By now, most servicers are fully familiar with New York’s Statute of Limitations and the nuance that it only begins to run on each installment when it becomes due unless accelerated. (See my article about the Statute of Limitations).
In our last article, we discussed the different types of short sales available and some of the details of the HAFA short sale program, in particular. In this article, we discuss some of the requirements and provisions of the Fannie Mae and Freddie Mac short sales.
My previous article regarding New York's Statute of Limitations (CPLR 213) described how New York provides an affirmative defense to actions based upon contractual obligations that accrued more than six (6) years ago.
Failure to strictly comply with two of New York’s recently enacted consumer protection statutes affecting residential foreclosures, RPAPL 1304 and RPAPL 1306, which require a 90-day notice to be sent to the borrower, and specific information contained therein to be filed with the New York State Department of Finance within three days thereafter, have recently been reviewed and interpreted by the New York courts.
When borrowers obtain a mortgage loan, they sign a Note, promising to repay the loan, and a Mortgage, that provides for the property to be sold at a public auction if they default, so the loan may be repaid from the proceeds of the sale. Sometimes, however, the property is sold at the auction for less than the balance due to the lender, resulting in a deficiency.
When a mortgage is foreclosed, not only are the rights of the owners of the property extinguished, but all rights of third parties who have subordinate liens or other interests are extinguished, as well as the property, which will be sold at the foreclosure sale “free and clear” of any such interests.
Due to the housing crisis of the past 5 years, efforts have been made to give homeowners every conceivable chance to avoid the foreclosures of their properties, so that they are not forced out of their homes. While well-intentioned, some of these provisions have resulted in unintended consequences. One such impact has been the rise of “zombie foreclosures.”
Most Default Mortgage Servicers consistently refuse to accept a deed in lieu of foreclosure from a defaulting homeowner unless there are no subordinate liens and unless they have obtained a financial statement from the homeowner to ensure he/she does not have adequate resources to repay the loan from their other assets.