STATE OF NEW YORK
________________________________________________________________________
6971
2025-2026 Regular Sessions
IN SENATE
March 27, 2025
___________
Introduced by Sen. KAVANAGH -- read twice and ordered printed, and when
printed to be committed to the Committee on Housing, Construction and
Community Development
AN ACT to amend the real property actions and proceedings law and the
civil practice law and rules, in relation to actions upon a subordi-
nate bond or note
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 1302 of the real property actions and proceedings
2 law, as amended by chapter 145 of the laws of 2022, is amended to read
3 as follows:
4 § 1302. Foreclosure of certain residential mortgages. 1. Any complaint
5 served in a proceeding [initiated on a residential mortgage covering a
6 one to four family dwelling pursuant to] involving a home loan, as such
7 term is defined in section thirteen hundred four of this article, must
8 contain an affirmative allegation that at the time the proceeding is
9 commenced, the plaintiff:
10 (a) is the owner and holder of the subject mortgage and note, or has
11 been delegated the authority to institute a mortgage foreclosure action
12 by the owner and holder of the subject mortgage and note; [and]
13 (b) has complied with all of the provisions of section five hundred
14 ninety-five-a of the banking law and any rules and regulations promul-
15 gated thereunder, and section six-l or six-m of the banking law, for
16 loans governed by section six-l or six-m of the banking law, and section
17 thirteen hundred four of this article for all residential mortgage loans
18 covering a one to four family dwelling;
19 (c) has maintained or is in possession of a payment history of the
20 subject loan, which includes a complete schedule of all transactions
21 credited or debited to the mortgage loan account, including but not
22 limited to any escrow account or suspense account, from the date of
23 origination of the loan to the present; and
24 (d) if such plaintiff claims to possess the original note, such plain-
25 tiff has maintained or is in possession of a custodial file documenting
26 such plaintiff's possession of the subject note, which includes the name
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD08275-02-5
S. 6971 2
1 of the entity that physically possesses the original note, the date on
2 which that entity took physical possession of the original note, a chro-
3 nological listing of the names of all prior entities that physically
4 possessed the original note, the date of transfer of that note starting
5 with the original lender, and the address where the original note is
6 currently located.
7 2. It shall be a defense to an action to foreclose a mortgage that:
8 (a) the terms of the home loan or the actions of the lender violate
9 any provision of section six-l or six-m of the banking law or section
10 thirteen hundred four of this article, for loans governed by these
11 provisions;
12 (b) the plaintiff's payment history for the subject loan does not
13 include a complete schedule of all transactions credited or debited to
14 the mortgage loan account, including any escrow account or suspense
15 account, from the date of origination of the loan to the present; and
16 (c) if the plaintiff claims to possess the original note, the
17 plaintiff's custodial file does not include the name of the entity that
18 physically possesses the original note, the date on which that entity
19 took physical possession of the original note, the address where the
20 original note is located, a chronological listing of the names of all
21 prior entities that physically possessed the original note and the date
22 of transfer of that note starting with the original lender and, if the
23 note is possessed by an entity other than the plaintiff, the authority
24 under which an entity other than the plaintiff physically possesses the
25 subject note for the plaintiff.
26 3. Any complaint served in a proceeding involving a home loan, as such
27 term is defined in section thirteen hundred four of this article, in
28 which the plaintiff is seeking to foreclose on a subordinate loan and
29 such plaintiff purchased the subject subordinate loan when that loan was
30 in default, the plaintiff must affirmatively allege the date such plain-
31 tiff purchased the subject loan and the amount such plaintiff paid for
32 the subject loan. If the plaintiff purchased the subject loan as part of
33 a portfolio of loans, the amount the plaintiff paid for the subject loan
34 shall be determined by multiplying the total amount paid for the portfo-
35 lio of loans by a ratio, that ratio being the unpaid principal balance
36 at default for the subject loan divided by the total unpaid principal
37 balance at default for all the loans in the portfolio.
38 § 2. Section 1302-a of the real property actions and proceedings law,
39 as added by chapter 739 of the laws of 2019, is amended to read as
40 follows:
41 § 1302-a. Defense of statute of limitations and lack of standing; not
42 waived. 1. Notwithstanding the provisions of subdivision (e) of rule
43 thirty-two hundred eleven of the civil practice law and rules, any
44 objection or defense based on the statute of limitations in a foreclo-
45 sure proceeding related to a home loan, as defined in paragraph (a) of
46 subdivision six of section thirteen hundred four of this article, shall
47 not be waived if a defendant fails to raise the objection or defense in
48 a responsive pleading or pre-answer motion to dismiss.
