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THE BANK IN THIS FORECLOSURE ACTION WAS NOT REQUIRED TO MEET THE 90-DAY-NOTICE REQUIREMENT OF RPAPL 1304 BECAUSE THE DEFENDANT HAD MOVED FROM THE RESIDENCE; HOWEVER THE BANK WAS STILL REQUIRED BY RPAPL 1304 TO PROVIDE NOTICE OF THE FORECLOSURE TO THE DEFENDANT; THE PROOF THAT NOTICE WAS MAILED WAS INSUFFICIENT (SECOND DEPT).

The Second Department determined the loan in question in this foreclosure proceeding was a “home loan” within the meaning of RPAPL 1304 and therefore the notice requirements of RPAPL 13O4 applied. The bank argued the loan was not a “home loan” because the defendant no longer lived on the property. The Second Department held that, because the defendant had moved, the 90-day-notice required by RPAPL 1304 did not apply, but the bank was still obligated to notify the defendants of the foreclosure action. Because the bank did not submit sufficient proof of compliance with the notice provisions of RPAPL 1304, the bank’s motion for summary judgment was properly denied:

… [W]hile finding, pursuant to RPAPL 1304(3), that “[g]iven that Defendant no longer occupies the residence as his principal dwelling place, the ninety-day period specified in the notice is inapplicable,” the Supreme Court properly concluded that “Defendant’s loan qualified as a ‘home loan’ under RPAPL § 1304(5) due to the fact that the home was Defendant’s primary residence from the time of the loan until he was transferred to California in 2011,” and that, “[t]herefore, Plaintiff needed to serve statutory notice pursuant to RPAPL § 1304 on Defendant by first class mail and certified mail.” …

To establish its compliance with the notice requirements of RPAPL 1304, the plaintiff submitted the affidavit of its employee, Takesha Brown, a document execution specialist. Although Brown stated in her affidavit that the RPAPL 1304 notices were mailed by certified and regular first-class mail, she did not attest to having personal knowledge of the mailing, and the plaintiff failed to attach, as exhibits to the motion, any documents to prove that the notices were actually mailed to the defendant … . In addition, the plaintiff failed to provide “proof of a standard office mailing procedure designed to ensure that items are properly addressed and mailed, sworn to by someone with personal knowledge of the procedure” … . Nationstar Mtge., LLC v Jong Sim, 2021 NY Slip Op 04979, Second Dept 9-15-21

 

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THE BANK IN THIS FORECLOSURE ACTION WAS NOT REQUIRED TO DEMONSTRATE IT WAS A LICENSED DEBT COLLECTION AGENCY PURSUANT TO THE NYC ADMINISTRATIVE CODE; THE BANK DID NOT ATTACH THE BUSINESS RECORDS NECESSARY TO DEMONSTRATE DEFENDANT’S DEFAULT (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Iannacci, determined: (1) the bank in this foreclosure action did not have to allege it was a licensed “debt collection agency” pursuant to the NYC Administrative Code (20-490); (2) the proof of defendant’s default was inadmissible hearsay:

A judicial foreclosure action such as the one at bar does not constitute the sort of tactics “shocking to the conscience of ordinary people”—like phone calls at unreasonable hours and other threatening behavior—that the subject Administrative Code provisions were enacted to address. Furthermore, the particular requirements and prohibitions placed upon debt collectors under the Administrative Code are concerned with ensuring that consumers can verify that payment on a debt is actually due, learn the correct amount of the debt, and meaningfully communicate with the debt collection agency about the debt … . In the context of judicial foreclosure, the state statutory scheme operates to protect homeowners and ensure fairness in the process, in a far more comprehensive manner and in ways that might not be entirely consistent with the Administrative Code provisions. * * *

… [T]he plaintiff failed to sustain its initial burden of demonstrating that the defendants defaulted in the repayment of the subject note. To establish such default, the plaintiff relied upon an affidavit of a representative of its loan servicer, whose averment regarding the defendants’ default was based upon her review of unidentified business records. Inasmuch as no business records were attached to, or otherwise incorporated into, the affidavit, this averment constituted inadmissible hearsay lacking in probative value … . Citibank, N.A. v Yanling Wu, 2021 NY Slip Op 04902, Second Dept 9-1-21

