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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]

We are excited to share a recent decision of a case handled by Friedman Vartolo, LLP. In US Bank Trust, National Association, as trustee for Bluewater Investment Trust 2018-1 v. Robert A. Bard, et al. Superior Court of New Jersey, Appellate Division, 04/28/2020, 2020 WL 2036643, Friedman Vartolo LLP successfully defended the appeal of a summary judgment award to the foreclosing lender.  New Jersey’s Appellate Division rejected defendant-borrower Robert A. Bard’s arguments, including that the subject mortgage loan did not require defendants to make monthly loan payments. 

This appeal follows the foreclosure of a 2008 mortgage loan granted to defendants Robert and Eleanor Bard in the amount of $634,000. The loan was modified in 2014 and the modification agreement was recorded in 2015. Defendants defaulted on their loan payments in September 2017. 

In December 2018, plaintiff moved for summary judgment and to strike defendants’ answer. In their opposition to the summary judgment motion/cross-motion to dismiss the complaint, Defendants alleged, most notably, that they never defaulted under the terms of the subject promissory note because their modified loan allegedly provided them the option to forego monthly installment payments in favor of a lump sum payment at the loan’s maturity in 2054.

In granting summary judgment, the trial court ruled that Plaintiff established its prima facie right to foreclose by showing, among other things, that Defendants borrowed the sums alleged and defaulted in their repayment of the loan.  “The defendant has acknowledged failure to pay, although he has asserted that he believed in his interpretation of the note that he could just wait and pay it all at the maturity date. The [c]ourt is satisfied in reading the note that that is not an option…the note generally provides for monthly payments and provides for a default upon failing to make the monthly [payment].  [T]he note [clearly] contemplated that monthly payments would be made.” US Bank Trust, Nat’l Assoc., as Trustee for Bluewater Investment Trust 2018-1 v. Robert A. Bard, et al., No. A-4371-18T4, 2020 WL 2036643, at *1-2 (N.J. Super. Ct. App. Div. Apr. 28, 2020)

On appeal, defendant argued that the trial court erred in granting summary judgment because there existed a material dispute of fact as to whether defendants defaulted. The Appellate Division

affirmed the trial court’s decision, rejecting Defendant’s argument that no payment was due until 2054.  “As the trial judge noted, the plain language of the note and the modification agreement provided no support for defendants’ theory, clearly required regular monthly payments, and set a fifteen-day deadline before defendants were considered in default. Defendants’ unsupported theory did not create a material dispute in fact thwarting the entry of summary judgment.” Id at *2-3.

The Appellate Division also rejected Defendants’ arguments concerning Plaintiff’s proof of compliance with the notice requirements of TILA and New Jersey’s Fair Foreclosure Act.  The court ruled that these arguments were either improperly before the court, to the extent they were not raised to the trial court, or unsupported by the record of the case. 

A fantastic job by Michael Eskenazi, Esq. of our firm. For more information regarding this case, please contact Deborah Gallo, Director of Operations at [email protected]