Adam Friedman

On August 14, 2019, the New York State Real Property and Proceedings Law (RPAPL) Section 1307 was amended to reflect a new section (4)(k) which requires that a foreclosing lender “pay homeowners’ association or cooperative fees as needed to maintain the property.”  RPAPL 1308 itself applies ONLY to vacant and abandoned one to four family residential property, and only applies to the first mortgage holder.  Vacant and abandoned is defined under RPAPL 1309 as a property where after three consecutive inspections by the lender that 1. No occupant was present and there was no evidence of occupancy on the property to indicate that any persons reside there; 2 residential real property was not being maintained in a manner consistent with the standards in the NY property maintenance code.

Within seven business days of determining that the property is vacant and abandoned as defined by statute,  the service must post a notice on an easily accessible part of the property that would be visible to the borrower, property owner, occupant, and monitor that the notice remains posted.

In addition to the other requirements already existing by statute, the recent change of law requires the servicer to pay homeowners’ association fees and cooperative fees.  The existing statutory language requires the property be secured, boarded, winterized, attractive nuisances addressed, etc.

Since the servicer already has a process in place to address the existing requirements under RPAPL 1308, the team that handles these items will next have to flag the property in the servicing system for the advancement of funds in payment of these fees.

Cooperative security interest is for personal property that is mortgaged and fall under the UCC.  Cooperative maintenance has priority to all liens, including, the security agreement.  Thus, it behooves the servicer to pay outstanding cooperative maintenance.

As with all new statutes and changes, we can anticipate further litigation.  For many years, first mortgagees relied on RPL Section 339-z which provides that the board of managers “shall have a lien on each united for unpaid common changes….prior to all other liens, except…taxes, all sums unpaid on a first mortgage of record, and…liens by a New York State Agency”

This new change will require a step by step analysis and a close review the developing case law.      

Please contact Director of Operations, Deborah Gallo, at [email protected]olo.com with any questions.

Gov. Andrew Cuomo is reviewing a bill (S1864 and A4403) which amends the real property tax law to lower the tax redemption period for abandoned buildings from two years to one year for properties that have been certified as vacant and abandoned.

State and local municipalities are hoping to reduce the number of properties which are vacant and abandoned, as well as, the lessen the likelihood that demolition would be necessary.

We will be closely watching to see if this is signed by the Governor.  From a servicer perspective, it will be more important than ever to monitor the taxes on the property and make sure that they are timely redeemed.

If you have any questions, please contact Deborah Gallo, Director of Operation, at [email protected]

Part 419 of the Superintendent of Financial Services’ Regulations – may be undergoing significant change. The superintendent of the New York Department of Financial Services (NYDFS) has proposed for comment changes to Part 419 with the potential to expand the obligations of servicers operating in the state.

New York first adopted Part 419 on an emergency basis on October 1, 2010 pursuant to the authority granted under the New York Mortgage Lending Reform Law that took effect a year earlier (July 2009). The Mortgage Lending Reform Law amended Section 590 of the New York Banking Law to require any person or entity engaged in the servicing of mortgage loans in the state to register with the NYDFS and to authorize the NYDFS to adopt a new regulatory framework for mortgage loan servicers. The NYDFS established application and registration procedures and financial responsibility requirements for servicers in Part 418 and regulates the business conduct of those servicers in Part 419. Every 90 days since initially adopting Part 419 on an emergency basis, the NYDFS has renewed the adoption, only once making adjustments to the rule text.

The proposed version of Part 419 still encompasses the servicing of first- and subordinate-lien forward and reverse mortgage loans. Some areas that will see changes:

-How payments are credited -new version – credited on the business day received vs.  accepted and credited, or treated as credited, on the business day received.

-Annual Statement of account – including – the application of all payments during such period

-Payoff statements – new version “plain language” payoff statement vs. the prior  “clear, understandable and accurate”

SPOC –  SPOC be assigned to borrowers who are at least 30 days delinquent or have requested a loss mitigation application vs. the federally mandated 45 days

Mortgage Servicing Transfers and lots more…..

We will continued to keep you informed as these proposed changes evolve and make their way to coming out as the new rules!