 

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THE 2011 ACCELERATION OF THE DEBT WAS REVOKED BY THE 2017 REVOCATION OF THE ACCELERATION RENDERING THE 2018 FORECLOSURE ACTION TIMELY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the 2018 foreclosure action was timely because the 2011 acceleration of the debt was revoked in 2017:

… [A]lthough the defendants demonstrated … the six-year statute of limitations began to run in July 2011, when the plaintiff accelerated the mortgage debt through its commencement of the 2011 action … , the plaintiff established that the April 2017 de-acceleration notice sent to the defendants revoked the acceleration of the mortgage debt. Since the March 2018 action was commenced within six years of the revocation of the mortage acceleration, the March 2018 action was not time barred … . Accordingly, the defendants’ motion for summary judgment dismissing the complaint … should have been denied. U.S. Bank N.A. v Papanikolaw, 2021 NY Slip Op 04777, Second Dept 8-25-21

 

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THE DEFENDANT’S CONCLUSORY AFFIDAVIT BLAMING THE DEFAULT JUDGMENT ON HIS PRIOR ATTORNEY WAS NOT A SUFFICIENT BASIS FOR VACATING THE DEFAULT JUDGMENT IN THIS FORECLOSURE ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the defendant’s (Echevarria’s) affidavit blaming the default in this foreclosure action on his prior attorney was not sufficient to support vacating the default judgment:

… [W]hile CPLR 2005 allows courts to excuse a default due to law office failure, it was not the Legislature’s intent to routinely excuse such defaults, and mere neglect will not be accepted as a reasonable excuse” … . “A conclusory, undetailed and uncorroborated claim of law office failure does not amount to a reasonable excuse” … .

Echevarria submitted an affidavit in which he asserted that his defaults “were due entirely to [the] negligence” of his prior attorney, who, without Echevarria’s knowledge, failed to file an answer to the complaint or opposition to the plaintiff’s motion for leave to enter a default judgment against Echevarria. According to his affidavit, Echevarria only learned of the defaults upon receiving notice of the foreclosure sale. We agree with the plaintiff that Echevarria’s claim of law office failure, which was based solely on the “conclusory and unsubstantiated” allegations in his affidavit, was insufficient to amount to a reasonable excuse … . Wilmington Sav. Fund Socy., FSB v Rodriguez, 2021 NY Slip Op 04784, Second Dept 8-25-21

 

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IN THE CONTEXT OF THIS COMPLICATED FORECLOSURE DECISION, THE 2ND DEPARTMENT EXPLAINED (1) WHEN EVIDENCE SUBMITTED IN REPLY CAN BE CONSIDERED AND (2) THE CRITERIA FOR THE BUSINESS RECORDS EXCEPTION TO THE HEARSAY RULE (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, addressed (1) when evidence presented in reply can be considered and (2) how to meet the criteria of the business records exception to the hearsay rule:

Supreme Court … should have considered the Lee affidavit … . … [T]he defendant did not object to the plaintiff’s submission of the Lee affidavit, despite its being submitted for the first time in reply, and does not raise any objection to its admission on appeal. In any event, “[a]lthough a party moving for summary judgement cannot meet its prima facie burden by submitting evidence for the first time in reply” … , the Lee affidavit was an exception to that rule, as it was submitted in response to a specific argument raised for the first time in opposition to the plaintiff’s motion and in support of the defendant’s cross motion … , and the defendant could have responded to the Lee affidavit in his reply papers in further support of his cross motion … . * * *

… [W]hile the Lee affidavit was sufficient to lay a proper foundation for the admission of a business record pursuant to CPLR 4518(a) … , Lee failed to identify the records upon which she relied in making the statements, and the plaintiff failed to submit copies of the records themselves. “[T]he business record exception to the hearsay rule applies to a ‘writing or record’ … . . . [and] it is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” … . “While a witness may read into the record from the contents of a document which has been admitted into evidence, a witness’s description of a document not admitted into evidence is hearsay” … . Thus, Lee’s assertions as to the contents of the plaintiff’s records were “inadmissible hearsay to the extent that the records she purport[ed] to describe were not submitted with her affidavit” … . Moreover, while “a witness may always testify as to matters which are within his or her personal knowledge through personal observation” … , Lee did not attest to such personal knowledge regarding the physical whereabouts of the consolidated note during the relevant time … . U.S. Bank N.A. v Pickering-Robinson, 2021 NY Slip Op 04775, Second Dept 8-25-21​

