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This Is Not the Law

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This Is Not the Law

Are New York courts amending the state’s foreclosure moratorium on their own? December 13, 2021
New York
Politics and law
Economy, finance, and budgets

The foreclosure-relief law that the New York State legislature passed in December 2020 was sweeping but straightforward. It suspended foreclosure proceedings for (initially) three months, provided that homeowners submitted a form declaring that they had suffered some kind of hardship (no need to specify) from the Covid-19 pandemic. If you cannot pay your mortgage, you simply need to sign a form and email it to the mortgage company—no notary necessary—and within minutes, you can breathe easy.

The rule was slated to expire at the end of April, but Albany extended it until January 15, 2022. To lawyers like me—I represent small groups of investors who buy delinquent mortgages and try to enforce them—this was disruptive, but navigating roadblocks is why we get paid to do our unpopular work. And Albany’s obstruction of the residential-foreclosure process is not exactly a new habit. With this latest imposition, at least a rule existed: the homeowner had to sign the form. No form and the case could proceed.

Or so we thought. Now, it seems courts are waiving even that minimum requirement. This year, I filed complaints, served papers, and included the hardship declaration in summons packages, with invitations to mail or email them back to me. If anyone wanted a stay on his foreclosure proceeding, it was his for the taking. Since cases cannot advance in New York before holding settlement conferences, I submitted conference requests after serving papers and waited for calendar dates, which courts are required to set within 60 days.

Many months later, I’m still waiting for Brooklyn, Manhattan, and Staten Island courts to hold settlement conferences with individuals who have not declared any hardship. After waiting three months last year, I emailed the Brooklyn clerk and politely inquired about the matter. That email went unanswered. I followed up the next week and this time received a one-line reply: “Conferences are scheduled to resume in the near future.” Notifying the clerk that I had been told the same thing about nine months earlier didn’t bring any further response.

Not to be outdone, a Manhattan court finally granted me a 2022 date for a conference I requested in December 2020, and a Staten Island court responded after five months to schedule a conference. It then promptly pushed it off another seven months. And that’s the one I got lucky on. My other Staten Island case is still frozen in place without a date—though to be fair to the court, five months have not yet passed. Back in Brooklyn, a judge’s clerk explained that the next appearance for cases that held settlement conferences before the pandemic is continually being pushed back two months “due to the moratorium.” The clerk didn’t explain what moratorium, exactly, applies for homeowners who chose not to sign the hardship form.

In Queens, the local court administration had announced over the summer that all judicial auctions would resume September 10, 2021. That’s about a year after the state’s chief administrative judge gave auctions the go-ahead, mind you. But Queens made an exception for mortgage-foreclosure auctions, for which no dates have been given.

I don’t know what the rules of the game are anymore. People should be protected in desperate times, but that doesn’t mean that courts should be free to decide on their own that they are closed to lenders. No duly enacted law or even administrative fiat seems to govern. It’s impossible for me as an attorney to advise a mortgage holder of its rights when courts are essentially adopting the silent treatment as a strategy.

Finally, I did what any attorney trying to marshal his last bit of faith in state government would do: I submitted a Freedom of Information Law request. I asked the Office of Court Administration to provide the memos where it was decided, for example, that the Brooklyn court didn’t need to hear any motions in any foreclosure cases until it felt like it. Lo and behold, I got a letter back about 30 days later—a minor miracle. Sadly, that letter merely referred me to the court’s website. I checked; the information is still not there.

Since no one in the know is talking, here’s my best guess. When the state passed the foreclosure-relief statute, certain court administrators and judges understood it as a cry for help from Albany: “Who will rid us of these turbulent mortgagees?” So the administrators and judges decided to oblige; so much for our independent judiciary.

But not even Albany can actually make the mortgages go away. New York foreclosure cases overwhelmingly do not end with the sale of the home, but rather with a settlement of some kind—even though the filing of the case is usually preceded by months of offers to the borrower offering to work something out. The simple truth is that, for some borrowers, the only piece of paper from the bank that really gets their attention is a summons. The mandatory settlement conference rule recognizes that the courts, with their implied power of coercion, can facilitate a resolution that lets people keep their homes.

If courts are refusing to do their duty, that’s ultimately to the recalcitrant borrower’s detriment. Before the pandemic, the borrower would be forced to come into court, face the facts, and make an offer to the bank. Now they’re being allowed to push off the day of reckoning indefinitely, as interest piles up on the property, until they’re left with no plausible way to catch up on payments and no equity to save.

If you’re a lender with a residential mortgage in New York City, you cannot foreclose on it. Will you ever be able to again? Those who know the answer won’t say.

Photo by Spencer Platt/Getty Images

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