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Residential Foreclosure Update
When is a Hardship Declaration required?
Only 2 exceptions are specifically set forth in the new law:
- If the property is vacant and abandoned, AND registered on the New York State Vacant Property registration before March 7, 2020, then a Hardship Declaration is not required.
- The law does not apply to "any mortgage loans made, insured, purchased or securitized by a corporate governmental agency of the state constituted as a political subdivision and public benefit corporation…."
Based on the foregoing, if one of these exceptions does not apply, we recommend taking a conservative approach and send the Hardship Declaration.
Pre-Referral
For any cases where the 90-Day Notice has not been mailed, the new law requires that the Hardship Declaration must be sent with the 90-Day Notice that is required under Real Property Action and Proceedings Law 1304. Included with this Alert is a copy of the most recent versions of all versions of the Hardship Declaration that have been translated by the Court to date.
We understand that this presents a conflict with the wording of Real Property Actions and Proceedings Law 1304 that requires the 90-Day Notice to be mailed in a separate envelope. However, as this is the most recent law in effect until May 1, 2020, we recommend strict compliance with this instruction to mail the two documents together. From a litigation standpoint, we believe the court will be more understanding to this because the current law is in response to COVID.
How should a lender/servicer handle loans where the 90-Day Notice was mailed prior to 12/28/2020?
The law itself does not state that it is retroactive. Therefore, it is reasonable to conclude that if the 90-Day Notice was already mailed, and a new notice is not needed, then the Hardship Declaration can be sent on its own, but in a manner consistent with the mailing requirements specified by RPAPL 1304 – regular and certified mail, to all borrowers, and to the property address and last known address.
If you have a referred a file to our office that has not yet been commenced, we recommend that our office handle mailing the Hardship Declaration and tracking its return.
Commencing a First Legal Action
If applicable, the law requires that at commencement, an Affidavit attesting that a Hardship Declaration has not been received and that a Hardship Declaration is served in accordance with Real Property Action and Proceeding Law 1303.
It is our recommendation that you create a process to communicate with counsel to confirm that the Hardship Declaration was mailed, including proof of mailings. Woods Oviatt Gilman LLP is in the position where we can prepare these Affidavits and attest to the mailings and compliance with Real Property Actions and Proceedings Law 1303.
Pending Actions
Under the new law, the courts are tasked with sending the Hardship Declarations on all files. It is important to remember that the courts typically are not aware of the occupancy status of the property, and we anticipate that the courts will be mailing out Hardship Declarations on all files.
However, we are already seeing that the courts are not equipped to handle the volume, and are receiving directives to assist the court by mailing the Hardship Declaration.
Additionally, an action does not come to the attention of the court until after a Request for Judicial Intervention. Our office has obtained clarification from the Office of Court Administration that, in those instances, when the Request for Judicial Intervention is filed, the court, at that time, will send the Hardship Declaration with the notice of settlement conference. This could cause a significant delay as that work cannot occur until, at a minimum, February 26, 2020 when the current 60 day moratorium expires. As such, it is our recommendation to proceed with mailing these Hardship Declarations before that time.
Does a Hardship Declaration have to be filed with the court?
Yes, upon receipt, you will need to provide our office with a copy of the Hardship Declaration so that we can file it with the court.
What happens if a Hardship Declaration is returned by the Borrower?
If returned, any action, commencing or proceeding with an active foreclosure, is stayed until May 1, 2020.
Litigation Exposure
It is important to consider potential future litigation when deciding whether as the lender/servicer, to mail the Hardship Declaration. In the event of a future challenge, if the court is the only entity sending the Hardship Declaration, there will be no one at the lender/servicer or law firm that will be able to attest to personal knowledge of the mailing. As such, it is our recommendation that counsel send the Hardship Declaration on pending cases and track receipt of same.
How can Woods Oviatt Gilman LLP assist you?
Our office is equipped to prepare and send the Hardship Declarations on files in our pipeline or pending referral. Please do not hesitate to reach out to the below contact to discuss this further.
For more information contact:
Attorney: Natalie A. Grigg, Esq.
Phone: 585-445-2610
Email: ngrigg@woodsdefaultservices.com
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