Governor Signs Access to Justice in Lending Act

October 21, 2010—Governor Paterson yesterday signed the Access to Justice in Lending Act, which will allow enable homeowners
who successfully defend themselves against foreclosure proceedings to
be awarded attorneys' fees from the lender that sued them.
The new legislation comes after years of advocacy by Legal Services NYC.

Currently in New York State, it is standard for a
mortgage agreement to contain language giving the lender the right to collect attorneys' fees if it is successful in a
foreclosure action. However, there is no requirement that the borrower have the same right to collect if
he or she is successful in
defending the foreclosure action.

This new legislation will benefit our clients in several important respects. First, it will level the playing field for low-income borrowers facing foreclosure by clarifying that the obligation to pay attorneys' fees and costs is mutual in certain cases. Moreover, it will allow a greater number of borrowers to obtain legal representation. By authorizing borrowers with meritorious defenses to recover attorneys' fees from their lender in certain foreclosure cases, it will increase access to legal representation for low-income borrowers who cannot otherwise afford an attorney. Finally, it will create an incentive for lenders to resolve more cases early-on in the foreclosure process, before both sides incur significant fees and costs.

LS-NYC attorneys have for years called for a law requiring reciprocity in mortgage documents.  Rick Wagner, the longtime Brooklyn Legal Services Corporation A Director of Litigation who passed away suddenly last year, was well known for his championship of the cause. Rick once wrote, "For far too long, plaintiff banks have
benefitted from a huge number of default judgments in foreclosure actions
and/or proceedings. Perhaps the single most important tool in the avoidance of
default judgments (and summary judgment where a homeowner has appeared pro
se) is legal representation, and this will never exceed an insignificant
percentage of foreclosure cases without private bar involvement. Those
of us in the legal services community—including those of us who are presently
prohibited from seeking attorneys' fees— can make a sizable contribution
toward leveling the foreclosure playing field by establishing this right for
homeowners and, hopefully, generating a private foreclosure defense bar fueled
by a substantial revenue stream in the form of contractually recoverable
attorneys fees."

More recently, LS-NYC Interim Executive Director Michael Young submitted a memo urging Governor Paterson to sign the bill, which was sponsored by Assemblyman Rory Lancman (D-Queens) and passed by the Legislature last summer. Read LS-NYC's memo by clicking here.

Read more about the new law in the 10/22 New York Times and the 10/23 New York Law Journal (subscription only).