The Governor has signed a new law, with immediate effect, regarding the waiver of the lack of standing defense by defendants in a foreclosure action. In brief, the new law provides that the defense of lack of standing in a home loan foreclosure proceeding is no longer waived if not raised, and may be raised by a defaulted defendant after the foreclosure sale. The relevant provisions of Real Property Actions & Proceedings Law provide:
Section 1. The real property actions and proceedings law is amended by adding a new Section 1302-a to read as follows:
§ 1302-a. Defense of lack of standing; not waived. Notwithstanding the provisions of subdivision (e) of rule thirty-two hundred eleven of the civil practice law and rules, any objection or defense based on the plaintiff's lack of standing in a foreclosure proceeding related to a home loan, as defined in paragraph (a) of subdivision six of section thirteen hundred four of this article, shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss. A defendant may not raise an objection or defense of lack of standing following a foreclosure sale, however, unless the judgment of foreclosure and sale was issued upon defendant's default.
§ 2. This act shall take effect immediately.
Section 1304, Subdivision 6 (a):
(1) “Home loan” means a loan, including an open-end credit plan, in which:
i. The borrower is a natural person;
ii. The debt is incurred by the borrower primarily for personal, family, or household purposes;
iii. The loan is secured by a mortgage or deed of trust on real estate improved by a one to four family dwelling, or a condominium unit, in either case, used or occupied, or intended to be used or occupied wholly or partly, as the home or residence of one or more persons and which is or will be occupied by the borrower as the borrower's principal dwelling; and
iv. The property is located in this state.
(2) A home loan shall include a loan secured by a reverse mortgage that meets the requirements of clauses (i) through (iv) of subparagraph one of this paragraph.
When underwriting a sale out of foreclosure the following criteria must be addressed in addition to completion of the Foreclosure Checklist:
- Is this a sale out of a referee or an REO entity?
- Is there a default judgment?
- Is the property a 1-4 family dwelling?
- Is the borrower a natural person?
- Did/does the borrower reside at the property?
- Is the original mortgagee of record different from the named plaintiff?
If all of these questions are answered in the affirmative, or if we are unable to confirm the answers to the foregoing questions, then the following exception must be raised:
Policy will except rights of the defendants in foreclosure action, ------vs.-------, Supreme Court of -----, Index number -----pursuant to RPAPL Section 1302-a.
The exception may be omitted upon proof that the foreclosure did not relate to a home loan, as defined in Section 1304 (6) (a) or the defendants in the action have not defaulted and/or have raised the lack of standing defense in the responsive pleadings or motion to dismiss.
If the foreclosure does relate to a home loan as defined above and the defendant has defaulted the exception may be omitted upon receipt of an affirmation by Plaintiff’s counsel confirming that Plaintiff was the holder of the Note and Mortgage and in possession of the Note and Mortgage at the time of the commencement of the action. Such statement shall be in the form as included herein.
As a reminder, insuring property out of foreclosure is a high-risk transaction and must be submitted for high liability review with a completed Foreclosure Certification as detailed in Stewart’s Bulletin No. 583.
In the event you have any questions regarding the above please contact Stewart Title Legal Department at 212-922-0050 and speak with any Underwriting Counsel.
For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.
Forms: RPAPL 1302-a Affidavit; FC Checklist; FC Certification