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Assembly Bill 10553 dated May 29, 2020 proposes a ban on foreclosure actions for at least a year and creates enormous problems and confusion for mortgage holders. The proposed statute has many unfortunate provisions and is also not clearly written as to some aspects.

Perhaps the best way to parse it, make it understandable and reveal its dangers is to first recite the categories of its provisions.

Which Mortgage Holders Are Covered?

Should the law pass, it will effect state regulated servicers, banks and/or credit unions. While it therefore appears not to constrain private lenders or entities not licensed in these categories in New York, it nonetheless has a broad impact.

What Properties Are Excepted?

Foreclosures can proceed or continue as against vacant or abandoned property. (While this is welcome, only a minority of properties fall into this category and it is apparent that the Legislature is happy to have lenders clean up these properties for local municipalities.)

What is Barred?

Initiation of any “judicial process,” moving for a foreclosure judgment or executing a foreclosure related eviction or foreclosure sale of real property.

Duration of Ban

The bar against proceeding is for 12 months after the date that the covered period ends. The covered period in turn is defined as being from the date the governor declared the state of disaster on March 7, 2020 until 365 days after the date the last region and/or county of New York State entered into Phase 3 of the governor’s re-open plan.

Continuing Obligations Upon Mortgage Holders

Even though mortgage holders suffer a moratorium in enforcing their rights, the statute still obliges them to take certain steps. One is that the mortgagee is compelled to send the borrower a notice of default in accord with the terms of the mortgage loan which must in turn include a list of state certified housing counseling agencies and a list of state funded legal services where the property is located. This is specifically stated not to be a substitute for the 90-day notice required by RPAPL 1304.

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