On October 22, 2010, Governor David Paterson of New York signed into law the Access to Justice in Lending Act. This law makes attorney-fee provisions in mortgages reciprocal, thereby allowing homeowners (defendants in foreclosure lawsuits) to get attorney's fees if and when they prevail in foreclosure actions.
Currently in New York State, it is standard for a mortgage agreement to contain language giving the lender the right to collect attorneys' fees if it is successful in a foreclosure action. However, there is no requirement that the borrower have the same right to collect if he or she is successful in defending the foreclosure action. This new piece of legislation will benefit homeowners defending a foreclosure in several important respects. First, it will level the playing field for borrowers facing foreclosure by clarifying that the obligation to pay attorneys' fees and costs is mutual. Moreover, it will allow a greater number of borrowers to obtain legal representation. By authorizing borrowers with meritorious defenses to recover attorneys' fees from their lender, it will increase access to legal representation for borrowers who cannot otherwise afford an attorney. Finally, it should create an incentive for lenders to resolve cases earlier in the foreclosure process.
Rick Wagner, the longtime Brooklyn Legal Services Corporation Director of Litigation who passed away last year, was well known for his advocacy on behalf of homeowners. He once wrote, "For far too long, plaintiff banks have benefitted from a huge number of default judgments in foreclosure actions and/or proceedings. Perhaps the single most important tool in the avoidance of default judgments is legal representation...Those of us in the legal services community—including those of us who are presently prohibited from seeking attorneys' fees— can make a sizable contribution toward leveling the foreclosure playing field by establishing this right for homeowners and, hopefully, generating a private foreclosure defense bar fueled by a substantial revenue stream in the form of recoverable attorneys fees."
New York State Assemblyman Rory Lancman (D-Queens) and Senate Deputy Majority Leader Jeff Klein (D-Bronx) announce passage of the “Access to Justice in Lending Act” by both houses of the legislature. Almost all mortgage agreements require borrowers to pay attorneys fees to lenders who foreclose on their mortgage, but borrowers are not given the same contractual right. As a result, few homeowners are able to retain attorneys in foreclosure proceedings – most default or try to represent themselves. Many homeowners have valid defenses to foreclosure and could save their homes with adequate legal representation. To add insult to injury, these homeowners then have the lenders' attorneys fees tacked on to the overall amount they owe the bank, pushing desperate homeowners further into debt. This new law creates a reciprocal right to attorneys’ fees for borrowers who successfully defend against foreclosure where the mortgage agreement gives such a right only to the lender.
“We cannot let people with valid defenses to foreclosure lose their homes merely for lack of legal representation, particularly when the mortgage agreement written by the bank tilts the legal playing field in the bank’s favor,” said Assemblyman Lancman (D-Queens). “If homeowners had the money to pay for a lawyer to represent them in foreclosure, they probably wouldn’t be in foreclosure in the first place. This legislation will allow lawyers to take on meritorious foreclosure cases with the fair and reasonable expectation that they will be compensated if they succeed. We know that many of the families that we see being foreclosed upon today entered into their mortgages due to predatory lending. These are the very people who should have the best defenses to foreclosure, but lose their homes simply because they could not secure counsel to defend them. Today, we have put homeowners on even playing ground with the lenders that are foreclosing on them, and given them a fighting chance to stay in their homes," said State Senator and Deputy Majority Leader Jeffrey D. Klein (D-Bronx/Westchester).
On October 22, 2010, in response to the robo-signing crisis affecting the nation, New York's office of Court Administration issued a new rule requiring that in all residential foreclosure actions plaintiff's attorneys file an affirmation certifying that counsel has taken reasonable steps to verify the accuracy of the documents filed. In all new cases, the affirmation must accompany the Request for Judicial Intervention. In pending cases, the affirmation must be submitted with either the proposed order of reference or the proposed judgment of foreclosure. In cases where a foreclosure judgment has been entered but the property has not yet been sold at auction, the affirmation must be submitted to the court referee and a copy filed with the court five business days before the scheduled auction. Plaintiff's counsel must also file an amended version of the affirmation if new facts emerge after the initial filing.
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