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STRICT COMPLIANCE WITH THE NOTICE OF FORECLOSURE PROVISIONS IN RPAPL 1304 IS REQUIRED; HERE THE BANK FAILED TO SHOW THAT IT SENT RPAPL 1304 NOTICES ADDRESSED INDIVIDUALLY TO DEFENDANTS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank’s failure to comply with the notice of foreclosure requirements of RPAPL 1304 precluded summary judgment:

RPAPL 1304(1) 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.” “Strict compliance with RPAPL 1304 notice to the borrower or borrowers is a condition precedent to the commencement of a foreclosure action” … . RPAPL 1304(2) states that “[t]he notices required by this section shall be sent by the lender, assignee or mortgage loan servicer in a separate envelope from any other mailing or notice” … .

… [A] “‘defense based on noncompliance with RPAPL 1304 may be raised at any time'” prior to the entry of a judgment of foreclosure and sale … . … [T]he plaintiff failed to establish its strict compliance with the service requirements of RPAPL 1304. … [T]he plaintiff failed to show that it sent RPAPL 1304 notices addressed individually to each of those defendants as required by the statute … . HSBC Bank USA, N.A. v Stein, 2025 NY Slip Op 04638, Second Dept 8-13-25

Practice Point: Strict compliance with the notice of foreclosure provisions of RPAPL 1304 is required. The notices must be sent to defendants individually.

 

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BUSINESS RECORDS SUBMITTED BY A PERSON WHO DOES NOT ALLEGE PERSONAL KNOWLEDGE OF THE PARTY’S RECORD-KEEPING PRACTICES AND PROCEDURES CANNOT BE RELIED UPON BY THE REFEREE IN A FORECLOSURE PROCEEDING (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the referee’s report in this foreclosure action should not have been confirmed because relied-upon business records were not incorporated into an affidavit from someone with personal knowledge of the plaintiff’s record-keeping practices and procedures:

… [T]he supplemental business records were not identified by [the affiant] “or otherwise incorporated into[ ] her affidavit. Rather, those records were attached as an exhibit to [a letter] of the plaintiff’s attorney, and the attorney did not allege personal knowledge of the plaintiff’s record-keeping practices and procedures” … . For this reason, the referee’s findings were not substantially supported by the record … . Citimortgage, Inc. v Rooney, 2025 NY Slip Op 04624, Second Dept 8-13-25

Practice Point: Here the referee’s report relied on business records submitted attached to a letter from plaintiff’s attorney. Because the attorney did not allege personal knowledge of the plaintiff’s record-keeping practices and procedures, the records should not have been considered and the referee’s report was not substantially supported by the record.

 

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ALTHOUGH THE FORECLOSURE CAUSE OF ACTION WAS DISMISSED AFTER TRIAL BECAUSE THE BANK FAILED TO PROVE STANDING AND COMPLIANCE WITH RPAPL 1304, THE JUDGE SHOULD NOT HAVE, SUA SPONTE, CANCELLED AND DISCHARGED THE MORTGAGE, RELIEF DEFENDANT HAD NOT REQUESTED (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined the judge did not have the power to sua sponte cancel and discharge the mortgage. After trial, the foreclosure cause of action was dismissed because the bank failed to demonstrate standing to foreclose and failed to demonstrate compliance with RPAPL 1304:

The Supreme Court erred in, sua sponte, directing the cancellation and discharge of record the mortgage. The court may grant relief warranted pursuant to a general prayer for relief “if the relief granted is not too dramatically unlike the relief sought, the proof offered supports it, and there is no prejudice to any party” … . Here, in his answer, the defendant sought, among other things, dismissal of the complaint insofar as asserted against him but did not seek cancellation and discharge of record the mortgage. Thus, the court’s sua sponte directive to cancel and discharge of record the mortgage was dramatically unlike the relief requested … . Moreover, the proof adduced at trial did not support the relief granted … , and the plaintiff was prejudiced, since it was not afforded an opportunity to be heard on the issue of the propriety of the relief granted, which deprived it of its security interest in the premises … . Bank of Am., N.A. v Amigon, 2025 NY Slip Op 04536, Second Dept 8-6-25

Practice Point: Here, although the foreclosure cause of action was dismissed on defendant’s motion after trial, the judge did not have the authority to cancel and discharge the mortgage, relief that was not requested by the defendant.

