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In the midst of the COVID 19 pandemic, we are attempting to predict what will happen in the default servicing world over the coming months.  I could reference the current COVID 19 figures today but, they would be outdated before I finished posting the article. 

For the default world, both counsel and servicers were required to have disaster response, business continuity and pandemic policies in place.  For those like our firm, placed in the northeast of the USA, we quickly went remote for the health of our staff and the ability to continue to service our clients. 

So, what can we anticipate?  Delinquencies will likely jump significantly with rising unemployment.  The Corelogic Loan Performance Insight Report was released yesterday.  It starts with the news that delinquencies were down from 4.0 a year earlier to 3.5 of home mortgages.  The lowest in more than 21 years.    The among the highest serious delinquency rates include New York, New Jersey, and Connecticut.  All three states are reeling in the wake of COVID-19. 

First comes compliance, making sure that servicing is complying with the newly enacted CARES Act of 3/27/2020, and that servicing requirements are updated. As well as, continuing to monitor the changes as they are implemented (suspension of foreclosure activities, credit bureau reporting, forbearance and workout options). 

Second, servicers must be staying up to date on the State level mandates and changes.  Many firms continue to send out regular updates as Governors issue Executive Orders and Courts issue directives and Administrative Orders.  As of 4/13/2020, the New York Virtual Courts are Expanded beyond Essential Matters.  While the existing ban on filing new “non-essential” matters remains in effect in New York, the Judges will now begin the process of remotely scheduling and conducting conferences for pending civil (and criminal) cases. As for New Jersey, On March 27, 2020, the Supreme Court of New Jersey issued an Omnibus Order amending and extending the guidance provided in its March 17, 2020 Order.  Specifically, where practicable, all hearing, conference and arguments will be conducted by video or phone conference.  Furthermore, the Office of Foreclosure will not review or recommend motions or judgments received on or after March 1, 2020 pending further court order.

As with most everything, communication is key.  Conference calls, virtual meetings, virtual trainings and events are the key way to keep staff informed and evolving in a very fluid scenario which seems to change almost day by day. Stay safe and for more information regarding recent changes, state level updates or to schedule a virtual meeting for your teams, please contact Deborah Gallo, Director of Operations at [email protected]

On June 24, 2019 P.L.2008, c.127 was enacted by the New Jersey Senate and General Assembly. It required the Department of Community Affairs to create a website or portal where residential mortgage lenders can submit a copy of the Notice of Intention to Foreclose (“NOI”) along with all relevant information (address, county, municipality, block, lot, current owner and date of NOI). After submitting the information, the DCA is directed to send notification to the residential mortgage lender confirming that the submittal has been received. Receipt of this confirmation is to be plead within the foreclosure complaint.

             The act provided a grace period that expires today. All NOIs sent prior to April 1, 2020 do not need to be registered on the portal. All NOIs sent on or after April 1, 2020 need to be registered. Yesterday we received the instructions for accessing the portal and setting up a username and password. Please find the FAQ and User Guide attached to this email. Usernames must be obtained by the lender or servicer who can then designate people or entities to register NOIs on their behalf. We recommend that all servicers review the attached documents and move quickly to set up a username so that new NOIs will be compliant. If any servicers or lenders would like assistance, please let us know. If you have any questions or concerns, please contact Catherine Aponte, Esq., at [email protected] or Deborah Gallo at [email protected]

On March 19, 2020, the New Jersey legislature passed Assembly Bill 3859, which stays the enforcement of all judgments of possession, warrants of removal, and writs of possession during a Public Health Emergency. The intention being to reduce the number of individuals that could be displaced during a pandemic. However, a court on its own or by a motion made by a party, an order can be entered permitted enforcement if it is in the interest of justice. Finally, it should be noted that the moratorium on enforcing evictions does not prohibit the initiation or continuation of either eviction or foreclosure proceedings during a Public Health Emergency. If you have any questions or concerns, please contact Catherine Aponte, Esq., at [email protected] or Deborah Gallo at [email protected]

In Citimortgage, Inc. etc. v. Salko, 179 A.D. 3^rd 1009, 2020 WL 465495, 2020 N. Y. Slip Op. 00566, following dismissal of the first complaint for lack of jurisdiction for improper service, mortgagee’s successor brought a foreclosure action against mortgages, and the mortgage counterclaims against mortgagee for alleging violations of the FDCPA. In the Appellate Divisions review, they held that denial of the cross motion that conditioned discontinuance of the foreclosure on tolling mortgage interest, late fees and expenses from the alleged default, or payment of attorney’s fees, was warranted. However, the trial court’s sua sponte order removing the previous acceleration of the mortgage debt and directing the mortgage remain as an installment contract was not warranted.https://law.justia.com/cases/new-york/appellate-division-second-department/2020/2018-02512.html

In March 2005, Salko executed a note in the principal amount of $937,500 in favor of ABN AMRO Mortgage Group, Inc. On May 20, 2011, CitiMortgage, Inc.as successor by merger to ABN AMRO, commenced an action against the Salkos, among others, to foreclose the mortgage. The defendant served an answer and, thereafter, moved to dismiss the complaint insofar as asserted against him for lack of personal jurisdiction due to improper service. In an order dated April 18, 2012, the Supreme Court granted the defendant’s motion, which was unopposed, and dismissed the complaint insofar as asserted against him.

In June 2014, the plaintiff commenced this action to foreclose the mortgage against the defendant only, with the intention of consolidating this action with the 2011 action against the remaining defendants. 

The Salkos interposed an answer with affirmative defenses and a counterclaim alleging, inter alia, violations of the FDCPA. In March 2017, the plaintiff moved to discontinue this action without prejudice and to dismiss or sever the Salkos‘ counterclaim, asserting that it had determined that it could not prove its compliance with RPAPL 1304. The defendant cross-moved to condition the discontinuance of the action on the payment of counsel fees to him, the tolling of all mortgage interest, late fees, and expenses from the date of the alleged default on the mortgage loan, and the severance and continuation of the counterclaim.

“In an action of an equitable nature, the recovery of interest is within the court’s discretion. The exercise of that discretion will be governed by the particular facts in each case, including any wrongful conduct by either party” (Prompt Mtge. Providers of N. Am., LLC v. Zarour, 155 A.D.3d 912, 915, 64 N.Y.S.3d 106 [internal quotation marks omitted]; see CPLR 5001[a]; BAC Home Loans Servicing, L.P. v. Jackson, 159 A.D.3d 861, 862, 74 N.Y.S.3d 59; Citicorp Trust Bank, FSB v. Vidaurre, 155 A.D.3d 934, 934–935, 65 N.Y.S.3d 237; U.S. Bank N.A. v. Williams, 121 A.D.3d 1098, 1102, 995 N.Y.S.2d 172; Dayan v. York, 51 A.D.3d 964, 965, 859 N.Y.S.2d 673).

Here, the Appellate Court found the equities supported denying those branches of the motion for tolling of interest, late fees, expenses, legal fees etc. (which was requested) However, they found the Supreme Court’s sua sponte, revocation of the acceleration and mortgage remaining as an installment contract exceeds the discretion of the Court and modified the Orders accordingly.

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