MORTGAGE FORECLOSURE - WHO IS BEHIND THE LEGAL FEES OF THE HOMEOWNER DEFENSES?

We all know the high cost of litigation.

In a recent case, BANK OF NEW YORK MELLON, ETC., Appellant, v. ALICE J. DIEUDONNE, Respondent, ET AL., Defendants. 2017-08956, Index No. 518577/16. Appellate Division of the Supreme Court of New York, Second Department. Decided March 13, 2019, the court held that the statute of limitations barred foreclosure because, in a prior action, the mortgage was accelerated by the filing of a complaint to foreclose the mortgage with an election to accelerate, even though a provision in the mortgage preserves the borrower’s right to make installment payments rather than the full debt. 

A review on e file reveals this was litigated vigorously. After service was a motion to dismiss by homeowner, involving memorandums of laws and affidavits, opposition papers, reply papers, a motion for leave to re argue, etc. all the way up to the appeal. The debt in issue appears to have been about 250G as of 2008 so there is 11 years of interest and other fees to be added. According to Trulia, etc., the house has a value of about 500G. My compliments to the homeowner's counsel who, reviewing the papers submitted, did an excellent job.

Through my many years of experience at the mortgage foreclosure clinic at the Nassau County Bar Association, most homeowners cannot afford legal fees for defense. If you cannot pay your mortgage, usually it is because income has dropped substantially so that the home is no longer affordable. And if you cannot pay your mortgage, can you afford legal fees? Many times in reading these cases on these successful homeowner cases on middle class homes, I wonder how the homeowner can afford such a litigation if they cannot afford the mortgage.

An article came out last week, "Mortgage Acceleration and Statute of Limitations Developments in the Second Department" by Adam M. Swanson and Jessie D. Bonaros, NYLJ, March 20, 2019. And there is a statement, of which I cannot find the evidence behind it, but I note as follows:

"Courts are giving out free houses but not to homeowners—to real estate speculators who are paying pennies to the homeowner for the right to fight foreclosure....Although it appears that these decisions benefit homeowners, all the benefits are going to real estate speculators while these decisions chill mortgage lending in New York."