If you have any questions, please contact our Director of Operations, Deborah Gallo, at [email protected] 

We are pleased to share a recent decision of a case handled by Friedman Vartolo, LLP.  In Linda Mehnert v. U.S. Bank National Association, as Trustee For Prof-2013-S3 Remic Trust VII, et al, United States District Court, D. New Jersey, 2018 WL 1942523, Defendant’s motion to dismiss was granted by the Court.

The Plaintiff Linda Mehnert sought damages from the Defendant related to a 2016 state court foreclosure Judgment on her home.  The matter came before the Court based on the defendant’s motion to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim.   

In deciding a Rule 12(b)(1) motion for lack of subject matter jurisdiction, the Court must determine whether the party presents a facial or factual attack because the distinction determined how the pleading is reviewed.  A facial attack “contests the sufficiency of the complaint because of a defect on its face”, and a factual attack “asserts that the factual underpinnings of the basis for jurisdiction fails to comport with the jurisdictional prerequisites.”  To establish standing a plaintiff must satisfy a three-prong test: 1. An injury in fact; 2. Causations; 3. Redressability of the injury by a favorable decision by the Court.   Here, the Court would liberally construct the test based upon a pro-se plaintiff.

Plaintiff’s claim overlapped with the state court judgment.  The Rooker-Feldman doctrine precluded the Court from hearing the matter (as a direct challenge of the state foreclosure proceeding).  The Court moved on to failure to state a claim.  The Court found that the Plaintiff failed to plausibly please the amount of damages or the necessary causal link to the damages. 

As to the FDCPA claims, plaintiff failed to provide plausible facts demonstrating Defendant was a debt collector as opposed to a creditor.  In fact, the complaint appeared to communicate that defendant was a creditor and thus the FDCPA did not apply.  The plaintiff also failed to sufficiently identify her ascertainable loss.  One would presume, that the loss of the home in foreclosure was the intent. However, Courts have found that a mortgagor who is not required to pay more than their legal obligation has not sustained any ascertainable loss.  As to good faith and fair dealing, the Plaintiff’s allegations were conclusory and were unsupported. 

A great job by Adam Friedman, Esq.! For more information regarding this case, please contact Deborah Gallo, Director of Operations at [email protected].

We are pleased to share a recent decision of a case handled by Friedman Vartolo, LLP.  In Christiana Trust, a division of Wilmington Savings Fund Society, FSB, as Trustee v. Adalgisa Bonafede as Administratrix of the Estate of Christopher Bonafede , etal  Index 135139/2016, Richmond County decided July 8, 2019.  Plaintiff’s cross motion for release of earnest money was granted.

An underlying Order to Show cause was brought by proposed intervenor City View Homes Corp. to vacate the foreclosure sale completed on March 7, 2019.  The Cross Motion sought an order directing referee to release the earnest money in the amount of $46,500.00 deposited by City View pursuant to the foreclosure sale when they failed to appear at the closing on April 8, 2019.

City View’s original stated reason for backing out of the sale was an “undisclosed homicide” dating back to 2013.  However, thereafter, they admit it was not ground to vacate the sale.  But, only after discovery of the homicide did, they begin raising issues with the building violation and service upon a minor.  The building violation did not warrant vacatur of the sale as the terms of sale outlined that same was “subject to building and zoning ordinances and…. possible violations of same”.  Additionally, the terms of sale did not provide any right for City View to “reject” the time of the essence letter. 

City View went on to argue that the title company declined to insurance the transaction due to improper service on Defendant Vincent Bonafede.  Correspondence revealed that the title company went from “we have been advised that the deal is dead” to “title could not be insured”.  Additionally, City View would not avail itself to the terms of sale which provided Plaintiff or it’s counsel arrange for a title company. 

Accordingly. the Court found that purchaser had acted in bad faith and granted Plaintiff’s cross motion in its entirety and directed release of the earnest money of $46,500 to Plaintiff’s counsel.

A great job by P. David Seibert, Esq. of our firm! For more information regarding this case, please contact  Deborah Gallo, Director of Operations at [email protected].