Blog

Thursday, October 22, 2020, the NYS Office of Court Administration released the attached Memorandum which includes the newly issued AO 232/20. This Administrative Order expands on topics previously addressed in AO 157/20. https://www.nycourts.gov/whatsnew/pdf/2020_10_22_11_14_11.pdf

In particular:

• All residential, commercial and in rem foreclosures may proceed, subject to federal and state relief provisions and restrictions (such as the current suspension of all NY commercial foreclosures through January 1, 2021), foreclosure conference requirements and general court delays due to the pandemic;
• Elimination of the conference requirement prior to scheduling auctions for Vacant and Abandoned Properties, provided plaintiff files an affirmation attesting, ‘following diligent inquiry’, that the property is currently abandoned and vacant
• Auctions must be conducted in accordance with newly issued local foreclosure auction plans and rules (however, not all districts and counties have published their new rules for review and compliance)
• No default judgments may be entered against a party that fails to answer a complaint or petition during a Suspension of Statutory Time Limits period (which is currently suspended through 11/3/20 pursuant to the Governor’s Executive Order 202.67)

Please contact Deborah Gallo, Esq. Director of Operations with any questions at dgallo@friedmanvartolo.com.

Pursuant to the Orders of the Governor and the Chief Judge of the State of New York, scheduling of residential foreclosure auctions may recommence starting October 15, 2020.  Although the suspension of residential auctions has been lifted, two conditions must be satisfied before auctions can be scheduled: (i) each judicial district must announce new protocols for conducting auctions; and (ii) a “Covid conference” must be held on each case to assess whether Covid has impacted the parties and whether settlement is viable.  Unfortunately not all judicial districts have released their new protocols and the Courts have been slow to schedule conferences for post-judgment cases.  While these conditions continue to delay foreclosures sales, we are actively engaged with the Courts in an effort to confirm the new auction rules and to expedite the scheduling of sales.

For any questions, please contact Deborah Gallo, Esq, Director of Operations at dgallo@friedmanvartolo.com.

The New York City Department of Consumer Affairs (DCA) has issued a set of revisions to its debt collection rules that are intended to track consumer language preferences and apprise consumers of the availability of language services, either from the servicer or the DCA. These new requirements, which are effective as of October 1, 2020, affect recordkeeping, translation quality (should a collector decide to provide translations), the debt validation notice, and any public website maintained by the servicer. These changes are made to Title 6 of the Rules of the City of New York (RCNY). The particulars of these changes are outlined below, with specific citations for each new requirement. Please note that these revisions do not require the servicer to provide any new language services; if a servicer chooses to provide language services, it must inform the consumer of their availability and ensure their accuracy.

Language Preference Tracking and Annual Report

The following are additional recordkeeping burdens borne by the servicer.

• Servicers must make reasonable efforts to ascertain every consumer’s language preference and maintain a record of it. 6 RCNY § 2-193(b)(5).
• Servicers must prepare an annual report, using a form provided by the DCA, disclosing (1) the number of accounts on which non-English collection communications were made and (2) the number of employees that conducted these non-English collection communications. 6 RCNY § 2-193(c)(3). Please note that this annual report form does not appear to be available at this time.

Prohibition on Inaccurate or Incomplete Translations and Requirement to Disclose Language Preference

The following will now be included in the legal definition of “false, deceptive, or misleading” representations:

• Any “false, inaccurate, or partial” translation of a collection communication, if the servicer is providing the translation. Please note that the servicer is not required to provide translation services under this revision. However, should a servicer decide to do so, the translation must be complete and correct. 6 RCNY § 5-77(d)(18).
• Failure to accurately disclose a consumer’s known language preference when returning or selling an account, or when referring an account for litigation. 6 RCNY § 5-77(d)(18). Please note that our interpretation of this is that the next contact with any existing NYC consumer should include a request for their language preference. The first contact with any new consumer should also include this request, unless a prior servicer has already included the consumer’s language preference information in a transfer file.

In addition, the following will now be included in the legal definition of “unfair or unconscionable means” of collecting a debt:

• Attempting to collect a debt without first requesting the consumer’s language preference and keeping a record of it. 6 RCNY § 5-77(e)(9).

Additional Requirements for Debt Validation Notices and Public Websites

The following are additional statements which must now be included in the standard debt validation notice sent to any NYC consumer:

• A statement informing the consumer of any language services provided by the servicer, including whether the servicer will provide non-English translations of all communications. 6 RCNY § 5-77(f)(2)(vii). As noted above, the servicer is not required to provide translation services under this revision. However, should a servicer decide to do so, it must inform the consumer that these services are available.
• A statement that the consumer may find “translation and description” of common debt-collection terms, in multiple languages, on the DCA website: www.nyc.gov/dca. 6 RCNY § 5-77(f)(2)(viii).

These same two statements, regarding (1) language services provided by the servicer and (2) the glossary provided by the DCA, must be added “clearly and conspicuously” to any website maintained by the servicer that is accessible by the public. 6 RCNY § 5-77(h)(1)-(2). Note that since these rules only apply to New York City, it is our recommendation that such website disclosures clearly indicate that they are for NYC consumers only. The DCA has added a new penalty to its enforcement schedule for failure to comply with this new website requirement. The penalties match those for violation of the debt validation notice requirements: $260 for a first violation, $315 for a second violation, and $350 per any additional violation. 6 RCNY § 6-62.  For any questions regarding this article, please contact Deborah Gallo, Director of Operations, as dgallo@friedmanvartolo.com.

