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In recent case, Citibank, N.A.  v. Yanling Wu, Supreme Court, Appellate Division, Second Department NY, September 1, 2021,  2021 WL 3889872, 2021 NY Slip Op 04902, The Appellate Court was asked to answer whether the Administrative Code of New York City Section 20-490 license (“debt collection agency”) applied to the mortgage Plaintiff.   Appeal by defendants Yanling Wu and Perry Sing, in a mortgage foreclosure from an order for Judgment of foreclosure and sale in Queens County entered October 29, 2019.

In 2016, plaintiff acquire the note after the defendants had allegedly defaulted in making payment and commenced an action to foreclose the mortgage.  The defendant’s filed an answer with affirmative defenses including lack of standing and that plaintiff alleged it had obtained a license to act as a “debt collection agency” pursuant to Administrative Code Section 20-490.

In response the plaintiff filed a motion for summary judgment and to strike defendant’s answer. Defendant cross moved to dismiss under CPLR 3015(e) based on lack of standing, lack of compliance with RPAPL 1303, and failure to demonstrate default.  The Plaintiff argued it was not required to be licensed as a “debt collection agency” under the NYC Administrative Code. 

The Supreme Court granted plaintiff’s motion for summary judgment and denied defendant’s cross motion in an order entered July 18, 2018. Thereafter, the Court granted the Judgment of foreclosure and sale. 

The Appellate Court, then went on to define a “debt collection agency” under the Administrative Code.    The decision reflects that the language of Administrative Code § 20–489(a) is ambiguous in the sense that it is unclear whether the requirement that the “principal purpose” of the business be the collection of debt is intended to apply to the entire, expanded definition of “debt collection agency,” or only to the first part of the definition pertaining to the collection of debts owed to another. To the extent the “principal purpose” requirement also applies to the expanded definition of “a buyer of delinquent debt who seeks to collect such debt,” the defendants did not show, or even attempt to argue, that it is the “principal purpose” of the plaintiff, Citibank, N.A., to buy and collect delinquent debt. Thus, to the extent that the “principal purpose” requirement modifies the entire definition of “debt collection agency,” the plaintiff would not fit within that definition.

Further, the Appellate Court found that the legislative declaration accompanying the relevant Administrative Code provisions explains that the New York City Council was concerned with “unscrupulous collection agencies in operation that practice[d] abusive tactics”—“tactics which would shock the conscience of ordinary people”—such as “threatening delinquent debtors, or calling such people at outrageous times of the night” (Administrative Code § 20–488).   This is not in line with a judicial foreclosure action where the foreclosure process does not include tactics “shocking to conscience of ordinary people” – such as abusive calls at varied time of the night. 

In fact, there are statutory requirements in the foreclosure process like 90 day notices, notices annexed to the complaint, and settlement conferences which specifically are set up to protect the homeowners in residential foreclosure.   Thus, the Court concluded that it was not the intention to consider a judicial foreclosure within the definition of “debt collection agency” in the Administrative Code. 

The Court went on to find that the endorsed note in blank was included in the complaint when the action was commenced – supporting standing, as well as affidavits of service for the required notices. 

However, it was found that plaintiff first submitted business records within its reply papers and that plaintiff must submit evidence of default as the moving party.  Thus, order and Judgment was reversed, motion for summary judgment denied, and orders modified accordingly.

For any questions regarding this decision, please contact Deborah Gallo, Esq.  at dgallo@friedmanvartolo.com. 

The New York Senate and Assembly passed a bill extending the hardship declaration stay in New York for evictions and foreclosures in both residential and commercial matters until January 15, 2022.  The bill mirrors previous bills creating and extending these hardship declaration related stays in nearly all ways except that a lender/landlord may now challenge the validity of the hardship in court.

In order to address the U.S. Supreme Court’s decision in Chrysafis v Marks, the bill now allows lenders or landlords to challenge the validity of the alleged hardship by serving a motion alleging their good faith belief that the filer has not, in fact, experienced a COVID-related hardship.  If movants are successful in establishing the lack of a hardship, the matter will be permitted to proceed without further stay.  The motion must be made on notice to the tenant/borrower who will then be permitted to submit evidence confirming their hardship.  The Bill notes that the hardship declaration creates “a rebuttable presumption” that the borrower indeed has faced a COVID-related hardship which prevents them from paying the amounts due and owing.  Functionally this means that any party challenging a hardship will have to establish that the borrower’s allegations made under “penalty of law” are untrue.

Should you have any questions, please contact Deborah Gallo, Esq. at dgallo@friedmanvartolo.com.

The State Legislature was back in session starting Wednesday, looking to extend New York’s eviction moratorium to January 15, 2022.   Gov. Kathy Hochul announced an extraordinary session for the Legislature Tuesday, aimed at also addressing the state’s cannabis program and the Open Meetings Law.

