A new state law signed in Albany this week will allow homeowners who win foreclosure proceedings to have the lender pay their lawyers’ fees.
Supporters say the law balances what they see as the long unfair practice of lenders writing provisions in mortgage contracts that allow them to collect lawyers’ fees from homeowners when the lender successfully forecloses. Some also say that the new law may give homeowners a better chance in court because they will more easily be able to get representation.
The law comes at a time when big banks are coming under increasing scrutiny for lax handling of mortgage documents.
“We have thousands of foreclosures in New York State where homeowners” have valid defenses, said Assemblyman Rory I. Lancman, a Democrat of Queens who co-sponsored the bill. “But they are unable to assert those defenses because they don’t have a lawyer.”
In some other types of litigation, like employment or civil rights, lawyers’ fees have long been awarded to the winning party, Mr. Lancman said. But foreclosure litigation has been an exception.
“There’s been a major problem as this foreclosure crisis has exploded in getting representation for people who need counsel,” said Andrew Scherer, the former president of Legal Services NYC, an agency that provides counsel to people who cannot afford lawyers in civil cases.
“This is going to provide a pretty reasonable incentive for private attorneys to take on these cases,” Mr. Scherer added.
In general, homeowners are considered to have won foreclosure proceedings when they are able to get a judgment from the court allowing them to keep their homes. With recent revelations that banks have cut corners in documenting mortgages during the boom, lawyers say, chances are better than ever to raise legitimate defenses to get a bank’s foreclosure action thrown out.
Even in cases in which a settlement is reached, Mr. Lancman said, lenders may be more willing to negotiate the lawyers’ fees, knowing that they may have to pay those fees if they lose a judgment.
Michael J. Wrubel, a Florida lawyer who represents homeowners, said he did not believe the new law would substantially tip the scale in favor of homeowners.
“When you take into consideration the amount of money that’s at stake in the grand scheme, it’s just not worth it to them to really be concerned about attorneys’ fees,” Mr. Wrubel said, referring to the lenders. “Every so often, they’ll get hit. The number of cases that that’s going to happen is going to be too rare for it to really make a difference.”
More Judicial Pushback Against Bank Foreclosure Processes: New York Requires “Reasonable” Verification (Updated)
More Judicial Pushback Against Bank Foreclosure Processes: New York Requires “Reasonable” Verification (Updated)
From Bloomberg:
New York state courts will require lawyers in residential foreclosure actions to certify they have taken “reasonable” steps to verify the accuracy of documents submitted to the court.
The new rule, released in a statement by the New York state Unified Court System, is effective immediately.
Chief Judge Jonathan Lippman introduced the requirement in response to disclosures of deficiencies in residential foreclosure filings nationwide, including notarization and “robo-signing” and affidavits that falsely state the signer has knowledge of the facts, the statement said.
“We cannot allow the courts in New York State to stand by idly and be party to what we now know is a deeply flawed process, especially when that process involves basic human needs — such as a family home — during this period of economic crisis,” Lippman said in the statement.
Update 10:50 PM: Hoisted from comments (thanks to helpful readers!), the first from La Caterina:
Here the form of affirmation the new rule REQUIRES to be filed in all new and pending foreclosures. I particularly like the little preamble:
N.B.: During and after August 2010, numerous and widespread insufficiencies in foreclosure filings in various courts around the nation were reported by major mortgage lenders and other authorities. These insufficiencies include: failure of plaintiffs and their counsel to review documents and files to establish standing and other foreclosure requisites; filing of notarized affidavits which falsely attest to such review and to other critical facts in the foreclosure process; and “robosignature” of documents by parties and counsel. The wrongful filing and prosecution of foreclosure proceedings which are discovered to suffer from these defects may be cause for disciplinary and other sanctions upon participating counsel.
* * *[____________], Esq., pursuant to CPLR §2106 and under the penalties of perjury, affirms as follows:
1. I am an attorney at law duly licensed to practice in the state of New York and am affiliated with the Law Firm of __________________, the attorneys of record for Plaintiff in the above-captioned mortgage foreclosure action. As such, I am fully aware of the underlying action, as well as the proceedings had herein.
2. On [date], I communicated with [name and title], a representative of Plaintiff, who informed me that he/she (a) has personally reviewed plaintiff’s documents and records relating to this case; (b) has reviewed the Summons and Complaint, and all other papers filed in this matter in support of foreclosure; and (c) has confirmed both the factual accuracy of these court filings and the accuracy of the notarizations contained therein.
3. Based upon my communication with [person specified in ¶2], as well as upon my own inspection of the papers filed with the Court and other diligent inquiry, I certify that, to the best of my knowledge, information, and belief, the Summons and Complaint and all other documents filed in support of this action for foreclosure are complete and accurate in all relevant respects. I understand my continuing obligation to amend this Affirmation in light of newly discovered facts following its filing.
4. I understand that the Court will rely on this Affirmation in considering the application.
