Mortgages and Mortgage Foreclosures
Mortgage Foreclosures/Licensed “Debt Collection Agency”
Under Section 20-490 (“License required”) of New York City’s Administrative Code (“Code”), “[i]t shall be unlawful for any person to act as a debt collection agency without first having obtained a license…” Under Code Section 20-489 (“Definitions”), a “debt collection agency” is defined, in part, as “a person engaged in business the principal purpose of which is to regularly collect or attempt to collected debts owed or due or asserted to be owed or due to another…”
In an action to foreclose a mortgage, the Defendant raised, as an affirmative defense, the Plaintiff’s failure to obtain a license to act as a “debt collection agency.” The Appellate Division, Second Department, in affirming the Order of the Supreme Court, Queens County, which had entered a judgment of foreclosure and sale, held that the Plaintiff was not required to be so licensed to foreclose on the mortgage. According to the Appellate Division,
“‘[a]n action to foreclose a mortgage is not an action to recover the mortgage debt from the mortgagor personally, but to collect it out of the land by enforcing the lien of the mortgage’ [citations omitted]. Thus, the foreclosure action is properly characterized as an action to enforce a security interest in property, rather than to collect money directly from a debtor [citations omitted]. In any case, to the extent a mortgage foreclosure constitutes debt collection[citation omitted], the plaintiff was not a ‘debt collection agency’ (Administrative Code Section 20-489[a])…Since the plaintiff is the owner of the subject note, its foreclosure action does not constitute an ‘attempt to collect debts owed or due or asserted to be owed or due to another’ (id. [emphasis added]; [citations omitted]).”
Citibank, N.A. v. Yanling Wu, 2021 NY Slip Op 04902, decided September 1, 2021, is posted at http://www.nycourts.gov/reporter/3dseries/2021/2021_04902.htm. Reprinted with permission from Current Developments dated September 27, 2021, issued by First American Title Insurance Company
Mortgage Foreclosures/Necessary Parties
The Supreme Court, Richmond County, denied the foreclosing Plaintiff’s motion to vacate the stay imposed on the death of the mortgagor, Janice Miglino (“Miglio” in the caption for the action). The Plaintiff sought to have the caption of the action amended to substitute as Defendants the decedent’s known and unknown heirs at law. The Court ordered that the stay remain in effect until the appointment of a representative for the mortgagor’s Estate. The Appellate Division, Second Department, reversed and granted the Plaintiff’s
motion. According to the Appellate Division,
“…the plaintiff submitted evidence establishing that Miglino died intestate. Accordingly, since the plaintiff does not seek a deficiency judgment, Miglino’s death did not affect the merits of the action, and the Supreme Court should have granted the plaintiff’s motion, inter alia, to vacate the automatic stay of the action imposed by the death of Miglino and to amend the caption to substitute for Miglino her known and unknown heirs at law [citation omitted].”
Wells Fargo Bank, N.A. v. Miglio, 2021 NY Slip Op 04780, decided August 25, 2021, is posted at http://www.nycourts.gov/reporter/3dseries/2021/2021_04780.htm. Reprinted with permission from Current Developments dated September 27, 2021, issued by First American Title Insurance Company
Mortgage Foreclosures/Standing
At a special meeting of shareholders, fifty percent of the Plaintiff’s shareholders authorized the corporation to foreclose on a defaulted mortgage it held. The shareholder holding the remaining interest objected and did not attend the meeting. The Appellate Division, First Department, affirming the granting of the Plaintiff’s motion for summary judgment and the denial of the Defendants’ motion to dismiss the complaint by the Supreme Court, New York County, ruled that the Plaintiff had standing to foreclose the mortgage. The Supreme Court correctly determined that a ‘fifty-percent shareholder causing the entity to forego recovery on its only remaining asset goes against every principle of equity.’” True Gate Holding, Ltd. V. Baroukhian, 2021 NY Slip Op 04588, decided July 29, 2021, is posted at
https://www.nycourts.gov/reporter/3dseries/2021/2021_04588.htm. Reprinted with permission from Current Developments dated September 27, 2021, issued by First American Title Insurance Company
In CitiMortgage, Inc. v. Goldberg, the Appellate Division, Second Department, held in part that the assignee of a consolidated mortgage lacked standing to foreclose because the copy of the consolidated note submitted with the pleadings lacked either an endorsement or an allonge and the mortgage assignment “did not purport to also assign the consolidated note.” Therefore, the Supreme Court, Nassau County, should have denied the Plaintiff’s motion for summary judgment. However, the Supreme Court properly denied the Defendant-mortgagor’s cross-motion for summary judgment; the Defendant “failed to establish, prima facie, that the plaintiff lacked standing [citation omitted].” The decision, 2021 NY Slip Op 04697, decided August 18, 2021, is posted at https://www.nycourts.gov/reporter/3dseries/2021/2021_04697.htm. Reprinted with permission from Current Developments dated September 27, 2021, issued by First American Title Insurance Company