“Recently the Supreme Court rendered a heartless decision that blocked the Biden administration’s eviction plan,” Hochul said during an address Tuesday evening. “Under my watch, here in the State of New York we are not going to exacerbate what is already a crisis in terms of the homelessness problem. We are not going to allow people who through no fault of their own lost income, not able to pay, and facing eviction. We are not going to allow that to happen here in the great State of New York. We are not going to abandon our neighbors in need, especially since the State of New York failed in its responsibility to get the money that was allocated by Congress out to the people in need earlier this summer. Therefore, we want to expand the safety net for people who qualify for rental and landlord assistance, and we can no longer wait nor can they.”

Today, September 1, 2021, Bills were introduced in the Senate and Assembly both to extend the moratorium to January 15, 2022 and make additional appropriations to the emergency rental assistance program.   We will continue to monitor the pending bills.   For any questions, please contact Deborah Gallo, Esq. at dgallo@friedmanvartolo.com.

In a recent case, U.S. Bank National Association v. Primiano, Superior Court of Pennsylvania, June 8, 2021, 2021 WL 2395158, defendant, John Primiano appealed from a motion for summary judgment in favor of plaintiff.  The Court affirmed the decision of the lower court.  In February 2006, Primiano entered into a mortgage with Washington Mutual Bank, FA for property located at 2413 Grays Ferry Avenue, Philadelphia, Pennsylvania, and executed a note in favor of WaMu in the principal amount of $192,500.00. The Note was endorsed by WaMu and made payable in blank, without recourse. The Mortgage was recorded on February 15, 2006. The Mortgage was subsequently acquired by JPMorgan Chase Bank, through a purchase and assumption agreement with the FDIC, as receiver of WaMu. It was further assigned by Chase to Wells Fargo Bank, N.A., which recorded the assignment on May 9, 2011.

In February 2012, Wells Fargo filed a mortgage foreclosure action against Primiano. In that case, Primiano entered into a judgment by stipulation in favor of Wells Fargo in August 2014 in the amount of $250,220.45, plus interest. The judgment was subsequently vacated when Primiano made a payment in January 2016 in the agreed-upon reinstatement amount and  the action was discontinued.

The Mortgage was later assigned a second time —by Wells Fargo to U.S. Bank, appellee herein. The second assignment was recorded on December 28, 2016.

On February 1, 2018, U.S. Bank filed a mortgage foreclosure complaint against Primiano alleging he was in default of the Note and Mortgage for failing to make the monthly payments since March 1, 2016. Primiano filed an answer to the complaint, in which he denied being in default of the loan, claimed he was overcharged, and challenged U.S. Bank’s standing to bring this action.

On March 2, 2020, U.S. Bank moved for summary judgment against Primiano alleging that there were no genuine issues of material fact. Attached to the motion was an affidavit attesting to the fact that U.S. Bank held the Note, the Mortgage was in default because no payment had been made since March 1, 2016, and certifying the amount of interest, costs, and total amount due. Primiano  filed a response to the motion for summary judgment. On June 11, 2020, the trial court granted summary judgment in favor of U.S. Bank, and awarded U.S. Bank an in rem judgment in the amount of $224,503.26, plus interest.

“[S]ummary judgment is only appropriate in cases where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.” Id. (citing Pa.R.C.P. 1035.2(1)). “When considering a motion for summary judgment, the trial court must take all facts of record and reasonable inferences therefrom in a light most favorable to the non-moving party and must resolve all doubts as to the existence of a genuine issue of material fact against the moving party.” Id. In responding to a motion for summary judgment, “the nonmoving party cannot rest upon the pleadings, but rather must set forth specific facts demonstrating a genuine issue of material fact.” Bank of Am., N.A. v. Gibson, 102 A.3d 462, 464 (Pa.Super. 2014) (citing Pa.R.C.P. 1035.3). We “reverse a grant of summary judgment if there has been an error of law or an abuse of discretion.” Nicolaou, 195 A.3d at 892. Summary judgment in a mortgage foreclosure action is subject to the same rules as other civil actions. CitiMortgage, Inc. v. Barbezat, 131 A.3d 65, 67 (Pa.Super. 2016) (citing Pa.R.C.P. 1141(b)).

In a mortgage foreclosure action, summary judgment is appropriate “if the mortgagor admits that the mortgage is in default, the mortgagor has failed to pay on the obligation, and the recorded mortgage is in the specified amount.” Gerber v. Piergrossi, 142 A.3d 854, 859 (Pa.Super. 2016).

