Bellyaching Bankers Rail Against Bill Attempting To Level Playing Field For New York Homeowners In Foreclosure Actions

The New York Law Journal reports:

• Legislation that would give property owners, as well as lenders, attorney's fees if they prevail in a residential foreclosure action is "unnecessary and would create uncertainty in the foreclosure process" in New York, the Bankers Association is contending.(1)

• The measure, A1239/S2614, by Assemblyman Rory I. Lancman, D-Queens, has passed both houses of the Legislature but has not yet been forwarded to Governor David A. Paterson. It was dubbed the Access to Justice in Lending Act by its sponsors.

• The bill stipulates that whenever a covenant in a mortgage agreement on residential property allows lenders to recover attorney's fees in a foreclosure proceeding, the mortgage must also contain a reciprocal covenant allowing the borrower the same right if a foreclosure is unsuccessful. Advocates of the measure say that covenants that favor lenders are routinely contained in residential mortgages.

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• Mr. Lancman said his bill was patterned after a provision in §234 of the Real Property Law, which, since the mid-1960s has allowed tenants to recover attorney's fees if they successfully fight evictions, provided leases give the same right to landlords who prevail in eviction proceedings. Mr. Lancman said the change would encourage more attorneys to represent defendants in foreclosure actions "because they [attorneys] can be confident, if successful, that they will be paid for their work."

• With the economy still struggling and foreclosures common in many courts, Mr. Lancman said he hopes that attorneys specializing in foreclosure work stay in the field. "We hope to be creating a private bar, just like there is a private bar of attorneys doing discrimination cases and other kinds of specialized work," Mr. Lancman said.

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• Legal Services NYC and the Neighborhood Economic Development Advocacy Project are urging enactment of the bill, which was sponsored in the Senate by Jeffrey Klein, D-Bronx. Legal Services NYC maintained that the bill would expand legal representation for middle- and low-income New Yorkers facing foreclosure while removing the incentive for some mortgage issuers to go forward with foreclosure proceedings.

For more, see Measure Opposed by Bankers' Group Would Allow Owners to Recover Attorney's Fees in Foreclosures.

(1) The rhetorical BS by the bankers is not surprising. Allowing a winning homeowner in a foreclosure action an attorney fee award in these situations is nothing unique. For example, in Florida, state law mandates an award of prevailing party attorney's fees under the reciprocity provisions of section 57.105(7), Florida Statutes. See Landry v. Countrywide Home Loans, Inc., 731 So. 2d 137 (Fla. 1st DCA 1999); Attorney Fee Awards For Successful Foreclosure Defense In Florida.

This law certainly has not made lenders reluctant to make home loans in Florida, as evidenced by the flood of foreclosures currently jamming the state's court system.