THE REFEREE’S REPORT IN THIS FORECLOSURE ACTION DID NOT IDENTIFY THE RECORDS RELIED UPON FOR THE CALCULATIONS AND DID NOT ATTACH THE RELEVANT BUSINESS RECORDS; IN ADDITION THE HEARING ON NOTICE REQUIRED BY CPLR 4313 WAS NOT HELD (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the referee’s report in this foreclosure action was deficient because the business records used for the calculations were not identified or attached. In addition, the referee did not hold the evidentiary hearing required by CPLR 4313:

“The report of a referee should be confirmed whenever the findings are substantially supported by the record, and the referee has clearly defined the issues and resolved matters of credibility” … . Here, with respect to the amount due on the mortgage loan, the referee based his findings on the affidavit of William Randolph, an employee of Seterus, Inc., the purported servicer of the mortgage loan, who asserted the total amount then due on the mortgage loan. Randolph, however, failed to identify the basis for his calculations, stating generally that the information in his affidavit was taken from the “business activities” of Seterus, Inc. Nor did Randolph attach any business records to his affidavit. Accordingly, Randolph’s assertions regarding the date of the defendant’s default in making his mortgage payments and the total sum due and owing under the mortgage loan constituted inadmissible hearsay and lacked probative value … . Thus, the referee’s findings with respect to the total amount due upon the mortgage loan, as well as payments for taxes, insurance, and other advances, were not substantially supported by the record … .

Further, the referee should not have computed the amount due on the mortgage loan without holding a hearing on notice to the defendant. CPLR 4313 provides in relevant part that “[u]nless the order of reference otherwise provides, the referee shall forthwith notify the parties of a time and a place for the first hearing to be held.” Here, there was no language in the order of reference indicating that a hearing was unnecessary. [plaintiff’s] contention that the defendant waived his right to a hearing is without merit … . Thus, the defendant was entitled to notice pursuant to CPLR 4313 … . Onewest Bank, FSB v Feffer, 2022 NY Slip Op 06707, Second Dept 11-23-22

Practice Point: In a foreclosure action, if the referee’s report does not identify the records relied upon for the calculations and does not attach those records, the report should not be confirmed. In addition, absent language in the order indication a hearing is not necessary, the calculations should not be made unless a hearing on notice pursuant to CPLR 4313 has been held.