Lorman Distinguished Faculty Member

Articles by Peter T. Roach

Located in Syosset, NY, Peter T. Roach & Associates, P.C. has the most experienced professionals in real estate, litigation, foreclosure, and bankruptcy law. Our vast knowledge and experience allow us to effectively take on any case. We do everything we can to better serve our clients and exceed their expectations! To learn more about our practice, please read some interesting articles about New York debt collection and real estate law.


Dual Tracking Prohibited When “Complete” Loss Mitigation Application  Received

While Borrowers have always had the ability to request Loss Mitigation as a way of resolving a foreclosure, both the public awareness and the legal requirements for Loss Mitigation have dramatically increased since the foreclosure crisis began in 2008.

Historically, Lenders would continue prosecuting a foreclosure,  notwithstanding that the Borrower had submitted an application and “package” of documents for them to review in order to resolve the foreclosure. This process, known as “Dual Tracking” was intended to avoid delays in the foreclosure process should the Loss Mitigation efforts fail.

Judgments of Foreclosure were routinely submitted and foreclosure sales were scheduled and sometimes held, even though though the Borrower may have been under the impression that they had resolved the foreclosure. To avoid such scenarios, Congress included in the Dodd-Frank Act specific provisions prohibiting this practice.

Dodd–Frank Wall Street Reform and Consumer Protection Act

Commonly referred to simply as Dodd-Frank, the act contains many Consumer Protection provisions, such as the prohibition against Lenders initiating the foreclosure until the borrower is at least 120 days in arrears. Notwithstanding the terms of the mortgage contract agreed to by both parties, Lenders must wait at least 120 days before starting a foreclosure. Fortunately for New York Lenders, Dodd-Frank does not prohibit sending the “90-day letter” required by RPAPL 1304 during this time.

Additionally, Dodd-Frank prohibits Lenders from submitting a Judgment of Foreclosure, or from scheduling a Foreclosure sale, if a “complete” loss mitigation package was submitted at least 37 days before the sale date.  

Loss Mitigation applications, however, are rarely, if ever, submitted with a 100% complete package. Inevitably, there is missing information or documents that Servicers require in order to complete their review. Accordingly, the question that has yet to be answered when a Lender is ready to submit a Judgment of Foreclosure, or from scheduling a Foreclosure sale and had previously received a  Loss Mitigation application, is whether a  “complete” Loss Mitigation package is one which is 100% complete or if it includes those that are “substantially” complete, and are missing only minor information or documents.

While it is too soon for case law to answer this question, it is this author’s recommendation, to “err on the side of caution” and assume that the courts, the CFPB and other Regulatory Agencies will apply a liberal construction as to whether or not a Loss Mitigation package was complete.  

Should there be any doubt that a “complete” loss mitigation package may be deemed to have been submitted, a letter should be sent to the Borrower providing a reasonable time within which to provide the missing information or documentation required.  Should the Borrower fail to provide the missing information or documentation required, another letter formally advising the Borrower that his/her Loss Mitigation application was denied due to incompleteness of the loss mitigation package.

In this way, the Lender avoids the Borrower being under the impression that they had resolved the foreclosure and can demonstrate compliance with both the “spirit” as well as the “letter” of the law while incurring only a minor expense to do so.

Peter Roach
Peter T. Roach & Associates, P.C.




Zombie Foreclosures: Are they coming for you?

Due to the housing crisis of the past 5 years, efforts have been made to give homeowners every conceivable chance to avoid the foreclosures of their properties, so that they are not forced out of their homes. While well-intentioned, some of these provisions have resulted in unintended consequences. One such impact has been the rise of “zombie foreclosures.”

The zombie foreclosure occurs when a homeowner is foreclosed upon and then moves out of the property during the foreclosure process. Because foreclosures in New York now take so long to complete, the abandoned property may remain vacant for months or even years. During this time, it becomes a blight on the neighborhood it is located in, prompting outrage from neighbors concerned about its detrimental effect on a town’s property values.

This happens more than ever before due to the many new procedural requirements that have been added to the foreclosure process and the congested court calendars that have resulted from the exponential increase of residential foreclosures during the past several years.

To combat these zombie foreclosures, some municipalities such as Nassau and Suffolk counties have created new processes to expedite foreclosures in cases where the home has already been abandoned by its owners.      

In order to avail themselves of these new procedures, lenders should consider regularly inspecting properties securing delinquent loans to identify any that are, in fact, vacant and utilizing the new procedures to expedite foreclosures.

Additionally, Lenders should solicit Deeds in Lieu of Foreclosure from delinquent homeowners, in exchange for a release from their liabilities, REGARDLESS OF THE EXISTENCE OF SUBORDINATE LIENS! By accepting a Deed in Lieu of Foreclosure, Lenders can avoid the "zombie foreclosure," begin to make any needed repairs, and market the property while the foreclosure is completed.

Finally, Lenders should continuously communicate with defaulting homeowners to evaluate if their circumstances have changed for the better or worse and to determine if a loss mitigation opportunity has been created before they decide to simply move out.

Although the New York foreclosure process will inevitably take too long,  sometimes, as shown above, there are ways to shorten it.

Are you doing everything you can?

Peter Roach
Peter T. Roach & Associates, P.C.





