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Perspectives

Focus on Deed Theft (Finally!)

A recent New York Times article by Kimiko De Freytas-Tamura, entitled “Why Black Homeowners in Brooklyn are being Victimized by Fraud,” shined a bright light on the increasing problem of deed theft. https://www.nytimes.com/2019/10/21/nyregion/deed-theft-brooklyn.html. Governor Cuomo has asked the NYS Department of Financial Services to investigate the circumstances giving rise to the deceptive tactics targeting Brooklyn homeowners. https://www.dfs.ny.gov/reports_and_publications/press_releases/pr1910221. This follows the signing into law of A5615/S1688 on August 14, 2019. This new law seeks to enhance the New York Home Equity Theft Prevention Act (RPL 265), which attempts to protect distressed home owners from those seeking to skim the equity from property via a contract containing a buyback clause whose terms are nearly impossible to achieve. The law expands, in pertinent part, the scope of the covered transactions to include not only those involving borrowers in foreclosure, but also transactions where the borrowers are presently in default although a foreclosure has not been commenced. The law also amends Criminal Procedure Law § 420.45 by authorizing a district attorney, after obtaining a conviction (whether by guilty plead or at trial) against a party for deed fraud, to file a motion in the county in which the property lies to void the fraudster’s deed ab initio.

Further, also seeking to combat deed fraud, New York now requires the names and social security or taxpayer identification number of all LLC members when submitting or recording a deed or transfer documents. However, without an index kept by the appropriate agency to cross check such numbers with the proper county clerk’s office, such disclosure will only be of limited value in preventing deed fraud.

Lastly, it is worth noting that to help combat “zombie” homes, e.g. homes that that are deteriorating and vacant whose owner’s defaulted on their mortgage, RPAPL 1308 (4) has been amended to require lenders and their servicers, when the property is vacant, to keep homeowner association dues or cooperative maintenance payments current during the foreclosure process.