Adam Friedman

The Cares Act seeks to create economic stabilization in numerous ways both for individuals and businesses.  This includes some temporary changes in the bankruptcy code.  

The Act amends the Small Business Reorganization Act to increase the eligibility threshold to file
under subchapter V of chapter 11 of the U.S. Bankruptcy Code to businesses with less
than $7,500,000 of debt. The increase sunsets after one year and the eligibility threshold
returns to $2,725,625.
Amends the definition of income in the Bankruptcy Code for chapters 7 and 13 to
exclude coronavirus-related payments from the federal government from being treated as
“income” for purposes of filing bankruptcy. Sunsets after one year.
Clarifies that the calculation of disposable income for purposes of confirming a chapter
13 plan shall not include coronavirus-related payments. Sunsets after one year.
Explicitly permits individuals and families currently in chapter 13 to seek payment plan
modifications if they are experiencing a material financial hardship due to the
coronavirus pandemic, including extending their payments for up to seven years after
their initial plan payment was due. Sunsets after one year.

For more information on the bankruptcy and other changes that the servicing industry must be aware of contact Director of Operations, Deborah Gallo, at [email protected]

Gov. Cuomo has reportedly signed Bill S8243c and S8428 (which slightly modifies the former) into law. The bill, which creates new Section 9-x of the Banking Law, appears to reflect the NY Legislature’s desire to afford NY homeowners with the same forbearance relief that the CARES Act provided on the federal level. As is often the case, the legislature hastily put a concept to paper seemingly without consideration for how it would function in practice. Not surprisingly, it is now up to the judiciary to determine the intent and apply the law as intended.

The statute provides for 180 day forbearances for qualified mortgagors (which can be made retroactive to as early as March 7, 2020) and the ability to extend the forbearance another 180 days upon the demonstration of a continued hardship. A mortgagee can only refuse to grant such forbearance to a qualified mortgagor if it would violate the safety and soundness provision; this is defined as “having sufficient capital and liquidity to meet its obligations and to operate in a safe and sound matter.”

The statute specifically excludes loans “made, insured or securitized by any federal agency, GSE, federal home loan bank.” An amendment has been made to also include “purchased by” as one of the qualifiers. The plain language here infers that any loans you purchased that were originated as a FNMA, FHLMC, HUD loan etc. would not be covered. The addition of “purchased by” will likely be a source of much litigation. One would argue that this extends the exclusion to not only loans originated by GSE/government agencies, but also any loans that have them in the assignment chain.

The statute intends to provide relief for mortgagors that were impacted during the “covered period” commencing March 7, 2020 with a to-be-determined end date. Based on a plain language reading, one would assume that the statute covers any missed payments within that period (as well as relief for those who have been paying but have a hardship and need the forbearance within the covered period).

There are more questions that are raised by the legislation that will result in additional litigation  and the Court’s interpretation of the intent.  For questions, please contact Director of Operations, Deborah Gallo at [email protected]

We have received a new Administrative Order in New York as the Court’s re-open regions and share their concerns regarding Eviction proceedings.  As of June 20, 2020:

Commencement documents in evictions must be filed with the Court by NYSCEF (efiling) or mail at this time.

The Court now requires two additional documents with the Petition in commercial and residential evictions proceedings.

• A petitioner’s attorney affirmation that they have review state and federal restrictions and qualifications on evictions proceedings and believe in good faith that the proceeding is consistent with those restrictions and qualifications.
• A notice to respondent-tenant (in English and Spanish) information the respondent-tenant that they may be eligible for an extension of time to respond to Petition in light of directives related to the COVID 19 Pandemic and linking them to a phone number and/or website link for further information.

Whether or note an answer is filed, further hearing is stayed until the Governor’s Executive Order suspending statutory timetables for the prosecution of legal matters expires.  This order continues the suspension of eviction matters with a singular exception:

• Eviction matters commenced on or before March 16, 2020 in which all parties are represented by counsel shall be eligible for calendaring of virtual settlement conference.

It is expected that on or before the expiration of the Governor’s Executive Order suspending timetables, further directives will be issued on how to prosecute these cases. 

For more information on this update please contact Director of Operations, Deborah Gallo, Esq. at [email protected]

We are excited to share two recent decisions on cases handled by Friedman Vartolo, LLP.  In the first case, Christiana Trust, a Division of Wilmington Savings Fund Society, FSB as trustee v. Anthony Corbin, et al, Kings County Supreme Index 504869/2014 entered 6/11/2020, Hon. Noach Dear granted plaintiff’s motion to re-argue, reversed the prior decision that found the action was time barred,  and denied defendant’s motion to dismiss and amend. The defendant’s answer failed to include a statute of limitations defense despite the complaint referencing the prior action.  In fact, defendant’s reply failed to address Plaintiff’s argument that the statute of limitations was waived. The Court found that defendant waited several months after the argument that Statute of limitations was waived to seek to amend their answer and did not address same in their opposition. Further, the defendant, a non-borrower cannot bring notice defenses.  Great work by Oran Schwager, Esq. of our firm!

