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Part 419 of the Superintendent of Financial Services’ Regulations – may be undergoing significant change. The superintendent of the New York Department of Financial Services (NYDFS) has proposed for comment changes to Part 419 with the potential to expand the obligations of servicers operating in the state.

New York first adopted Part 419 on an emergency basis on October 1, 2010 pursuant to the authority granted under the New York Mortgage Lending Reform Law that took effect a year earlier (July 2009). The Mortgage Lending Reform Law amended Section 590 of the New York Banking Law to require any person or entity engaged in the servicing of mortgage loans in the state to register with the NYDFS and to authorize the NYDFS to adopt a new regulatory framework for mortgage loan servicers. The NYDFS established application and registration procedures and financial responsibility requirements for servicers in Part 418 and regulates the business conduct of those servicers in Part 419. Every 90 days since initially adopting Part 419 on an emergency basis, the NYDFS has renewed the adoption, only once making adjustments to the rule text.

The proposed version of Part 419 still encompasses the servicing of first- and subordinate-lien forward and reverse mortgage loans. Some areas that will see changes:

-How payments are credited -new version – credited on the business day received vs.  accepted and credited, or treated as credited, on the business day received.

-Annual Statement of account – including – the application of all payments during such period

-Payoff statements – new version “plain language” payoff statement vs. the prior  “clear, understandable and accurate”

SPOC –  SPOC be assigned to borrowers who are at least 30 days delinquent or have requested a loss mitigation application vs. the federally mandated 45 days

Mortgage Servicing Transfers and lots more…..

We will continued to keep you informed as these proposed changes evolve and make their way to coming out as the new rules!

If you have any questions, please contact our Director of Operations, Deborah Gallo, at [email protected] 

We are pleased to share a recent decision of a case handled by Friedman Vartolo, LLP.  In Linda Mehnert v. U.S. Bank National Association, as Trustee For Prof-2013-S3 Remic Trust VII, et al, United States District Court, D. New Jersey, 2018 WL 1942523, Defendant’s motion to dismiss was granted by the Court.

The Plaintiff Linda Mehnert sought damages from the Defendant related to a 2016 state court foreclosure Judgment on her home.  The matter came before the Court based on the defendant’s motion to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim.   

In deciding a Rule 12(b)(1) motion for lack of subject matter jurisdiction, the Court must determine whether the party presents a facial or factual attack because the distinction determined how the pleading is reviewed.  A facial attack “contests the sufficiency of the complaint because of a defect on its face”, and a factual attack “asserts that the factual underpinnings of the basis for jurisdiction fails to comport with the jurisdictional prerequisites.”  To establish standing a plaintiff must satisfy a three-prong test: 1. An injury in fact; 2. Causations; 3. Redressability of the injury by a favorable decision by the Court.   Here, the Court would liberally construct the test based upon a pro-se plaintiff.

Plaintiff’s claim overlapped with the state court judgment.  The Rooker-Feldman doctrine precluded the Court from hearing the matter (as a direct challenge of the state foreclosure proceeding).  The Court moved on to failure to state a claim.  The Court found that the Plaintiff failed to plausibly please the amount of damages or the necessary causal link to the damages. 

As to the FDCPA claims, plaintiff failed to provide plausible facts demonstrating Defendant was a debt collector as opposed to a creditor.  In fact, the complaint appeared to communicate that defendant was a creditor and thus the FDCPA did not apply.  The plaintiff also failed to sufficiently identify her ascertainable loss.  One would presume, that the loss of the home in foreclosure was the intent. However, Courts have found that a mortgagor who is not required to pay more than their legal obligation has not sustained any ascertainable loss.  As to good faith and fair dealing, the Plaintiff’s allegations were conclusory and were unsupported. 

A great job by Adam Friedman, Esq.! For more information regarding this case, please contact Deborah Gallo, Director of Operations at [email protected].

We are pleased to share a recent decision of a case handled by Friedman Vartolo, LLP.  In Christiana Trust, a division of Wilmington Savings Fund Society, FSB, as Trustee v. Adalgisa Bonafede as Administratrix of the Estate of Christopher Bonafede , etal  Index 135139/2016, Richmond County decided July 8, 2019.  Plaintiff’s cross motion for release of earnest money was granted.

An underlying Order to Show cause was brought by proposed intervenor City View Homes Corp. to vacate the foreclosure sale completed on March 7, 2019.  The Cross Motion sought an order directing referee to release the earnest money in the amount of $46,500.00 deposited by City View pursuant to the foreclosure sale when they failed to appear at the closing on April 8, 2019.

City View’s original stated reason for backing out of the sale was an “undisclosed homicide” dating back to 2013.  However, thereafter, they admit it was not ground to vacate the sale.  But, only after discovery of the homicide did, they begin raising issues with the building violation and service upon a minor.  The building violation did not warrant vacatur of the sale as the terms of sale outlined that same was “subject to building and zoning ordinances and…. possible violations of same”.  Additionally, the terms of sale did not provide any right for City View to “reject” the time of the essence letter. 

