The New York State Senate is deliberating over corrective legislation designed to expedite the foreclosure proceedings process and protect New York homeowners from lenders who intentionally prolong the process.
The proposed Certificate of Merit bill (A. 5582) and the Foreclosure Fraud Prevention Act (A.7395), already passed by the New York State Assembly last week, would help protect homeowners from lenders who are careless, irresponsible, or commit fraud during foreclosure proceedings.
According to insiders, court delays and subsequent foreclosure proceeding backlogs, often referred to as the “shadow docket,” have become a major burden on both homeowners and the judicial system. The legislative fix “will require banks to file the necessary paperwork, which ultimately triggers the settlement conference, simultaneously with the filing of any foreclosure action.”
Legislators expect these changes to the law will help New York homeowners “get their day in court” and ensure court documents in foreclosure filings are accurate.
According to chair of the assembly judiciary committee, Helene Weinstein, who sponsored the bill, the new legislation will help eliminate the so-called shadow docket in the courts by assisting homeowners when lenders file for foreclosure and then refuse to bring the case before a judge leaving them “in legal limbo.”
Proposed by the Office of the Attorney General and the Office of Court Administration, the Certificate of Merit bill is expected to help homeowners avoid foreclosure and expedite court-supervised mediation sessions between the homeowner and the lender.
The Foreclosure Fraud Prevention Act imposes criminal penalties on residential mortgage lenders, servicers and their agents who prepare, execute or file false foreclosure documents, as well as on "high managerial agents" who are aware of such conduct by their employees but fail to stop it.
It would impose both misdemeanor and felony-level penalties for lenders and servicers who “knowingly engage in fraudulent residential mortgage foreclosure practices.”
“Wrongful foreclosure and the growing shadow docket are preventing thousands of families from even getting a chance to keep their homes,” said
Some consumer advocates also see the proposed legislation as a positive step toward reforming foreclosure proceedings.
Among others, co-director of the Neighborhood Economic Development Agency, Josh Zinner, endorsed the bill, which in his view, will ensure “lenders don’t file foreclosures based on invalid information,” and consequently speed up the time it takes homeowners to get to court-supervised mediation or get loan modifications.
Furthermore, said Beth Finkel, state director for AARP in New York, it will stop some banks and their lawyers “who are exploiting administrative loopholes” to deny homeowners a chance at affordable settlements as they continue to charge interest and fees.
“This bill addresses a real problem for homeowners who are stuck in legal limbo because lenders aren’t filing the required paperwork,” said Kristen Brown Lilley, director of policy advocacy at the Empire Justice Center.