 

THE FORECLOSURE ABUSE PREVENTION ACT (FAPA) APPLIES RETROACTIVELY; THE FORECLOSURE ACTION HERE IS THEREFORE TIME-BARRED (THIRD DEPT).

The Third Department, reversing Supreme Court, reiterated that the Foreclosure Abuse Prevention Act (FAPA) applies retroactively. Here the foreclosure action was deemed time-barred because the bank’s attempt to stop the running of the statute of limitations by de-accelerating the debt was precluded by FAPA:

… [T]his action is time-barred, and must be dismissed. “[T]he six-year statute of limitations applicable to a foreclosure action begins to run when a mortgage debt has been accelerated by the commencement of an action seeking the entire sum due” … . The first action was commenced in 2007, and such commencement accelerated the loan and called due the entire outstanding balance; thus, the six-year statute of limitations began to run at that time. Pursuant to FAPA, enacted during the pendency of this action, the parties’ 2012 stipulation discontinuing the first action, by itself, did not reset the statute of limitations, which expired in 2013 (see CPLR 3217 [e] …). Plaintiff did not commence this action until 2019, well after expiration of the statute of limitations … . Thus, defendant demonstrated prima facie that this action, which is based upon the same mortgage debt as the first action, is time-barred (see CPLR 213 [4]). In opposition to defendant’s showing, plaintiff failed to raise a triable issue of fact, and Supreme Court should have dismissed the foreclosure action … .

We have recently addressed plaintiff’s position that FAPA does not apply retroactively, and we again reject it. U.S. Bank N.A. v Craft, 2025 NY Slip Op 04510, Third Dept 7-31-25

Practice Point: This decision demonstrates how the Foreclosure Abuse Prevention Act (FAPA) can be applied retroactively to render a foreclosure action time-barred.

 

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IN A FORECLOSURE CONTEXT, THE BANK, WHEN MOVING FOR A DEFICIENCY JUDGMENT, GETS TWO CHANCES TO DEMONSTRATE THE VALUE OF THE PROPERTY; IF THE FIRST SUBMISSION IS DEEMED INADEQUATE, THE BANK MUST BE ALLOWED TO TRY AGAIN (FIRST DEPT).

The First Department, reversing Supreme Court, determined the bank in this foreclosure action should have been given a second opportunity to present evidence of the value of the property for purposes of a deficiency judgment:

A lender in a foreclosure action moving for a deficiency judgment “bears the initial burden of demonstrating, prima facie, the property’s fair market value as of the date of the auction sale” … . Upon a lender’s motion for a deficiency judgment, RPAPL 1371(2) provides, in part: “the court, whether or not the respondent appears, shall determine, upon affidavit or otherwise as it shall direct, the fair and reasonable market value of the mortgaged premises as of the date such premises were bid in at auction or such nearest earlier date as there shall have been any market value thereof and shall make an order directing the entry of a deficiency judgment.”

The Court of Appeals has interpreted this provision as “a directive that a court must determine the mortgaged property’s ‘fair and reasonable market value’ when a motion for a deficiency judgment is made. As such, when the court deems the lender’s proof insufficient in the first instance, it must give the lender an additional opportunity to submit sufficient proof, so as to enable the court to make a proper fair market value determination” … . Valley Natl. Bank v 252 W. 31 St. Corp., 2025 NY Slip Op 04528, First Dept 7-31-25

Practice Point: In a foreclosure action, if the bank is seeking a deficiency judgment it gets two shots at proving the value of the property.