City View went on to argue that the title company declined to insurance the transaction due to improper service on Defendant Vincent Bonafede.  Correspondence revealed that the title company went from “we have been advised that the deal is dead” to “title could not be insured”.  Additionally, City View would not avail itself to the terms of sale which provided Plaintiff or it’s counsel arrange for a title company. 

Accordingly. the Court found that purchaser had acted in bad faith and granted Plaintiff’s cross motion in its entirety and directed release of the earnest money of $46,500 to Plaintiff’s counsel.

A great job by P. David Seibert, Esq. of our firm! For more information regarding this case, please contact  Deborah Gallo, Director of Operations at [email protected].

The U.S. Supreme Court held in Taggart v. Lorenzen that a creditor can be held in civil contempt for violating a bankruptcy court’s discharge order, if there is “no fair ground of doubt” as to whether the order barred the creditor’s conduct. Taggart v. Lorenzen, No. 18-489, 2019 U.S. LEXIS 3890 (June 3, 2019). The Court vacated and remanded the Ninth Circuit’s holding in 888 F.3d 438, 445 (9th Cir. 2018), which allowed creditors an “unreasonable belief” defense to alleged discharge violations. Under that standard, even a creditor that subjectively but unreasonably believed their actions were permissible despite the discharge injunction could not be sanctioned.

Supreme Court established a more moderate standard: civil contempt sanctions may be appropriate “when the creditor violates a discharge order based on an objectively unreasonable understanding of the discharge order or the statutes that govern its scope.” Thus, the Court found the middle ground between the “strict liability” standard Taggart proposed, requiring preapproval from the bankruptcy court to act, and the “even if unreasonable” defense to discharge violations advocated for by Taggart’s creditors.

The Court’s opinion allows a “good faith belief” defense so creditors do not risk contempt for any discharge violations, so long as they had a reasonable belief, even if mistaken,  that their conduct was permissible.  However, the Court did decide that an unreasonable mistake should not shield creditors from liability. It remains to be seen if the “no fair ground of doubt” standard for assessing discharge injunction violations can be extended to automatic stay violations.   The application of the new standard is bound to create more caselaw, and further litigation, in the coming months and years.

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

On June 14, 2019, Governor Cuomo signed into law the Housing Stability and Tenant Protection Act of 2019, which he described as “the strongest possible set of reforms that the Legislature was able to pass and are a major step forward for tenants across New York.” The Act is a sweeping reform of laws governing rent control, rent stabilization, landlord duties, and procedure for landlord-tenant proceedings.

Under the Act, the window to serve the petition has been shifted forward, and service must now be between ten (10) and seventeen (17) days before the initial appearance date.[1] The practical import of this change is that petitioners will need to choose an initial appearance date that is, on average, five days later than before. RPAPL 733(1).

Notices are required for Terminating Tenancies: Less then a year = 30 days; More than 1 year, but, less than 2 years = 60days; more than 2 years = 90 days.

Under the Act, however, either party can get an adjournment of the first trial date by simply stating that they have not been able to gather the necessary evidence or witnesses.[1] The second trial date, and any subsequent trial dates, can also be adjourned in the discretion of the court.  The practical effect of this is that once a case has been set down for trial, it is certain to take a much longer time before the petitioner is able to actually present evidence and testimony and receive a final disposition of the case. RPAPL 745.

Under the act, the Notice of eviction has increased from 72 hours to 14 days.  RPAPL 749  The stays of the warrant were authorized for six months, which under the act, as increased to one year. RPAP 753.  We can expect, therefore, that Courts will be inclined to stay warrants more often and for longer periods.  .

The Act makes one change specifically directed at post-foreclosure cases: they will be sealed and kept confidential. The intention is to enable post-foreclosure occupants to find a new apartment once a judgment has been entered against them. In this sense, this is a positive change for our clients, since occupants should be able to vacate sooner. On the other hand, this may create an obstacle in on-boarding transfer files: If prior counsel has not kept a complete record, it will be more difficult to obtain the records from court.  RPAPL 757.

The Act provides a new statewide provision on unlawful evictions. Any person committing an unlawful eviction, or assisting one, can be prosecuted for a class A misdemeanor and subject to civil penalties. The civil penalties are between $1,000 and $10,000 per occurrence, with an additional penalty of $100 per day after an occupant requests to be reinstated. RPAPL 768.

These changes, although numerous, have a principal effect of prolonging various aspects of our cases. They do not fundamentally alter the way these cases are brought, the proof we need to collect, or our drafting. As the courts adjust to these new procedures, we will seek to develop strategies for minimizing these new delays.

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