Comprehensive New York foreclosure legislation provides additional critical protections for New York State homeowners, tenants and neighborhoods in the wake of the ongoing foreclosure crisis.

The legislation builds upon the 2008 landmark sub-prime lending reform law protecting homeowners currently at risk of foreclosure and minimizing the negative impacts that foreclosures have on communities. It protects homeowners in Buffalo, Rochester, Niagara Falls and throughout New York state by providing mandatory settlement conferences and protects tenants from premature evictions.

It also safeguards New York neighborhoods from the decay caused by foreclosure by reducing the erosion of area property values and by preventing vacant homes from becoming sites of criminal activity. This legislation expands the reforms in several ways to protect New York homeowners, tenants and neighborhoods. The new law:

• Expands the 90-day pre-foreclosure notice currently sent for subprime loans to include all New York home loans, including loans on cooperative apartments.
• Requires lenders who serve a 90-day notice on a New York homeowner to make, within three days of that service, a regulatory filing with the New York Banking Department with information to allow the Banking Department and the Division of Housing and Community Renewal to provide targeted assistance to distressed homeowners during the pre-foreclosure period and closely monitor foreclosure statistics.
• Expands the scope of early mandatory settlement conferences to include borrowers of all New York home loans and not just borrowers with subprime loans and requires both plaintiffs and defendants to negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible.
• Establishes protections for New York tenants in foreclosed properties by requiring that they receive written notification of the foreclosure action and the change in ownership of the property, and be permitted to remain in their home for the remainder of their lease term or 90 days, whichever is longer, provided that such lease requires the payment of rent that is not substantially less than fair market rent.
• Requires plaintiffs in a New York foreclosure action who obtain a judgment of foreclosure and sale to maintain the foreclosed property so that it does not pose a blight or nuisance, or create a blighting influence on neighboring properties. If the property is occupied by a tenant, the plaintiff must also maintain the property in a safe and habitable condition.
• Prevents brokers who perform distressed property consulting services from accepting upfront fees.
• Permits the court to award reasonable attorneys’ fees to a prevailing borrower in a foreclosure action.

Residential tenants in New York and most other states used to have their leases extinguished at foreclosure and could be evicted by the new owners. The Protecting Tenants at Foreclosure Act (PTFA) provides residential tenants with new  protections when landlords lose rental units to foreclosure of federally related mortgages.

Tenants living in foreclosed rental units must be given a minimum 90-day pre-eviction notice after the buyer takes legal title from the foreclosure referee.

PTFA protects tenants:

(a)  with  month-to-month leases;
(b) with leases terminable at-will;
(c) without formal leases but verifiable rent payment history, and;
(d) with  Section 8 leases and  subsidy contracts

However, if the tenant has more than 90 days remaining  on the lease, the tenant must be allowed to stay until the lease ends, unless the buyer will occupy the property as a primary residence.

Protections are limited to “bona fide” leases in which:

1) the tenant is not the mortgagor, the mortgagor’s child, spouse, or parent;
2) the lease is the result of an arms-length transaction, and;
3) the rent is not substantially less than market rent, unless reduced by a subsidy.

Federally related mortgages are those:

(a) insured, regulated, guaranteed, supplemented or assisted by the federal government or;
(b) intended to be sold to the Federal National Mortgage Association, the Government National Mortgage Association or  the Federal Home Loan Mortgage Corporation.