Will the New York Court of Appeals eventually weigh in on the issue of whether a loan is accelerated based upon the very specific language on the demand letter? The changing law is complicated by the fact that New York has four Appellate Divisions, each with jurisdiction over different counties. This causes splits in the law, and the same facts can lead to opposite legal results for property owners within the same state.  The statute of limitations does not begin to run on the entire mortgage debt unless and until there has been an acceleration of the mortgage debt. [See, e.g., Nationstar Mortgage, LLC v. Weisblum, 143 A.D.3d 866 (2d Dept. 2016).]

The mortgage debt may be accelerated by a notice sent to borrower by the creditor or creditor’s loan servicer; however, the notice to the borrower must “clearly and unequivocally” establish the creditor’s intent to accelerate the mortgage debt upon the expiration of the cure period listed in the notice. 

In the First Department (Bronx and Manhattan), a default notice that says the servicer “will accelerate” absent cure serves to automatically accelerate the debt upon expiration of the letter [Deutsche Bank Natl. Trust Co. v. Royal Blue Realty Holdings, Inc., 148 A.D.3d 529 (1st Dept. 2017)]. This results in the six-year clock starting to run earlier than most expected. However, the Second Department (which includes Brooklyn, Queens, Staten Island, Long Island, and more) recently held that “will accelerate” language in a default notice is not “clear and unequivocal” notice of acceleration, “as future intentions may always be changed in the interim” [Milone v. US Bank Natl. Assn., 164 A.D.3d. 145 (2d. Dept. 2018)]. In U.S. Bank N.A. v. Gordon, 176 A.D.3d 1006 (2d Dept. 2019), the New York Appellate Division, Second Department, held that a notice of default stating that if the loan was not made current, the lender “will automatically accelerate [the] loan,” was “merely an expression of future intent” and therefore did not accelerate the borrowers’ debt. As such, the Second Department again held that the notice of default did not trigger the statute of limitations. Accordingly, the effect of “will accelerate” language depends on which county the property is located in.

Now, the Third Department (28 Counties covering the Capitol Region and Northern NY) has entered the mix.  U.S. Bank National Association v. Creative Encounters LLC, Supreme Court, Appellate Division, Third Department, New York, May 14, 2020, 183 A.D.3d 1086124 N.Y.S.3d 922020 N.Y. Slip Op. 02844.   The issue on appeal was whether the voluntary discontinuance, together with letters and notices from Nationstar Mortgage, LLC and its successor in interest, constituted affirmative acts that revoked the election to accelerate the debt.  In this case, After the second action was discontinued, plaintiff’s representative sent two letters to Tufano. The first letter, dated November 3, 2016, provided the 90–day notice required under RPAPL 1304 and demanded payment of $87,009.49 by November 30, 2016 to cure the default. The second letter, dated January 5, 2017 and captioned “Notice of Intent to Foreclose,” advised that Tufano had 30 days to cure a default dating back to May 1, 2011 in the amount of $89,518.61.   The Court found that these letters did not indicate a clear and unambiguous return to an installment payment plan and, did not actually evidence any real intent to de-accelerate the loan. Thus, in effect, “plaintiff simply put defendant[s] on notice of its obligation to cure a … default and then promptly embarked on the notices required to initiate a [third] foreclosure action” (Wells Fargo Bank, N.A. v. Portu, 179 A.D.3d 1204, 1207, 116 N.Y.S.3d 761 [2020] ).

Statute of limitations law in New York is forever evolving and remains an area of confusion and risk that can lead to total lien loss if navigated incorrectly. Lenders and servicers should continue to beware of this risk and work closely with their New York counsel at the loan level to understand the fact specific circumstances, the county of the property, and exposure with any given matter. For any questions regarding this article, please contact Deborah Gallo, Director of Operations, as dgallo@friedmanvartolo.com.

The New York State Office of Court Administration issued guidance for housing court proceedings on Aug. 13. Governor Andrew Cuomo said he would extend the eviction moratorium until Sept. 5, but in a court memorandum, Chief Administrative Judge of the Courts Lawrence Marks further extended it until Oct. 1 for cases filed on or after March 17. The memorandum provides: ( 1) eviction proceedings filed on or after March 17, 2020 continue to be suspended; (2) cases filed before March 17 may proceed; (3) residential eviction cases filed before March 17 – including cases where a warrant of eviction has already issued but not been executed – must be conferenced before a judge before any further action is taken, and no outstanding or new residential warrants of eviction may be executed prior to October l, 2020; and (d) commercial evictions may proceed without a conference.

Housing advocacy groups  want three pieces of legislation to pass, including S8667. which would extend the eviction and foreclosure moratorium until the “end of the state of emergency in the state of New York plus one full year.” (Currently, in committee).

Advocates are also calling for passage of the Rent and Mortgage Cancellation Act of 2020, which would provide relief from housing payments for renters and small homeowners during the COVID-19 public state of emergency, and until 90 days after the state of emergency ends. The bill would also authorize financial assistance for residential co-ops, affordable-housing providers or landlords who can demonstrate COVID-19-related hardship.  (Referred to housing committee/no vote).

The third bill, S7628A, would provide housing vouchers for eligible individuals and families who are homeless, or who face an imminent loss of housing. The state’s Housing Trust Fund Corporation would oversee the program, which would begin October 1, and state and local public housing agencies would administer it. This bill is currently in the Senate Housing, Construction and Community Development Committee. (Currently, in committee)

It remains to be seen, when and if, the legislature will act and further clarify how evictions will proceed on the go forward. For any questions regarding this article, please contact Deborah Gallo, Director of Operations, as dgallo@friedmanvartolo.com.