Chapter 472 of the Laws of 2008

August 5, 2008

Governor Patterson signed Chapter 472 of the Laws of 2008. This Chapter imposes new notice requirements in residential mortgage foreclosure actions.

I. RPAPL Section 1303

RPAPL Section 1303, which was first created in Chapter 308 of the Laws of 2007, requires that in an action to foreclose a mortgage secured by an owner-occupied one-to-four-family dwelling, a notice entitled "Help for Homeowners in a Foreclosure" be delivered with the summons and complaint. The content of the notice has been amended by Chapter 472 of the Laws of 2008 for foreclosure actions commencing on or after September 1, 2008. A copy of the original notice, which should be delivered with the summons and complaint in mortgage foreclosure actions commenced on or after February 1, 2007 through August 31, 2008, and a copy of the amended notice, which should be delivered with a summons and complaint in mortgage foreclosure actions commenced on or after September 1, 2008 follow this story.

The notice must be delivered with the summons and complaint, it must be in 14-point bold type and must be printed on a colored paper, with a color different than the summons and complaint. The title at the top of the notice must be in 20-point bold type.

RPAPL Section 103 (4) provides that the banking department shall prescribe the telephone number and web address to be included in the notice.

When we are insuring a policy on a property being conveyed by a referee, we must raise the following exception:

Proof of compliance with RPAPL Section 1303.

To omit the exception, we must examine the foreclosure file to confirm that the correct notice has been delivered with the summons and complaint. We also must obtain an affirmation from the foreclosing attorney of record that:

1. the correct notice (depending on the date the foreclosure action was commenced) was delivered with the summons and complaint that was served on the defendants in the action;

2. the notice was on colored paper other than the color of the summons and complaint; and

3. the notice was printed in 14-point bold type and that the title of the notice was printed on 20-point bold type.

This affirmation cannot be "upon information and belief" or "to the best of his/her knowledge".

II. RPAPL Section 1304

This new subsection requires a lender or a mortgage loan servicer to give a notice to a borrower at least 90 days before commencing a legal action against the borrower regarding a "high-cost home loan" as defined in Banking Law Section 6-1, a "subprime home loan" as definded in RPAPL Section 1304(e). This notice must be sent by registered or certified mail and first class mail to the last known address of the borrower, and if different, to the residence which is the subject of the mortgage. This notice need only be sent once in a twelve month period to the same borrower in connection with the same loan.

The ninety day period does not apply or shall cease to apply if the borrower has filed an application for the adjustment of debts of the borrower or order for relief from the payment of debts or the borrower no longer occupies the residence as the borrower's principal residence.

The notice must be in at least 14-point type. It must contain a list of at least five United States Department of Housing and Urban Development-approved housing counseling agencies, or other housing counseling agencies as designated by the Division of Housing and Community Renewal that serve the region where the borrower resides.

A copy of the notice follows.

Definitions for RPAPL Section 1304

RPAPL Section 1304 only applies to high-cost home loans as defined in Banking Law Section 6-1, subprime home loans as defined in RPAPL Section 1304(c) or nontraditional home loans as defined in RPAPL Section 1304(e).

High-Cost Home Loan, as defined in Banking Law Section 6-1 is a "home loan" (as defined in Banking Law Section 6(1)(e)) in which the terms of the loan exceed one or more of the thresholds as defined in Banking Law 6(1)(g).

Home Loan: as defined in Banking Law Section 6-1(1)(e) is a loan, including an open-end credit plan, other than a reverse mortgage transaction, in which:

(i) The principal amount of the loan does not exceed the conforming loan size limit for a comparable dwelling as established from time to time by the federal national mortgage association;

(ii) The borrower is a natural person;

(iii) The debt is incurred by the borrower primarily for personal, family, or household purposes;

(iv) The loan is secured by a mortgage or deed of trust on real estate upon which there is located or there is to be located a structure or structures intended principally for occupancy of from one to four families which is or will be occupied by the borrower as the borrower's principal dwelling; and

(v) The property is located in this state.

Subprime Home Loan, as defined under RPAPL Section 1304(c) means a home loan given between January 1, 2003 and September 1, 2008 in which the terms of the loan exceed the "threshold" as defined in RPAPL Section 1304(d). The "threshold" requirements refer to the annual percentage rate charged on a home loan. A sub-prime home loan, as defined in RPAPL Section 1304(c), does not apply to a construction loan, a temporary or bridge loan with a term of 12 months or less or a home equity line of credit.

Non-Traditional Home Loan, as defined under RPAPL Section 1304(e) is a payment option, adjustable rate mortgage on an interest-only loan given between January 1, 2003 and September 1, 2008.

III. RPAPL Section 1302

RPAPL Section 1302 addresses the foreclosure of high-cost home loans as defined by Banking Law Section 6-1. The statute is now amended to include the foreclosure of subprime home loans as defined in Banking Law Section 6-m. Please note this is a different definition of subprime home loans than is used in RPAPL Section 1304. Although it was omitted, we are presuming that non-traditional home loans, as defined in RPAPL Section 1304(e), were intended to be included.

RPAPL Section 1302 provides that in an action to foreclose a high-cost home loan, a subprime home loan, or a non-traditional home loan, the complaint must contain an allegation that, at the time the proceeding is commenced, te plaintiff:

1. is the owner of the subject owner and holder of the subject mortgage and note, or has been delegated authority to commence the mortgage foreclosure action by the owner of the note and mortgage; and

2. has complied with all the provisions of Banking Law Section 595-a, and any rules and regulations promulgated there under, Banking Law Sections 6-1 and 6-m and RPAPL Section 1304.

Te new legislation also provides that it shall be a defense to an action to foreclose a mortgage or a high-cost home-loan or sub-prime loan that the terms of the loan or the actions of the lender violate any provision of Sections 6-1 or 6-m of the Banking Law of RPAPL Section 1304.

When we are issuing a fee policy and/or mortgage policy on a property that was conveyed our of a mortgage foreclosure, which was commenced on or after September 1, 2008, if the property was an owner-occupied one to four family dwelling; if the mortgagor was a natural person; and if the mortgage being foreclosed was a high-cost home loan, subprime home loan or non-traditional home loan, we must raise the following exceptions:

Proof of compliance with RPAPL Section 1302.
Proof of compliance with RPAPL Section 1304.

To omit the exception for RPAPL Section 1302, we will review the complaint to confirm it contains the allegation required by RPAPL Section 1302.

To omit the exception for RPAPL Section 1304, we will need a copy of the notice and receipt for registered or certified mail, and an affidavit of service for the first class mailing. In the alternative, we will accept an affidavit from an officer of the lender that it complied with RPAPL Section 1304. This affidavit cannot be "upon information and belief" or "to the best of his/her knowledge".

If the mortgagor-defendant filed an answer to the complaint and did not include RPAPL Section 1302 as a defense we will omit the exception.

If the mortgagor-defendant filed an answer that contained RPAPL Section 1302 as a defense and the answer was denied, we will not omit the expectation until the time to file a notice of apeal of the judgement of foreclosure and sale has expired.

Notice Required Under RPAPL Section 1303 in Mortgage Foreclosure Actions Commenced On or After September 1, 2008 »

Notice Required Under RPAPL Section 1303 in Mortgage Foreclosure Actions Commenced On or After February 1, 2007 Through August 31, 2008 »

Notice Required Under RPAPL Section 1304 »