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Foreclosure Home For Sale Photo: Shutterstock

Effective Dec. 23, 2019, a new statute—RPAPL §1302-a—eliminates waiver of the standing defense in a home loan foreclosure action even though not raised in an answer or pre-answer motion.  Not only does this expose foreclosing lenders to assaults on their foreclosure actions for elusive durations, it raises questions as to the marketability and insurability of titles devolving through foreclosures. With an increased risk of litigation and the resulting inclusion of a title policy exception for challenges to the foreclosure based on lack of standing, foreclosure titles will likely be devalued.

Pre-RPAPL §1302-a

Prior to the amendment, if a borrower were to raise lack of standing as a defense, under RPAPL § 1302 (1)(a), it needed to be made at the time the defendant answered the complaint, otherwise the defense was deemed waived. Another ground upon which a pre-answer motion to dismiss may be made is CPLR § 3211a(3): “the party asserting the cause of action has not legal capacity to sue” (i.e., standing).  In this regard, subsection (e) provides that a motion based upon such ground is waived unless raised either by a motion to dismiss or in a responsive pleading. Therefore, as a matter of statue, the defense of standing is waivable.  This axiom is supported by a remarkable abundance of case law. (US Bank N.A. v. Nelson, 169 A.D.3d 110, 93 N.Y.S.3d 138 (2d Dept. 2019); Wells Fargo Bank v. Halberstam, 166 A.D.3d 710, 87 N.Y.S.3d 328 (2d Dept. 2018).  For much more extensive citation see 2 Bergman On New York Mortgage Foreclosures §19.07 [1], LexisNexis Matthew Bender (rev. 2019)).

The Statute

The language of the statute is relatively brief, but its affect is expansive: § 1302-a.  Defense of lack of standing; not waived.  Notwithstanding the provisions of subdivision (e) of rule thirty–two hundred eleven of the civil practice law and rules, any objection or defense based on plaintiff’s lack of standing in a foreclosure proceeding related to a home loan, as defined in paragraph (a) of subdivision six of section thirteen hundred four of this article, shall not be waived if a defendant fails to raise the objection or defense in a responsive pleading or pre-answer motion to dismiss.  A defendant may not raise an objection or defense of lack of standing following a foreclosure sale, however, unless the judgment of foreclosure and sale was issued upon defendant’s default.

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