Primiano’s first argument is that U.S. Bank lacks standing because it is not the real party in interest. Primiano points out that in the 2012 Action, the copy of the Note that Wells Fargo (the plaintiff in that case) presented in its complaint and motion for summary judgment did not contain an endorsement. In the instant case filed by U.S. Bank, the Note attached to the complaint and motion for summary judgment is the same Note as presented in the 2012 Action but contains a blank endorsement.  Primiano contends that the “issue of the two conflicting notes” creates a genuine issue of material fact such that summary judgment should not have been granted. 

A plaintiff in a mortgage foreclosure action “can prove standing either by showing that it (i) originated or was assigned the mortgage, or (ii) is the holder of the note specially indorsed to it or indorsed in blank.” Gerber, 142 A.3d at 859-60 (quoting J.P. Morgan Chase, N.A. v. Murray, 63 A.3d 1258, 1267-68 n.6 (Pa.Super. 2013))   Pennsylvania permits assignments of mortgages and “[w]here an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of his rights.” Barbezat, 131 A.3d at 69.

U.S. Bank alleged in its complaint that it “is the proper party by way of an Assignment of Mortgage recorded December 28, 2016 as Instrument #53154549.” It produced copies of the original recorded Note and Mortgage, as well as the recorded assignments from Chase to Wells Fargo and from Wells Fargo to U.S. Bank as exhibits to its Motion for Summary Judgment. Additionally, U.S. Bank’s motion for summary judgment also included an affidavit from the mortgage servicer confirming that U.S. Bank was in possession of the original Note.

U.S. Bank produced sufficient evidence to establish that it had standing to pursue this action by virtue of the assignments, recorded prior to the commencement of this action, and the fact that U.S. Bank possessed the Note. Primiano failed to point to any evidence in the record in support of his assertion that a genuine issue of material fact exists regarding the validity of the assignments. 

Primiano’s argument that there is a genuine issue of fact as to the validity of the endorsement was unavailing. The 2012 Action was brought by Wells Fargo, not U.S. Bank. U.S. Bank was not a party to the 2012 Action and was not involved in that case. U.S. Bank did not have the burden in this case of explaining the existence of an unendorsed note in a case in which it was not a party. Therefore, evidence used in the 2012 Action were found not relevant to U.S. Bank’s instant action and thus, the trial court did not err in failing to consider them. Moreover, the signature on an endorsement is presumed to be authentic and authorized. Primiano produced no evidence to rebut that presumption.

Finally, Primiano argued that U.S. Bank overcharged him for “forced-placed” insurance despite him carrying and paying for his own hazard insurance. Primiano’s amended answer and new matter only contained general denials and claims of lack of knowledge in response to U.S. Bank’s assertions of default and amount due under the loan. These were bald assertions with no supporting evidence. 

The only supposed support presented by Primiano was his self-serving affidavit, in which he conclusory states he is not in default of the loan and that he was overcharged for insurance payments. 

The Court therefore concluded that the trial court did not commit an error of law or abuse its discretion when it granted U.S. Bank’s motion for summary judgment.    For any questions regarding this case, please contact Deborah Gallo, Esq. at dgallo@friedmanvartolo.com.

A new CFPB final rule effective August 31, 2021, amends RESPA Regulation X early intervention and loss mitigation requirements, found at 12 C.F.R. §§ 1024.39 and 1024.41. The amendments provide significant new rights to homeowners exiting a mortgage loan forbearance or experiencing a payment hardship related to the COVID-19 pandemic. See 86 Fed. Reg. 34,848 (June 30, 2021). The new rule:

1. Requires servicers to comply with additional procedural safeguards before initiating foreclosure;
2. Permits a servicer to offer certain streamlined loan modifications without requiring the borrower to submit a complete loss mitigation application;
3. Specifies how and when a servicer must resume reasonable diligence efforts at the end of forbearance; and
4. Imposes new early intervention requirements for borrowers in default.

The new rule applies not just to FHA, VA, USDA, Fannie Mae, and Freddie Mac mortgages, but applies to “federally related” mortgage loans, as defined by RESPA. As written, this is extremely broad and applies to servicers of non-federally-backed mortgage loans. The rule applies where a borrower has not received a forbearance, but has defaulted on mortgage payments while experiencing financial hardship due directly or indirectly to the COVID-19 emergency.

The new rule provisions are effective August 31, 2021. The amendments requiring servicers to comply with additional procedural safeguards before initiating foreclosure will sunset on December 31, 2021. The additional early intervention requirements apply until October 1, 2022.

Failure to comply with the requirements under the new rule will result in the borrower having a right of action under RESPA for out of pocket and emotional distress damages, attorney fees, plus up to $2000 in statutory damages where there is a pattern or practice. Statutory damages in class actions are capped at $1 million.

The CFPB’s existing servicing rule prohibits a servicer from initiating foreclosure until the borrower is more than 120 days delinquent, providing a pre-foreclosure period encouraging servicers to reach out to the borrower and review all loss mitigation options prior to the commencement of foreclosure, before substantial costs have been incurred, and while the likelihood of a successful loss mitigation outcome is greatest.