49 2. Notwithstanding the provisions of subdivision (e) of rule thirty-
50 two hundred eleven of the civil practice law and rules, any objection or
51 defense based on the plaintiff's lack of standing in a foreclosure
52 proceeding related to a home loan, as defined in paragraph (a) of subdi-
53 vision six of section thirteen hundred four of this article, shall not
54 be waived if a defendant fails to raise the objection or defense in a
55 responsive pleading or pre-answer motion to dismiss. A defendant may not
56 raise an objection or defense of lack of standing following a foreclo-
S. 6971 3
1 sure sale, however, unless the judgment of foreclosure and sale was
2 issued upon defendant's default.
3 § 3. The opening paragraph and subdivision 3 of section 1311 of the
4 real property actions and proceedings law, as added by chapter 312 of
5 the laws of 1962, are amended to read as follows:
6 Each of the following persons[, whose interest is claimed to be
7 subject and subordinate to the plaintiff's lien,] shall be made a party
8 defendant to the action, and shall be necessary and indispensable
9 parties to that action:
10 3. Every person having any lien or incumbrance upon the real property
11 [which is claimed to be subject and subordinate to the lien of the
12 plaintiff].
13 § 4. Section 1321 of the real property actions and proceedings law, as
14 added by chapter 312 of the laws of 1962, subdivision 1 as amended by
15 chapter 269 of the laws of 2020, is amended to read as follows:
16 § 1321. [Default or admission] Order of reference. 1. [If the defend-
17 ant fails to answer within the time allowed or the right of the plain-
18 tiff is admitted by the answer, upon] Upon motion of the plaintiff, the
19 court shall ascertain and determine the amount due, or direct a referee
20 to compute the amount due to the plaintiff and to such of the defendants
21 as are prior incumbrancers of the mortgaged premises, and to examine and
22 report whether the mortgaged premises can be sold in parcels and, if the
23 whole amount secured by the mortgage has not become due, to report the
24 amount thereafter to become due. Where the defendant is an infant, and
25 has put in a general answer by [his] such defendant's guardian, or if
26 any of the defendants be absentees, the order of reference also shall
27 direct the referee to take proof of the facts and circumstances stated
28 in the complaint and to examine the plaintiff or [his] such plaintiff's
29 agent, on oath, as to any payments which have been made. The order of
30 reference shall also include the name and telephone number of the mort-
31 gage servicer for a plaintiff involving a mortgage foreclosure of a one-
32 to four-family residential property.
33 2. When [he] the plaintiff moves for judgment, the plaintiff shall
34 show whether any of the defendants who have not appeared are absentees.
35 3. In any residential foreclosure action involving a home loan, as
36 such term is defined in section thirteen hundred four of this article,
37 in which the plaintiff is seeking to foreclose on a subordinate loan and
38 such plaintiff purchased the subject subordinate loan when that loan was
39 in default, the amount due shall not exceed the amount the plaintiff
40 paid for the subject loan, as determined under section thirteen hundred
41 two of this article, and the maximum rate of interest provided under
42 section fourteen-a of the banking law accruing from the date the plain-
43 tiff purchased the subject loan.
44 § 5. The opening paragraph of subdivision 4 of section 213 of the
45 civil practice law and rules is amended to read as follows:
46 an action upon a bond or note, the payment of which is secured by a
47 mortgage upon real property, or upon a bond or note and mortgage so
48 secured, or upon a mortgage of real property, or any interest therein,
49 except for a subordinate bond or note purchased when such bond or note
50 is in default;
51 § 6. The civil practice law and rules is amended by adding a new
52 section 213-e to read as follows:
53 § 213-e. Action upon a subordinate bond or note. Beginning January
54 first, two thousand twenty-seven, an action upon a subordinate bond or
55 note, the payment of which is secured by a mortgage upon real property,
56 or upon a bond or note and mortgage so secured, or upon a mortgage of
S. 6971 4
1 real property, or any interest therein, where the subject bond or note
2 is purchased when such bond or note was in default, shall be commenced
3 within the shorter of (a) three years of the purchase of the bond or
4 note or (b) the relevant time limit as provided by subdivision four of
5 section two hundred thirteen of this article.
6 § 7. Subdivision (h) of section 203 of the civil practice law and
7 rules, as added by chapter 821 of the laws of 2022, is amended to read
8 as follows:
9 (h) Claim and action upon certain instruments. Once a cause of action
10 upon an instrument described in subdivision four of section two hundred
11 thirteen or section two hundred thirteen-e of this article has accrued,
12 no party may, in form or effect, unilaterally waive, postpone, cancel,
13 toll, revive, or reset the accrual thereof, or otherwise purport to
14 effect a unilateral extension of the limitations period prescribed by
15 law to commence an action and to interpose the claim, unless expressly
16 prescribed by statute.
