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Borrowers Can Now Sue the Servicer or Lender in New York for Servicing Violations!

If the new NY State Senate bill 564--A, which passed the NY Senate in early 2023, is signed into law by the governor in its current shape, it will open the door to lawsuits for damages by borrowers for various violations that previously did not trigger actions in court. The new bill will require more validations in note due diligence during note acquisitions, servicer transfers, MSR purchases, or servicer oversight by lenders and note investors.

1. If at any point, the prior or current servicer did not comply with regulations, the borrower can bring action as an individual. Therefore, servicing comments review should be tested for federal, New York state and local laws, if any.

2. In current foreclosure cases, borrowers can assert counterclaims related to the foreclosure process and servicing dating back to loan origination. If the foreclosure commenced by a prior or current servicer, attorney or third party, the borrower is allowed to bring a third-party claim against the filing party and lender on title.

3. Borrower cannot recover attorney's fees, get awarded damages and injunctive relief from foreclosure action. If the foreclosure action gets dismissed this way, the lender will be out of luck collecting as the anti-Engel law will prevent refiling the foreclosure.

In summary, servicing (comments) reviews and foreclosure milestones combined with anti-Engel dates review should be done on any New York RPL, NPL loans with active foreclosures or prior foreclosure actions. Please contact ProTitleUSA and One Diligence, LLC for a product related to complete due diligence on issue discovery to gauge the mortgage enforceability and risk assessment with respect to the new bill.