Governor Cuomo Extends New York Mortgage Foreclosure Moratorium, But With Exceptions…

Hinshaw & Culbertson - Consumer Crossroads
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Hinshaw & Culbertson - Consumer Crossroads

On May 7, 2020, New York Governor Andrew Cuomo issued Executive Order 202.28, which provides further temporary relief measures for tenants facing an eviction. The order also directly impacts mortgage loan holders, servicers, and borrowers, as it bars the "initiation" of certain residential and commercial mortgage foreclosures for another 60 days from June 20, 2020.

To recap, Governor Cuomo's March 30, 2020 Executive Order 202.8 provided that "[t]here shall be no enforcement of either an eviction of any tenant residential or commercial, or a foreclosure of any residential or commercial property for a period of ninety days." Now, in Executive Order 202.28, the Governor has built on Executive Order 202.8 and barred "initiation" of a foreclosure or eviction proceeding for sixty more days, although with a new exception on eligibility for the moratorium:

There shall be no initiation of a proceeding or enforcement of either an eviction of any residential or commercial tenant, for nonpayment of rent or a foreclosure of any residential or commercial mortgage, for nonpayment of such mortgage, owned or rented by someone that is eligible for unemployment insurance or benefits under state or federal law or otherwise facing financial hardship due to the COVID-19 pandemic for a period of sixty days beginning on June 20, 2020.

This exception language could create challenges for mortgagees as it is conditioned on knowledge that the borrower or a tenant residing in the property is eligible for unemployment benefits—both state and federal—or is facing financial hardship due to the COVID-19 pandemic. This information is vague and almost never within the knowledge of a mortgagee or their loan servicer. Moreover, in the case of a tenant and a mortgagor landlord, a mortgagee and its loan servicer would not have contact information or permission to contact such a tenant to determine whether they qualify under this Executive Order. As a result, mortgagees and their loan servicers will have great difficulty determining with certainty whether they can initiate foreclosure proceedings within this new 60 day period, leaving them in a potentially no-win situation.

Should a mortgagee proceed to initiate a foreclosure, the Executive Order would almost certainly be used as a shield. On the other hand, should they not proceed to initiate a foreclosure action, they could see the Executive Order used as sword later by a mortgagor asserting a statute of limitations defense. Essentially, the Executive Order makes initiation of new foreclosure matters problematic until August 19, 2020.

Meanwhile, Hinshaw continues to update its interactive U.S. map for consumer financial services lenders, servicers and investors to track state regulations related to the COVID-19 pandemic as they are issued.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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