ARTICLE: The Home Equity Theft Prevention Act

In July 2006, the New York State legislature enacted The Home Equity Theft Prevention Act ("HETPA"), which is designed to help homeowners who are facing foreclosure keep their homes.  Within HETPA are several provisions requiring strict compliance by mortgage lenders before commencing a foreclosure proceeding.  The lender's failure to comply will automatically entitle the homeowner to dismissal of the foreclosure proceeding. 

There are two recent and relevant cases discussing HETPA, which homeowners and lenders should be aware of.  In Aurora Loan Services, LLC v. Weisblum, 2011 NY Slip Op. 04184 (2nd Dep't 2011), the Second Department dismissed the alleged lender's foreclosure proceeding, citing several deficiencies.  Pursuant to HETPA, the lender was required to send to both borrowers, the husband and wife, among other things, a notice listing at least five housing counseling agencies located in the vicinity of the borrowers'  home, at least 90 days before commencing a foreclosure proceeding.  The notice had to be served personally on each borrower along with a copy to be sent by both first-class mail and by certified or registered mail.  The lender, Aurora, did not comply with the requirements.  The Court held that these service requirements, found in Section 1304  of the Real Property Actions and Proceedings Law ("RPAPL 1304") were mandatory conditions precedent to a foreclosure action.  The fact that both borrowers later appeared and participated in the foreclosure proceeding did not waive the service requirements in RPAPL 1304.  Thus, the lender had to restart the foreclosure proceeding from the beginning.    

 The Aurora case followed a prior case also by the Second Department, First National Bank of Chicago v. Silver, 73 A.D.3d 162 (2nd Dep't 2010) , which discussed the required contents of the notice that was to be delivered simultaneously with the summons and complaint for a foreclosure proceeding.  The Court held that the failure of the lender to comply with these mandatory notice provisions, found in RPAPL 1303, compelled dismissal of a foreclosure case.  Among other things, the notice had to be printed on specific colored paper and font size and contain a warning about foreclosure scams.  The lender, First National Bank of Chicago, unsuccessfully argued that its failure to abide by these specific requirements in RPAPL 1303 was a red herring and could not be raised outside of the borrowers' answer.  The Second  Department held that the borrowers had the right to raise this defense of noncompliance with the notice requirements at any time during the foreclsoure proceeding.    

Barr, Post & Associates has successfully prosecuted and defended mortgage foreclosure actions.  Our commercial/residential real estate department has years of experience handling all aspects of real estate transactions from the simple apartment lease to the complex commercial closing.