17 § 8. The opening paragraph of subdivision (a) of section 205-a of the
18 civil practice law and rules, as added by chapter 821 of the laws of
19 2022, is amended to read as follows:
20 If an action upon an instrument described under subdivision four of
21 section two hundred thirteen or section two hundred thirteen-e of this
22 article is timely commenced and is terminated in any manner other than a
23 voluntary discontinuance, a failure to obtain personal jurisdiction over
24 the defendant, a dismissal of the complaint for any form of neglect,
25 including, but not limited to those specified in subdivision three of
26 section thirty-one hundred twenty-six, section thirty-two hundred
27 fifteen, rule thirty-two hundred sixteen and rule thirty-four hundred
28 four of this chapter, for violation of any court rules or individual
29 part rules, for failure to comply with any court scheduling orders, or
30 by default due to nonappearance for conference or at a calendar call, or
31 by failure to timely submit any order or judgment, or upon a final judg-
32 ment upon the merits, the original plaintiff, or, if the original plain-
33 tiff dies and the cause of action survives, [his or her] such original
34 plaintiff's executor or administrator, may commence a new action upon
35 the same transaction or occurrence or series of transactions or occur-
36 rences within six months following the termination, provided that the
37 new action would have been timely commenced within the applicable limi-
38 tations period prescribed by law at the time of the commencement of the
39 prior action and that service upon the original defendant is completed
40 within such six-month period. For purposes of this subdivision:
41 § 9. Subdivision (a) of section 3012-b of the civil practice law and
42 rules, as added by chapter 306 of the laws of 2013, is amended to read
43 as follows:
44 (a) In any residential foreclosure action involving a home loan, as
45 such term is defined in section thirteen hundred four of the real prop-
46 erty actions and proceedings law, in which the defendant is a resident
47 of the property which is subject to foreclosure, the complaint shall be
48 accompanied by a certificate, signed by the attorney for the plaintiff,
49 certifying that the attorney has reviewed the facts of the case and
50 that, based on consultation with representatives of the plaintiff iden-
51 tified in the certificate and the attorney's review of pertinent docu-
52 ments, including the mortgage, security agreement and note or bond
53 underlying the mortgage executed by defendant and all instruments of
54 assignment, if any, [and] any other instrument of indebtedness including
55 any modification, extension, and consolidation agreement, and the
56 payment history for the subject loan and the custodial file for the
S. 6971 5
1 subject note as defined under section thirteen hundred two of the real
2 property actions and proceedings law, to the best of such attorney's
3 knowledge, information and belief there is a reasonable basis for the
4 commencement of such action and that the plaintiff is currently the
5 creditor entitled to enforce rights under such documents. If not
6 attached to the summons and complaint in the action, a copy of the mort-
7 gage, security agreement and note or bond underlying the mortgage
8 executed by defendant and all instruments of assignment, if any, and any
9 other instrument of indebtedness including any modification, extension,
10 and consolidation agreement, and the payment history for the subject
11 loan and the custodial file for the subject note as defined under
12 section thirteen hundred two of the real property actions and
13 proceedings law shall be attached to the certificate.
14 § 10. Subdivision (f) of rule 3408 of the civil practice law and
15 rules, as amended by section 2 of part Q of chapter 73 of the laws of
16 2016, is amended to read as follows:
17 (f) Both the plaintiff and defendant shall negotiate in good faith to
18 reach a mutually agreeable resolution, including but not limited to a
19 loan modification, short sale, deed in lieu of foreclosure, or any other
20 loss mitigation, if possible.
21 1. Compliance with the obligation to negotiate in good faith pursuant
22 to this section shall be measured by the totality of the circumstances,
23 including but not limited to the following factors:
24 [1.] (i) Compliance with the requirements of this rule and applicable
25 court rules, court orders, and directives by the court or its designee
26 pertaining to the settlement conference process;
27 [2.] (ii) Compliance with applicable mortgage servicing laws, rules,
28 regulations, investor directives, and loss mitigation standards or
29 options concerning loan modifications, short sales, and deeds in lieu of
30 foreclosure; and
31 [3.] (iii) Conduct consistent with efforts to reach a mutually agree-
32 able resolution, including but not limited to, avoiding unreasonable
33 delay, appearing at the settlement conference with authority to fully
34 dispose of the case, avoiding prosecution of foreclosure proceedings
35 while loss mitigation applications are pending, and providing accurate
36 information to the court and parties.
37 Neither of the parties' failure to make the offer or accept the offer
38 made by the other party is sufficient to establish a failure to negoti-
39 ate in good faith.
40 2. As provided for under section thirteen hundred twenty-one of the
41 real property actions and proceedings law, it shall be unlawful for a
42 plaintiff to demand payment in excess of the amount the plaintiff paid
43 for a subordinate loan such plaintiff purchased in default, as deter-
44 mined under section thirteen hundred two of the real property actions
45 and proceedings law, and the maximum rate of interest provided under
46 section fourteen-a of the banking law accruing from the date the plain-
47 tiff purchased the subject loan. Any demand for a payment in excess of
48 this amount, whether to reinstate the loan or through a repayment plan,
49 loan modification or other loss mitigation option, shall also constitute
50 a failure to negotiate in good faith.
51 § 11. This act shall take effect on the one hundred twentieth day
52 after it shall have become a law and shall apply to all actions filed on
53 or after such effective date.