Mortgages/Erroneous Satisfaction
In an action to foreclose the first executed and recorded (but satisfied of record) mortgage on the Defendant’s property, the Supreme Court, Suffolk County, denied the Defendant’s motion to vacate the judgment of foreclosure and to enjoin the scheduled sale. The Court granted the Plaintiff’s cross-motion to expunge the satisfaction; the Plaintiff claimed that the satisfaction should have been recorded against a second mortgage it held on the same property. Although the debt secured by the first mortgage was not paid in full, and it was not alleged that the mortgagor relied on the recorded satisfaction, the Appellate Division, Second Department, ruled that the motion to expunge the mortgage should have been denied. The affidavit of an officer of the Plaintiff’s loan servicer, averring that she was familiar with the Plaintiff’s business records and asserting that the satisfaction was prepared in error. However, the affiant’s “assertions as to the contents of those [business] records were inadmissible since the records themselves were not submitted with her affidavit [citations omitted]. Therefore, her averments were inadmissible hearsay…” U.S. Bank National Association v. Kandra, 2021 NY Slip Op 04679, decided August 11, 2021, is posted at http://www.nycourts.gov/reporter/3dseries/2021/2021_04679.htm. Reprinted with permission from Current Developments dated September 27, 2021, issued by First American Title Insurance Company
Usury/Mortgage Foreclosure
The Defendant in an action to foreclose a mortgage claimed that her payment of a mortgage broker’s commission, a title insurance charge and a fee paid to her attorney at closing rendered the loan usurious. The Supreme Court, Suffolk County, denied the Defendant’s motion for summary judgment and the Appellate Division, Second Department, affirmed that ruling. According to the Appellate Division,
“[i]f itemized in writing to the borrower, reasonable fees, charges and costs for, among other things, title insurance and legal services are not considered interest on a loan secured by a one-or-two family owner-occupied residence [citation omitted]…[The Defendant] failed to establish, as a matter of law, that the plaintiff entered into the transaction with the usurious intent necessary to support a finding of usury [citation omitted].” Zanfini v. Chandler, 2021 NY Slip Op 04681, decided August 11, 2021, is posted at https://www.nycourts.gov/reporter/3dseries/2021/2021_04681.htm. Reprinted with permission from Current Developments dated September 27, 2021, issued by First American Title Insurance Company
Pandemic/Evictions and Mortgage Foreclosures
Chapter 417 of the Laws of 2021 was signed into law on September 2, 2021. As stated in Governor Hochul’s Press Release issued September 2, this legislation provides
“a new moratorium on COVID-related residential and commercial evictions for New York State which is in effect until January 15, 2022. Under the new law, all protections under the Tenant Safe Harbor Act[Chapter 127 of the Laws of 2020] for residential tenants who are suffering financial hardship as a result of the pandemic will remain in place, along with new protections on commercial evictions…
“The legislation places a moratorium on residential foreclosure proceedings so that homeowners and small landlords who own 10 or fewer residential dwellings can file hardship declarations with their mortgage lender, other foreclosing party, or a court that would prevent foreclosure.
“The legislation’s moratorium on commercial evictions and commercial foreclosure proceedings apply to small businesses with 100 or fewer employees that demonstrate a financial hardship…”
On September 9, 2021, to implement Chapter 147, the Chief Administrative Judge of the Courts of New York State issued Administrative Order 262/21 setting forth, effective immediately, “procedures and regulations [which] shall apply to the conduct of foreclosure matters before the New York State Unified Court System.”
Chapter 417 (Senate Bill S50001/Assembly Bill A40001), the Governor’s Press Release, and AO 262/21 can be obtained at:
Bill Search and Legislative Information | New York State Assembly (https://nyassembly.gov/leg/?default_fld=&leg_video=&bn=S50001&term=2021&Summary=Y&Text=Y), Governor Hochul Signs New Moratorium on COVID-related Residential and Commercial Evictions into Law, Effective Through January 15, 2022 https://www.governor.ny.gov/news/governor-hochul-signs-new-moratorium-covid-related-residential-and-commercial-evictions-law) and AO262.pdf
(https://www.nycourts.gov/whatsnew/pdf/AO262.pdf). Reprinted with permission from Current Developments dated September 27, 2021, issued by First American Title Insurance Company
Prepared/Contributed by:
Jean Partridge and Jason Bergman, Benchmark Title Agency, LLC