Reducing the Foreclosure Timeline 

Most Default Mortgage Servicers consistently refuse to accept a deed in lieu of foreclosure from a defaulting homeowner unless there are no subordinate liens and unless they have obtained a financial statement from the homeowner to ensure he/she does not have adequate resources to repay the loan from their other assets.
While this may make sense in the Non-Judicial states, and even in some Judicial states with short foreclosure timelines, it has become nothing short of absurd in those Judicial states where there exists a substantial disparity between the time required to foreclose a mortgage secured by owner occupied residential property and the time required to foreclose a mortgage secured by non-owner occupied residential property. In order to fully understand the absurdity of this reasoning, it is important to first review the foreclosure process and the current timeline required to complete it. 


Read the full article here (PDF Format).


Peter Roach
Peter T. Roach & Associates, P.C.




Lender’s Title Insurance: It's No Guarantee

Title insurance is an indemnification contract, like many other types of insurance. Just as a life insurance policy does not ensure you will live forever, a title insurance policy does not guarantee that your title is valid, but merely provides the insured with compensation to offset the loss sustained as a result of title not being as insured.

The Policy Conditions and Stipulations provide, amongst other things, that upon notification of the defect, the title company may either cure the defect or pay the claim. Additionally, the title company may provide an indemnification to third parties to avoid the insured sustaining any loss and thus avoiding the necessity to compensate the insured. It is only when the insured has actually suffered a loss resulting from the title defect that the company must pay the claim.

The most common title claims a lender will have include:

  • Prior mortgages, judgments or other liens

  • Errors in the legal description

  • Forgery

Although lenders are insured against loss arising from all of these risks by title insurance, the title company will handle claims for each in a very different manner.

For example, a lender believes that it holds a 1st mortgage, but discovers a prior mortgage encumbering the property that was not disclosed by their title report. As long as the borrower pays what is owed, the lender has not actually suffered a loss. Even if the borrower defaults and the lender is constrained to foreclose its mortgage, until the foreclosure sale is held and no third party purchases the property, the title company is not required to compensate the lender as the lender has not yet “suffered a loss.”

Upon discovery of a prior lien, the lender must notify the title company and submit a claim. Typically, the claim will be processed and the company will issue its letter of indemnification, commonly known in the trade as a “happy letter.” This is simply a letter in which the insurance company confirms its responsibility and confirms that if the property is foreclosed, the title company will insure the next purchaser against loss without delay.

As for errors discovered in the legal description, the title company will typically request the foreclosure attorney to obtain an order from the court, correcting the error as part of the foreclosure. Although the title company will pay the foreclosure attorney’s legal fees for the additional work this entails, there will, again, be no payment to the lender required from the title company, as this avoids any loss.

As for the more serious defects, such as forgery (click the link to see my previous article on forgery), the title company will retain an attorney at its sole expense to cure the defect or offset the loss by litigation. Failing to do so will pay the insured the actual amount of their loss, but not more than the policy amount, so interest, tax advances, etc. may not be reimbursed.


Peter Roach
Peter T. Roach & Associates, P.C.





What Recourse Does a Lender Have When A Mortgagor’s Signature is Forged?

Most residential mortgages are executed by a husband and wife.  When you discover that one of their signatures was forged, there are still several means in which your investment may still be recovered:

1. File a title claim:  Submit a claim to the company that insured the mortgage as a valid lien, that the lien is invalid because the signature was forged.

The title company will retain an attorney at its own expense to litigate the forgery issue. They may be able to recover a part of the loss utilizing the doctrine of “equitable subrogation,” which allows recovery from the party whose signature was forged to the extent they received a benefit by having their prior valid obligations paid from the loan proceeds. Upon completion of the litigation, the title company will pay you the amount of your loss up to the face amount of the policy, which is the original amount of the loan. Note that the title company will typically attempt to reduce their payment obligation by the amount they recover and will also demand an Assignment of Mortgage to recover some or all of the funds they paid you.  

It is important to remember, however, that the amount that is due will usually exceed the face amount of the policy as a result of accrued interest, real estate tax and insurance advances, legal fees and costs, etc. that have accumulated since the mortgage was originated. Since you are entitled to recover all of these sums, in addition to the principal balance, you should insist that any recovery by the title company be applied first to the entire payoff balance of your mortgage before any reduction of their obligation to indemnify you for your loss. Additionally, any Assignment of Mortgage given to the title company should provide that the assignment is for a “Junior Participation Interest” only, so you receive full reimbursement of ALL money due to you before the title company collects any money due to them.

2. File a complaint with the District Attorney: In addition to any civil remedies you have, you may file a complaint with the District Attorney as forgery is a criminal act. While the criminal prosecution and conviction will not provide any financial benefit by itself, criminal sentences and plea bargains often include “restitution” where the forger is required to reimburse some or all of your loss.

3. Foreclose the remaining valid interest: Upon receipt of payment from the title company, you will usually be left with a valid mortgage only as to the interest of the party whose signature was genuine. You may complete the foreclosure of this “half-interest” and have it sold at a public auction, but the purchaser at the foreclosure sale will only receive this “half-interest” and will then own the mortgaged property together with the spouse whose signature had been forged. Chances are the spouse will be willing to purchase the other “half-interest” so as to gain complete ownership of the property, thus providing another source of reimbursement.

4. Hire a Collection Attorney: Notwithstanding the forgery, you will still have a valid claim against the party who signed the Note, although it will be unsecured.  You should consider retaining a collection lawyer (as opposed to a litigation lawyer - see my article explaining the difference!)  Collection attorneys will work on a “contingency” basis to obtain a monetary judgment and enforce it against any of the assets of the party who signed the Note, so you will not risk “throwing good money after bad.”

If you have any questions or comments, please contact me at peter.roach@roachlawfirm.com.

Peter Roach
Peter T. Roach & Associates, P.C.