The second case, Ronen, LLC vs.  Bais Hamedrash Ateres Chaim Hanipoly, et al, Kings Supreme Index 510107/2019 entered 6/11/2020, Hon. Noach Dear granted Plaintiff’s motion for summary judgment and denied defendant’s cross motion to dismiss and discharge mortgage.  The Court found that the clock for 205(a) (savings statute) does not begin until the dismissal is final including the time to appeal or re-argue is expired.  Herein, notice of entry was not filed on the dismissal orders.  Great work by Zachary Gold, Esq. of our firm!  For more information on these decisions please contact Director of Operations, Deborah Gallo, Esq. at [email protected]

New York Senate Bill S8243C and New York Senate Bill S8428  were delivered to the Governor on June 5, 2020.  If signed, Senate Bill S8243C will add a new Section 9-x of the Banking Law of New York and Part C of Senate Bill S8428 will amend that new section. Both will be effective immediately. These bills are legislative expansions on the previously issued Executive Order 202.0 and emergency regulation 3 NYCRR Part 199 related to COVID-19 financial hardship.

The S8243C bill requires New York regulated banking organizations to make applications for forbearance for residential mortgages available to qualified mortgagors during the period in which the NY on PAUSE order is in effect in the county wherein the qualified mortgagor is located and to grant such applications for a period of 180 days.

S8428 amends the definition of a “qualified mortgagor,” by removing the requirement that the individual reside in New York with their “principal dwelling” in New York, and replacing it with the requirement that the individual’s “primary residence” must be in New York; and provides the option to extend the forbearance on monthly payments one hundred eight days provided the borrow demonstrates continued financial hardship.

The dates effected run from March 7, 2020 to the date upon which the restrictions are lifted under the Executive Orders.

Under the Senate Bill S8243C, the original carve out from the relief options included mortgage loans “made, insured or securitized” by any federal agency, the GSEs, or a federal home loan bank, or to “the rights and obligations of any lender, issuer, servicer or trustee of such obligations,”. Senate Bill S8428 modifies the carve out in two respects by adding (1) “a corporate governmental agency of the state constituted as a political subdivision and public benefit corporation” to the list of entities, and (2) loans “purchased” by any of the listed entities.

Senate Bill S8428 amends the grant of forbearance section of 9-x of the Banking Law to require “all monthly payments due” be included in the initial 180 day forbearance period and subjects the ability of a qualified mortgagor to obtain an additional forbearance period to demonstrating a continuing financial hardship. Additionally, if the qualified mortgagor had already received a forbearance pursuant to Executive Order 202.9, the total forbearance period would include the period of the forbearance already received under the Executive Order 202.0. The Senate Bill also removes the requirement that the mortgagor be in arrears, on a trial period plan or have applied for loss mitigation.

Senate Bill S8243C provided for three options to be made available with regard to any mortgage forbearance granted by a regulated institution to a qualified mortgagor pursuant to the bill, Executive Order 202.9, as a result of financial hardship.  Option(a) the mortgagor shall have the option to extend the term of the loan for the length of the period of forbearance.  The regulated institution shall not  charge additional interest or any late fees or penalties on the forborne payment; or   Option (b) the mortgagor shall have the option to have  the  arrears  accumulated  during  the forbearance period payable on a monthly basis for the remaining term of the loan without being subject to  penalties  or  late fees incurred as a result of the forbearance; Option (c) the mortgagor and regulated institution cannot reasonably agree on a mutually acceptable loan modification, the regulated institution shall offer  to defer  arrears accumulated during the forbearance period as a non-interest bearing balloon loan payable at the maturity of  the  loan or at the time the loan is satisfied through a refinance or  sale of  the  property. Any late fees accumulated as a result of the forbearance shall be waived. Senate Bill S8428 adds a fourth option, to negotiate a “loan modification or other option that meets the changed circumstances of the qualified mortgagor.”  The use of these options cannot be negatively reported to the credit bureaus.

Senate Bill S8243C subjected the obligation of a regulated institution to include in the options offered to a qualified mortgagor an option to defer the arrearages in the form of an interest free balloon loan to the option being consistent with the safety and soundness of the institution, Senate Bill S8428 removes the safety and soundness element with respect to the option and adds an overall safety and soundness provision. Under the safety and soundness provision, the obligation of a regulated institution to grant forbearance relief is subject to the regulated institution “having sufficient capital and liquidity to meet its obligations and to operate in a safe and sound matter.” It must notify the New York Department of Financial Services within five business days, if it cannot operate in a safe and sound manner, including specific information surrounding that assessment. At the same time, the regulated institution must notify the qualified mortgagor that the application for relief was denied and provide a statement and contact information for complaints to the New York Department of Financial Services.

Failure to comply with the legislation will be a defense to the foreclosure and will likely subject the institution to regulatory review.

For more information regarding this legislation, please contact Deborah Gallo, Director of Operations at [email protected]