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NY Assembly Taking Commendable Steps to Plug Loopholes in the Foreclosure System

On Tuesday, the New York State Assembly Judiciary Committee approved new legislation requiring lenders to file mandatory paperwork early in the process, and with some other rules to prevent “shadow docket.”

Now, what is a “shadow docket” you might ask, and how does it affect the foreclosure process. Well the “shadow docket” is the cesspool where the results of “sewer service” end up, effectively binding the hands of the judiciary from doing anything about the cases.

As of now, until new rules come into practice, lenders bringing a residential foreclosure action have 120 days to file a proof of service. They should also file a “certificate of merit” which is a sworn statement that the lender has the required authority to foreclose a home. And at the same time, the lender must also file a request for judicial intervention.

Many lenders employ a two-pronged strategy – one of using “sewer service” to serve notices, and next, they do not file the “certificate of merit” required to prove their standing to foreclose concerned residential property.

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The result is that these cases do not enter the formal docket of courts and judges cannot do anything to resolve the cases. The lie hidden in the “shadow docket.”

The new law that has been proposed would add a section to the Civil Practice Law and Rules, and would require a “certificate of merit” to be submitted at the very beginning of a foreclosure action accompanied by both summons and complaint – thus ensuring that all affected homeowners may avail the benefits of settlement conferences when faced with foreclosure. Copies of mortgage documents must also be attached to the complaint.

The bill also reduces the number of days available to lenders for filing proof of service from 120 days to 20 days.

On Tuesday, the Assembly Judiciary Committee approved the bill by 18-2, and it would now go before the full Assembly for a vote.

Judge Judy Harris Kluger said that while the bill, if it becomes a law, would not still be able to provide relief to about, 8,600 foreclosures in NY city that have already passed into “shadow docket” (oblivion) it would at least prevent the inventory of shadow dockets from growing further.

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