While borrowers are not required to make payments when they are in forbearance, the CFPB defines such forbearance as a delinquency. Borrowers in forbearance for a period of four months or more without making payments, who then exit the forbearance without bringing the loan current, face imminent foreclosure because their loan is more than 120 days delinquent. To alleviate this problem, the final rule requires that servicers comply with additional procedural safeguards before making the “first notice or filing” necessary to initiate foreclosure from the effective date of August 31, 2021, until December 31, 2021. The CFPB explained that this is the time period in which it expects the greatest number of forbearance exits, leading to potential servicing errors due to capacity issues.

The pre-foreclosure procedural safeguards only apply to mortgages secured by the borrower’s principal residence that became 120-days delinquent after March 1, 2020. “Small servicers”—with fewer than 5000 mortgages which they also own— are not required to comply. In addition, if the statute of limitations to foreclose will run prior to January 1, 2022, the servicer may initiate foreclosure without satisfying the procedural safeguards.

For mortgages that are covered by the rule, a servicer may not make the first notice or filing necessary to initiate foreclosure under state law during the protected window of the period from August 31, 2021, to December 31, 2021, unless it has satisfied one of three procedural safeguards described below.

First, Borrower Evaluated Based upon Complete Application: if the borrower has submitted a complete loss mitigation application, has remained delinquent at all times since that complete application, and the servicer is permitted to foreclose under Reg. X § 1024.41(f)(2). Section 1024.41(f)(2) provides that after a complete application is received, the servicer may not initiate foreclosure until the borrower has been sent a written denial notice pursuant to section 1024.41(c)(1)(ii) and any appeal window has expired or the appeal has been denied, or the borrower has rejected all loss mitigation options offered by the servicer or failed to perform under a loss mitigation option.

Second, Property Is Abandoned: applies if the property securing the mortgage is abandoned according to the laws of the state or municipality where it is located. The CFPB does not define abandonment and directs servicers to the jurisdiction of the premises. Note, however, if a servicer initiates foreclosure on this basis, and a property is determined not to be abandoned under applicable law, the safeguard would not have been satisfied, and the servicer would be in violation of RESPA.

Third, Borrower Is Unresponsive: the one most likely to be at play for borrowers that fell behind during the pandemic. This safeguard is satisfied if the servicer has not received any communication from the borrower for at least 90 days prior to making the first notice or filing and the following conditions are met:

1. The servicer has satisfied its required early intervention live contact attempts during the 90-day period prior to the first notice or filing.
2. The servicer sent the early intervention notice letter required by Reg. X § 1024.39(b) at least 10 and no more than 45 days prior to the first notice or filing. This includes a statement encouraging the borrower to contact the servicer, a telephone number for the borrower’s point of contact assigned pursuant to section 1024.40, a brief description of available loss mitigation options and how to apply for them, and information about how to contact a HUD-certified housing counselor.
3. The servicer has sent all notices required by Reg. X § 1024.41, as applicable, during the 90-day period before the servicer makes the first notice or filing. In theory this might include a section 1024.41(b)(2) notice (if the borrower has submitted an incomplete application during the 90-day period or has defaulted on a streamlined mod trial payment plan and the notice was not provided previously), and could also include the section 1024.41(c)(2)(iii) letter if a forbearance was offered or extended during the 90-day period; and
4. The borrower’s forbearance, if applicable, ended at least 30 days before the servicer makes the first notice or filing.

The goal is to make sure the borrower has exhausted their loss mitigation options.

The CFPB intends to “closely monitor” consumer complaints and examine servicers to “ensure that servicer’s procedures have not created obstacles that frustrate a borrower’s ability to engage with the servicer” or that “make borrowers appear unresponsive even though they were attempting to contact the servicer.” 86 Fed. Reg. 34,848, 34,886. This includes determining whether servicer phone lines have unreasonably long hold times. Id, The CFPB specified that its record retention requirements for servicers include a requirement that if the servicer makes the first notice or filing before January 1, 2022, the servicer’s records must include evidence that one of the procedural safeguards was satisfied, such as evidence that the servicer did not receive communications from the borrower during the key time-period and that all other required notices and outreach efforts were made. Reg. X Official Interpretation § 1024.41(f)(3)-1; 86 Fed. Reg. 34,848, 34,902. Given the intent of close monitoring, we can expect that enforcement action will be used to make sure that compliance is met, and the borrower’s opportunities are meaningful. 

An Executive Summary from the CFPB can be found at: https://files.consumerfinance.gov/f/documents/cfpb_covid-mortgage-servicing-rule_executive-summary_2021-06.pdf

Should you have any questions, please contact, Deborah Gallo, Esq. at dgallo@friedmanvartolo.com.