COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020
On December 28, 2020, Governor Andrew Cuomo signed into law the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 (the “EEFPA”). While much coverage has been given in the press to the EEFPA’s eviction rule changes, the law also has dramatic effects on the New York foreclosure landscape which took effect upon the signing of the law. In conjunction with the EEFPA, on December 31, 2020, Justice Lawrence Marks, chief administrative judge of the courts of New York, issued an accompanying order and memoranda on how the courts intend on implementing the EEFPA.
With regards to foreclosure actions, the act affects foreclosure actions at all stages of litigation and in some cases places new requirements on lenders seeking to foreclose on New York residential mortgages. The EEFPA’s foreclosure provisions are centered around a new COVID-19 Hardship Affidavit (the “Affidavit”), the language of which is included in the EEFPA’s text. Currently the Affidavit has been provided in English and Spanish, but the EEFPA has required translation into the 6 most commonly spoken languages in New York City after English and Spanish. According to the Court’s memoranda, other translations will be made available “as practicable”.
In terms of applicability, the EEFPA’s requirements applies to all foreclosure actions involving a mortgage relating to real property if the owner or mortgagor is a natural person and owns ten or fewer dwelling units. Notably, the requirements do not apply to vacant and abandoned properties which are defined as properties that were first listed with the New York vacant property electronic registry before March 7, 2020. The EEFPA also does not affect mortgages “made insured, purchased or securitized by a corporate governmental agency of the state as a political subdivision and public benefit corporation.”
Although technically there is no moratorium on filing new foreclosure actions, the EEFPA now requires pre-foreclosure notices under Real Estate Property Actions and Proceedings Law (“RPAPL”) § 1303 and § 1304 to include the Affidavit before the filing of a foreclosure action. The Affidavit must be in the borrower’s “primary language” and if that is not provided by the Courts, then it is the lender’s responsibility to obtain a suitable transaction. In the event a borrower returns the Affidavit to the lender or the lender’s agent, no foreclosure action may be initiated until May 1, 2021.
Additionally, the filing of a foreclosure Complaint must now include an affidavit of service of the Affidavit as well as an affidavit from the lender or lender’s agent stating that no executed Affidavit has been received from the borrower. Further “at the earliest possible opportunity” following a new filing, the Court is required to seek, on the record or in writing, that the borrower received the Affidavit and has not submitted an executed Affidavit. If the Court finds the borrower did not receive the Affidavit, the Court must stay proceedings for no less than 10 business days to allow the borrower to consider execution of the Affidavit.
PENDING FORECLOSURES WITHOUT JUDGMENT
As for pending foreclosure matters, all pending foreclosure matters, including those filed before March 7, 2020 and those filed by January 27, 2021 are stayed for sixty (60) days. During the sixty (60) day stay, the Courts are required to mail borrowers the Affidavit in English, and, “to the extent practicable”, the borrower’s primary language if other than English. If the borrower provides an executed Affidavit to the lender or the Court, the pending foreclosure matter is stayed until May 1, 2021.
PENDING FORECLOSURES WITH JUDGMENT
For foreclosure actions in which judgment has been entered but no sale has taken place, including actions filed before March 7, 2020, all such proceedings are stayed “at least until the Court has held a status conference.” There is no stated purpose or goal of the conferences, but if a borrower returns an executed Affidavit to the Court or the lender, the sale is stayed until May 1, 2021.
Although the administrative order and memoranda from the Courts provided some clarification as to the implementation of the EEFPA, there are still many questions left unanswered. Notably, it is unclear how lenders, or even the Court, are expected to know the borrower’s primary language if it is not English. Furthermore, for pending foreclosure matters that have not had a request for judicial intervention filed, how will the Courts know notices are to be sent or where to send them considering service has not been completed? Are all pre-foreclosure notices now improper by virtue of their failure to include the Affidavit, even though it was not in existence when the notices were mailed? It is also unclear why the bill requires a conference for all matters at judgment when the Court’s previous Administrative Order 157/20 already mandated conferences be held to determine the effect COVID-19 had on borrowers. Requiring yet another conference when most pending foreclosure matters have already had one if not two COVID-19 conferences seems redundant.
Lastly, although the above requirements are set to expire on May 1, 2021, assuming this deadline is not extended, it is curious that the Legislature chose such an expansive range of foreclosure matters. Unlike the prior Administrative Orders issued by the Courts, which were largely targeted at individuals who defaulted around the time of the COVID-19 crisis, the EEFPA’s requirements effect all pending actions. Therefore, a property that has been under foreclosure since 2015 in which the borrower defaulted in 2014 is treated the same as a party whose default occurred in 2020 as a direct result of COVID-19 related unemployment.
Click here to view the text of the EEFPA. The accompanying administrative order can be found here.
Setting these issues aside, lenders are recommended to review the terms of the EEFPA to ensure their compliance with the same, especially as it relates to pre-foreclosure notices. Our office will continue to monitor development in the implementation of the EEFPA. Any questions relating to the EEFPA or general questions related to New York foreclosures, please contact Eric P. Kelner or Keith M. Salmeri.
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