With the onslaught of an unprecedented number of residential and commercial foreclosure actions filed in the past few years, state courts both in New York and elsewhere have struggled to keep up with the daily flow of newly filed actions. As a result, lenders and property owners alike have begun to consider alternatives to state courts as the venue for their cases. This article addresses both the availability and the viability of the federal courts as an alternative to state courts for foreclosure actions.
Availability of Federal Court
The first issue that lenders must address in considering whether to commence a foreclosure action in federal court, and borrowers must consider in determining whether to remove a foreclosure action filed in state court to a federal court, is whether there exists a basis for federal subject matter jurisdiction. As foreclosure actions usually involve solely state law questions, the only possible basis for federal jurisdiction is usually diversity of citizenship. Assuming that the foreclosure involves a principal indebtedness of more than $75,000, the diversity analysis will hinge on whether there is complete diversity of citizenship between the parties.