 

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IN THIS FORECLOSURE ACTION THE DEATH OF THE MORTGAGOR/PROPERTY OWNER DID NOT TRIGGER AN AUTOMATIC STAY BECAUSE THE MORTGAGOR/PROPERTY OWNER DIED INTESTATE AND THE ACTION COULD CONTINUE AGAINST THE DISTRIBUTEES WITHOUT THE APPOINTMENT OF A REPRESENTATIVE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that the death of the mortgagor/property owner in this foreclosure action did not divest the court of jurisdiction because the mortgagor/property owner died intestate and the suit could continue against the distributees without the appointment of a representative:

“Generally, the death of a party divests a court of jurisdiction to act, and automatically stays proceedings in the action pending the substitution of a personal representative for the decedent” … . “In most instances a personal representative appointed by the Surrogate’s Court should be substituted in the action to represent the decedent’s estate”  … . “However, if a party’s death does not affect the merits of a case, there is no need for strict adherence to the requirement that the proceedings be stayed pending substitution” … . “Where a property owner dies intestate, title to real property is automatically vested in his or her distributees” … . Under such circumstances, “a foreclosure action may be commenced directly against the distributees” … . Thus, where a mortgagor/property owner dies intestate and the mortgagee does not seek a deficiency judgment, the mortgagor/property owner’s death “does not affect the merits of a case, [and] there is no need for strict adherence to the requirement that the proceedings be stayed pending substitution” … . Wells Fargo Bank, N.A. v Miglio, 2021 NY Slip Op 04780, Second Dept 8-25-21

 

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PLAINTIFF IN THIS FORECLOSURE ACTION DID NOT PRESENT SUFFICIENT PROOF OF COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 OR THE MORTGAGE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff’s proof of compliance with the notice requirements of RPAPL 1304 and the mortgage in this foreclosure action was insufficient:

RPAPL 1304 provides that “at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower . . . including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower” (RPAPL 1304[1]). “Strict compliance with RPAPL 1304 notice to the borrower or borrowers is a condition precedent to the commencement of a foreclosure action” … . RPAPL 1304 requires that the notice be sent by registered or certified mail, and also by first-class mail, to the last known address of the borrower … . The plaintiff can establish strict compliance with RPAPL 1304 by submitting domestic return receipts, proof of a standard office procedure designed to ensure that items are properly addressed and mailed, or an affidavit from someone with personal knowledge that the mailing of the RPAPL 1304 notice actually occurred … .

… [T]he plaintiff failed to establish, prima facie, that the mailing of the RPAPL 1304 notice by first-class mail actually occurred. Graves [document management specialist] did not aver that she had personal knowledge of the mailing, did not describe a standard office procedure designed to ensure that items are properly addressed and mailed, and did not attach proof of first-class mailing of the RPAPL 1304 notice … . Moreover, the plaintiff failed to establish, prima facie, that the mailing of the notice of default in accordance with the terms of the mortgage agreement actually occurred … . Federal Natl. Mtge. Assn. v Donovan, 2021 NY Slip Op 04748, Second Dept 8-25-21

 

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DEFENDANT IN THIS FORECLOSURE ACTION UNSUCCESSFULLY RAISED USURY AS AN AFFIRMATIVE DEFENSE; DEFENDANT ARGUED THE BROKER’S COMMISSION, TITLE INSURANCE COST AND ATTORNEY’S FEE CONSTITUTED A COVER FOR USURY (SECOND DEPT).

