I received an email from Stewart Title Insurance Company concerning a bill that was recently signed into a law to allow borrowers in a foreclosure proceeding access to legal representation by providing that mortgage agreements which allow a prevailing lender to recover attorneys fees in a foreclosure proceeding shall be read to allow prevailing borrowers to recover attorneys fees as well, thereby enabling borrowers with meritorious defenses to foreclosure to obtain the legal representation necessary to assert those defenses, similar to the reciprocal attorneys fees rights given tenants by Real Property Law Section 234.
It takes effect 60 days after it becomes a law (December 20, 2010) and apply to all real property mortgages that are in existence on or after such date to all actions and proceedings
commenced on or after such date.
The effect of this law could be to cause banks who are foreclosing to think twice before advancing an action where the loan was improperly underwritten. This in turn may prompt banks to settle foreclosure suits where they not only risk being unable to collect on their loan but be responsible for a borrower’s legal fees as well.