York S.B. 7698 amended foreclosure requirements for residential mortgages by clarifying that it is a defense to an action to foreclose a mortgage if a lender violates § 1304 of the Real Property Actions & Proceedings Law.

Violations of New York Law Might Provide a Defense to the Foreclosure

You likely have a defense to a foreclosure action if the lender violates the provisions of New York's amended foreclosure law.

Filing an Answer to a New York Foreclosure Lawsuit

Depending on the situation, you generally get 20 or 30 days to file an answer to a foreclosure lawsuit, raising any defenses you have to the action. So, if you're facing a foreclosure and think your lender violated New York's foreclosure laws, like by failing to send you a 90-day preforeclosure notice, consider filing a response to the foreclosure. Again, these amendments to New York's foreclosure laws apply to foreclosures initiated on or after January 1, 2022.

If you don't respond to the suit, the lender will ask the court for, and probably receive, a default judgment, allowing it to hold a foreclosure sale. But if you choose to defend the foreclosure lawsuit, the case will go through the litigation process.

Raising a Defense of Standing Even If the Answer Deadline Has Passed

You can raise the issue of standing as a defense to foreclosure, even if the deadline to answer the suit has passed. New York law permits a homeowner defendant in a foreclosure suit to raise a defense of standing at any time in the litigation.

However, the defendant may not put forward an objection or defense of lack of standing following a foreclosure sale unless the judgment of foreclosure and sale was issued upon the defendant's default. (N.Y. Real Prop. Acts. Law § 1302-a). So, a foreclosed borrower can assert a lack of standing even after a foreclosure sale if the judgment of foreclosure was a default judgment. Again, a default judgment happens when the borrower fails to answer the suit.

Talk to a Lawyer

If you have questions about New York's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the action in court, consider talking to a foreclosure attorney.

Talking to a HUD-approved housing counselor about different loss mitigation options is also a good idea.