Foreclosure defense attorneys and the general New York media alike have praised Governor Cuomo for enacting a bill that will require lenders’ lawyers to file certificates of merit at the commencement of an action (click here for the complete language of the Act). Much like the October 2010 Order of Chief Judge Jonathan Lippmann (often referred to as the “OCA Affidavit/Affirmation”), the new law will certainly pressure plaintiffs and their counsels to exercise heightened discretion when reviewing the merits and standing of a potential foreclosure. But, the consensus opinion that this law has helped countless homeowners by “closing a loophole” is misplaced.
Yes, there are a number of foreclosure cases in New York that remain in “shadow dockets”- court calendars specifically held for cases in which an action was commenced, but a request for judicial intervention (RJI) was never filed. The factor that all those championing this law have forgotten to mention is that an RJI can be filed by either party, meaning that a defendant is never “trapped” by the system as the proponents suggest. Arguing that the legislative intent is to help those people that have remained in shadow docket limbo for multiple years is bogus. At any point during that time, the homeowner could have paid the fee to file an RJI and had his/her opportunity to negotiate a loan modification or other settlement under court supervision.
The fact that the legislative body pats itself on the back for “speeding up” foreclosures and saving homeowners from “fees and interest adding up” is another display of political smoke and mirrors. Requiring certifications at the time of filing does not necessarily “speed up” foreclosures. In some instances, it will certainly reduce the amount of time the foreclosure case is open, but if a foreclosing lender simply waits multiple years before commencing, how has that helped save the homeowner? Does interest magically stop accruing?
By the same token, it is overreaching to assume that homeowners will be in better position to modify as a result of this law. While a more expeditious entrance into the conference part is possible, it can never be guaranteed due to the statute of limitations-the fact that a foreclosing lender has six years from acceleration to commence an action.
While the legislature’s attempts to improve the foreclosure crisis are noble, the desired results can be achieved by other means. For instance, if the goal is to speed up the foreclosure process while in the court system, one would think that improving the efficiency of the court’s foreclosure parts/systems would be a good start. It’s telling that my firm currently has several unopposed motions pending a Judge’s decision since as far back as December 2012. Are we expected to believe that the elimination of shadow dockets will lead to a robust increase in court expediency and efficiency?
Outside of the criticisms of the law’s intent and in light of the upcoming August 30th effective date, it’s prudent to review two other less-discussed facets of the law: first, it nullifies CPLR 3015(d) (“unless specifically denied in the pleadings, each signature on a negotiable instrument is admitted”) with respect to unrepresented defendants; second, it requires plaintiffs to file proof of service within 20 days of service on the defendant, regardless of the method of service. The latter will accomplish the goal of getting homeowners into a settlement conference within 80 days or less from the date service is effectuated.
The biggest potential effect that plaintiffs must prepare for pertains to a defendant’s use of the defense of standing. Currently, with a few exceptions, Judges will not permit a standing defense to be raised once the defendant’s time to answer has expired. In light of this new law, plaintiffs must now, essentially, certify that they have standing to commence. Thus, even if a defendant has waived his right to a standing defense, it’s likely many defendants and defense attorneys will raise this defense indirectly by asserting that plaintiff’s certifications were improper.
Overall, the meaty part of the law will essentially simply supplant the OCA Affidavit/Affirmation with a more rigid requirement. It also requires that a copy of the note, mortgage, assignments, etc. be included with the certification if not otherwise provided in the complaint. Good plaintiff attorneys have already been submitting all the 3408(e) docs along with their complaints, but it’s conceivable that this will rectify the poor habits of those who have been willing to commence actions without having the requisite proof from their clients.
Written By: Ralph Vartolo, Esq.
