New York changes its disgraceful foreclosure law - to a more disgraceful law

In many foreclosure cases where I represented homeowners, I pointed out to the court that it is unfair to indigent homeowners to provide to them assigned counsel after a foreclosure conference when they already defaulted by failing to file an answer (which they obviously did not know how to do without counsel), and without giving them a right to file a late answer.

My motions on that topic were rejected by courts claiming there is no unfairness or unconstitutionality involved in such a situation.

Yet, the lack of comprehension of homeowners who had no legal education, as to how one needs to respond to service of a foreclosure lawsuit, until it was too late (21 days after personal service of a complaint) resulted in innumerable foreclosures across New York State.

Imagine a criminal defense attorney being assigned to a criminal defendant after half of the proceedings is over and after all rights of the criminal defendant are forfeited - that's what was happening in foreclosure proceedings in New York.

Yet, now, finally, New York amended its disgraceful legislation - after, I wonder, how many people lost their homes because they could not afford an attorney and because an attorney was assigned to them only when it was too late.

Unfortunately, the amendment may be even worse than having no amendment at all, since it will create in people a false illusion of trustworthiness of the court as the defendant homeowner's legal advisor, and can lead to even more foreclosures because people will be filing only answers, and no affirmative defenses.

As of December 20, 2016 the following changes come into law, as stated in a recent decision of Westchester Supreme Court that, following the spirit of the legislation that has yet to come into effect, allowed the homeowners to file a late answer, after a foreclosure settlement:

"Effective December 20, 2016 CPLR § 3408 Mandatory settlement conference in residential foreclosure, will be amended to add the following relevant provisions:

(l) At the first settlement conference held pursuant to this section, if the defendant has not filed an answer or made a pre-answer motion to dismiss, the court shall:


1. advise the defendant of the requirement to answer the complaint;


2. explain what is required to answer a complaint in court;


3. advise that if an answer is not interposed the ability to contest the foreclosure action and assert defenses may be lost; and


4. provide information about available resources for foreclosure prevention assistance."

The legislation, of course, did one good thing and two VERY bad things.

The good thing is that finally homeowners will have a right to file a late answer after the foreclosure conference.

The bad thing is that the legislation puts the judge in the position of a legal advisor to litigants, even though judges of New York Supreme Court, by the New York Constitution, may not practice law.

The problematic thing is that there are over 40 so-called "affirmative defenses" that, depending on the circumstances of the case, may be raised, and, if a certain affirmative defense applies, it must be raised at the same time as the Answer, otherwise it will be waived and lost.

One of the most significant of such affirmative defenses in foreclosure proceedings is the foreclosing plaintiff's lack of capacity to sue.

Banks are notorious in having mortgages obtained through agents, without proper formalities, then improperly securitizing already defaulted mortgages and assigning them to security trusts after banks are already went bankrupt, and such chains of assignments usually have at least one, often more, flaws, allowing the homeowner to have the foreclosure action dismissed.

The new version of CPLR 3408 requires the judge to advise homeowners only of their right to file an answer, and "explain what is required to answer a complaint", but I doubt that any judge will give a comprehensive legal advice to homeowners, one of two adversarial parties in litigation in front of that judge, as to what affirmative defenses need to be raised in that answer, what is the significance of raising such defenses and what can be lost if those defenses are not raised in the answer.

Yet, most likely, homeowners will be now lulled into an illusion that since the judge advised them on the law, they will be safe following the judge's advice - and will be filing only an answer without affirmative defenses, thus forfeiting the most significant affirmative defense of the foreclosing plaintiff's capacity to sue.   

As it appears, the new CPLR 3408 is a half-measure and a sellout of homeowners - again - which also puts courts in the awkward position of advisors-adjudicators, a disqualifying position.