The Second Department determined the broker’s commission, title insurance and attorney’s in connection with defendant’s (Chandler’s) mortgage were not a cover for usury. Chandler had raised usury as an affirmative defense to foreclosure:

General Obligations Law § 5-501(2) provides that “[n]o person or corporation shall, directly or indirectly, charge, take or receive any money, goods or things in action as interest on the loan or forbearance of any money, goods or things in action at a rate exceeding the [maximum permissible interest rate].” In New York, the civil usury statute provides that “[t]he maximum interest rate permissible on a loan is 16% per annum, and any interest rate in excess of that amount is usurious” … . “A usurious contract is void and relieves the borrower of the obligation to repay principal and interest thereon” … . There is a strong presumption against a finding of usury, which must be established by clear and convincing evidence … . …

Chandler claimed that three charges, a $14,000 mortgage broker’s commission, a title insurance charge of $7,212.50, and a $1,000 fee paid to her attorney at the closing, were a cover for usury. “[W]hether a commission is a cover for usury is a factual issue which must be demonstrated by clear and convincing evidence” … . If itemized in writing to the borrower, reasonable fees, charges and costs for, among other things, title insurance and legal services are not considered interest on a loan secured by a one- or two-family owner-occupied residence  Notably, “[a]n imprecise … . disclosure . . . constitutes a bona fide error of fact which is insufficient to establish the requisite usurious intent” … . Zanfini v Chandler, 2021 NY Slip Op 04681, Second Dept 8-11-21

 

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THE LOAN SERVICER’S AFFIDAVIT IN THIS FORECLOSURE ACTION LAID A PROPER FOUNDATION FOR THE BUSINESS RECORDS DESCRIBED IN IT, BUT THE RECORDS THEMSELVES WERE NOT ATTACHED, RENDERING THE AFFIDAVIT INADMISSIBLE HEARSAY (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff’s representative in this foreclosure action demonstrated in her affidavit that she was familiar with the relevant business records, but did not attach the records. Therefor the affidavit was hearsay:

… [T]he plaintiff submitted … the affidavit of Denise Dickman, … the plaintiff’s loan servicer, who averred that she was familiar with the business records maintained … for the purpose of servicing mortgage loans for the plaintiff and that she had personal knowledge of the manner in which those business records were created. Dickman further averred that the satisfaction of mortgage was intended to be recorded against the second mortgage, under which the defendant had defaulted and which [the bank] had “charged off as uncollectable.” However, “[d]ue to a clerical error, a loan number was not included with the processing request for the charge off,” and, consequently, a satisfaction of mortgage was “prepared, executed and filed in error” … .

Since Dickman attested that she was familiar with [the bank’s] record-keeping practices and procedures, her affidavit laid a proper foundation for the admission of the business records on which she relied in asserting that the satisfaction of mortgage was erroneously filed due to a clerical error … . However, Dickman’s assertions as to the contents of those records were inadmissible since the records themselves were not submitted with her affidavit … . U.S. Bank N.A. v Kandra, 2021 NY Slip Op 04679, Second Dept 8-11-21

 

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THE BANK’S EVIDENCE OF DEFENDANT’S DEFAULT AND COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 AND THE MORTGAGE WAS INSUFFICIENT (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined plaintiff bank did not present sufficient evidence of defendant’s default or the bank’s compliance the the notice requirements of the mortgage and RPAPL 1304:

… [Plaintiff’s representative] did not attest that he was personally familiar with the record-keeping practices and procedures of the plaintiff or those of the plaintiff’s predecessor in interest, or that the records generated by the plaintiff’s predecessor in interest were incorporated into the plaintiff’s own records or routinely relied upon in its business (see CPLR 4518[a] … ), and failed to attach any business records of the plaintiff or its predecessor in interest to his affidavit ,,, . Moreover, to the extent that the …. employee’s purported knowledge of [defendant’s] default was based upon his review of unidentified business records … , his affidavit constituted inadmissible hearsay and lacked probative value … . …

The plaintiff failed to submit an affidavit of service or any proof of mailing by the post office demonstrating that it properly served [defendant]  pursuant to the terms of RPAPL 1304 … . The … employee’s affidavit was insufficient to establish that the notice was sent to [defendant] in the manner required by RPAPL 1304, as the employee did not provide evidence of the plaintiff’s standard office mailing procedure and provided no evidence of the actual mailing … . Bank of N.Y. Mellon v DeLoney, 2021 NY Slip Op 04655, Second Dept 8-11-21

 

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