 

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IN THIS FORECLOSURE ACTION, THE REFEREE’S AFFIDAVIT DID NOT LAY A PROPER FOUNDATION FOR ALL THE DOCUMENTS RELIED UPON; THEREFORE THE REFEREE’S REPORT SHOULD NOT HAVE BEEN CONFIRMED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined a proper foundation was not laid for the documents supporting the referee’s report:

In computing the amount due, the referee relied upon an affidavit of merit from an authorized signer of PNC Bank, National Association (hereinafter PNC). Although the referee stated in his report that PNC was the plaintiff’s servicer, the documents in the record indicate that the plaintiff and PNC merged into one entity. Although the authorized signer stated in her affidavit that she was personally familiar with the record-keeping practices and procedures of PNC, her employer, she did not state that “she was personally familiar with the record-keeping practices and procedures” of the plaintiff … or that the records of any other entity, such as the plaintiff or a prior loan servicer, “were provided to [PNC] and incorporated into [PNC’s] own records, that [PNC] routinely relied upon such records in its business, or that she had personal knowledge of business practices and procedures of any other relevant entity” … . Consequently, the affidavit did not provide a proper foundation for the business records allegedly submitted with the affidavit. Further, although business records are included in the record, the referee stated that the documents submitted by the plaintiff were the authorized signer’s affidavit “and annexed exhibit: copies of Mortgage and Note,” and the referee did not refer to the business records. National City Mtge. Co. v Wercberger, 2025 NY Slip Op 04488, Second Dept 7-30-25

Practice Point: Consult this decision for an example of common flaws in the evidentiary foundation for documents submitted in support of a referee’s report in a foreclosure proceeding.

 

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THE PURPOSE AND REACH OF THE FORECLOSURE ABUSE PREVENTION ACT (FAPA) EXPLAINED IN SOME DETAIL (THIRD DEPT).

The Third Department, in a full-fledged opinion by Justice Reynolds Fitzgerald, determined that the Foreclosure Abuse Prevention Act (FAPA) applied and required the dismissal of the complaint on statute of limitations grounds:

… FAPA’s enactment amended numerous CPLR provisions as well as other statutes, including: CPLR 213 (4) (a), stating that “[i]n any action [upon a note or mortgage], if the statute of limitations is raised as a defense, and if that defense is based on a claim that the [note] at issue was accelerated prior to, or by way of commencement of a prior action, a plaintiff shall be estopped from asserting that the instrument was not validly accelerated, unless the prior action was dismissed based on an expressed judicial determination, made upon a timely interposed defense, that the instrument was not validly accelerated”; CPLR 203 (h), stating that “[o]nce a cause of action upon a [note or mortgage] has accrued, no party may, in form or effect, unilaterally waive, postpone, cancel, toll, revive, or reset the accrual thereof, or otherwise purport to effect a unilateral extension of the limitations period prescribed by law to commence an action and to interpose the claim”; CPLR 3217 (e), stating that “[i]n any action on [a note or mortgage], the voluntary discontinuance of such action, whether on motion, order, stipulation or by notice, shall not, in form or effect, waive, postpone, cancel, toll, extend, revive or reset the limitations period to commence an action and to interpose a claim”; and CPLR 205-a (a), prohibiting the six-month period savings provision within which a plaintiff may recommence an action if the original action was terminated due to any form of neglect.

Having determined that FAPA applies to this foreclosure action and turning to the merits underlying defendant’s motion for summary judgment based upon the statute of limitations, plaintiff is estopped from asserting that the mortgage debt was not validly accelerated pursuant to CPLR 213 (4), since the 2015 action was dismissed for plaintiff’s failure to prosecute and was not dismissed based upon an expressed judicial determination that the debt was not validly accelerated … . HSBC Bank USA, N.A. v Vesely, 2025 NY Slip Op 04279, Third Dept 7-24-25

Practice Point: Consult this opinion for an in-depth discussion of the purpose and reach of the Foreclosure Abuse Prevention Act (FAPA).

 

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FILING A REQUEST FOR JUDICIAL INTERVENTION CONSTITUTED TAKING PROCEEDINGS FOR THE ENTRY OF JUDGMENT WITHIN ONE YEAR OF DEFENDANT’S DEFAULT; THE FORECLOSURE ACTION SHOULD NOT HAVE BEEN DISMISSED AS ABANDONED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined this foreclosure action should not have been dismissed as abandoned on the ground plaintiff failed to take action within one year of defendant’s default. In fact plaintiff filed a request for judicial intervention which constituted taking “proceedings for the entry of judgment within one year after the default:”

Pursuant to CPLR 3215(c), “[i]f the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned . . . unless sufficient cause is shown why the complaint should not be dismissed.” To avoid dismissal pursuant to CPLR 3215(c), “[i]t is not necessary for a plaintiff to actually obtain a default judgment within one year of the default” … . “Rather, ‘as long as proceedings are being taken, and these proceedings manifest an intent not to abandon the case but to seek a judgment, the case should not be subject to dismissal'” … .

Here, the plaintiff demonstrated that, within one year after the defendant’s default, the plaintiff filed a request for judicial intervention that sought a foreclosure settlement conference as mandated by CPLR 3408. “Where, as here, a settlement conference is a necessary prerequisite to obtaining a default judgment (see CPLR 3408[a], [m]), a formal judicial request for such a conference in connection with an ongoing demand for the ultimate relief sought in the complaint constitutes ‘proceedings for entry of judgment’ within the meaning of CPLR 3215(c)” … . U.S. Bank N.A. v Newson, 2025 NY Slip Op 04269, Second Dept 7-23-25

Practice Point: The CPLR does not require a plaintiff to obtain a default judgment within a year of the default to preclude dismissal. Plaintiff need only take some action which indicates it does not intend to abandon the action. Here the filing of a request for judicial intervention was sufficient.

 

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PLAINTIFF’S FAILURE TO COMPLY WITH A STATUS CONFERENCE ORDER REQUIRING THE FILING OF AN APPLICATION FOR AN ORDER OF REFERENCE DID NOT JUSTIFY THE SUA SPONTE DISMISSAL OF THE COMPLAINT (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined plaintiff’s failure to comply with status conference order to file an application for an order of reference by a date certain did not warrant a sua sponte dismissal of the complaint:

“[A] court’s power to dismiss a complaint, sua sponte, is to be used sparingly and only when extraordinary circumstances exist to warrant dismissal” … . “Here, the plaintiff’s failure to comply with the status conference order directing it to file an application for an order of reference was not a sufficient ground upon which to direct dismissal of the complaint” … . … Supreme Court should have granted those branches of the plaintiff’s motion which were pursuant to CPLR 5015(a) to vacate the dismissal order and to restore the action to the active calendar … . Federal Natl. Mtge. Assn. v Davis, 2025 NY Slip Op 04232, Second Dept 7-23-25

Practice Point: Failure to comply with a status conference order to apply for an order of reference by a certain date does not justify a judge’s sua sponte dismissal of the complaint.

 

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A PARTY WHO IS NOT A OBLIGOR ON THE NOTE, BUT IS A SIGNATORY ON THE MORTGAGE, IS SUBJECT TO FORECLOSURE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined that defendant (Lucy), who was not an obligor on the note, but who executed the mortgage, was subject to foreclosure:

A party who is not an obligor on a note but is a signatory on the corresponding mortgage, while not personally liable for the debt, is a mortgagor and has agreed to mortgage his or her interest in the property as security for the debt … . Here, although Lucy did not execute the Obligation to Pay and is not personally liable for the payment obligation, she executed the mortgage whereby she pledged her interest in the property as security for the obligations set forth in the co-ownership agreement and the Obligation to Pay, and thus, Lucy’s interest in the property is subject to foreclosure … . Deutsche Bank Trust Co. Ams. v Zzoha, 2025 NY Slip Op 03793, Second Dept 6-25-25

Practice Point: A party who is not on obligor on the note but is a signatory on the corresponding mortgage is subject to foreclosure.

 

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