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FAILURE TO PROVE COMPLIANCE WITH THE NOTICE-OF-FORECLOSURE PROVISIONS OF RPAPL 1304 REQUIRED REVERSAL OF SUMMARY JUDGMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the plaintiff’s failure to prove compliance with the notice requirements in RPAPL 1304 required reversal in this foreclosure action:

… [T]he plaintiff failed to demonstrate, prima facie, its strict compliance with RPAPL 1304. To that end, the plaintiff submitted an affidavit of Sarah L. Stonehocker, a vice president of loan documentation employed by the plaintiff’s loan servicer, Wells Fargo Bank, N.A. (hereinafter Wells Fargo), with attachments, which were insufficient to establish compliance with RPAPL 1304. While Stonehocker averred that she had personal knowledge of Wells Fargo’s business records and that, according to the business records she reviewed, 90-day notices were served via certified and first-class mail at the subject property, Stonehocker did not attest that she was familiar with the standard office mailing procedures of LenderLive, LLC (hereinafter LenderLive), the third-party vendor that apparently sent the RPAPL 1304 notices on behalf of the plaintiff. Thus, Stonehocker’s “affidavit did not establish proof of a standard office mailing procedure designed to ensure that items are properly addressed and mailed” … .

Moreover, Stonehocker’s affidavit failed to address the nature of Wells Fargo’s relationship with LenderLive and whether LenderLive’s records were incorporated into Wells Fargo’s own records or routinely relied upon in its business… . Thus, Stonerhocker’s affidavit failed to lay a foundation for the admission of a transaction report generated by LenderLive (see CPLR 4518[a] …). “Finally, the tracking numbers on the copies of the 90-day notices submitted by the plaintiff, standing alone, did not suffice to establish, prima facie, proper mailing under RPAPL 1304” … . U.S. Bank N.A. v Nahum, 2024 NY Slip Op 05581, Second Dept 11-13-24

Practice Point: Reversal of summary judgment because the bank failed to prove the RPAPL 1304 notice of foreclosure was properly mailed to defendant(s) is becoming less frequent, but there have been hundreds of reversals on this same ground over at least the last ten years.

 

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THE FORECLOSURE ABUSE PREVENTION ACT (FAPA) APPLIES RETROACTIVELY TO THE 2005 DISONTINUANCE OF THE FORECLOSURE ACTION RENDERING THE ACTION COMMENCED IN 2015 TIME-BARRED (SECOND DEPT).

The Second Department, in a complex decision addressing issues not summarized here, determined the Foreclosure Abuse Prevention Act (FAPA) (CPLR 3217) applied retroactively to the 2005 voluntary discontinuance. Therefore the instant action, which was commenced in 2015, was time-barred:

The Foreclosure Abuse Prevention Act … ; hereinafter FAPA) amended CPLR 3217, which governs the voluntary discontinuance of an action, to provide that “[i]n any action on an instrument described under [CPLR 213(4)], 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, unless expressly prescribed by statute” … . Thus, applying FAPA, the voluntary discontinuance of the 2005 action did not serve to reset the statute of limitations … .

Wells Fargo’s contention that CPLR 3217(e), added under FAPA, was not intended to have retroactive effect is without merit. FAPA took effect “immediately,” applying “to all actions commenced on an instrument described under [CPLR 213(4)] in which a final judgment of foreclosure and sale has not been enforced” … . Thus, “[a]lthough the Legislature did not explicitly state that FAPA should apply retroactively, it clearly indicated that it should” … . Wells Fargo Bank, N.A. v Edwards, 2024 NY Slip Op 05368, Second Dept 10-30-24

Practice Point: The Foreclosure Abuse Prevention Act (FAPA) was applied retroactively here to a 2005 voluntary discontinuance of the foreclosure action, rendering the action started in 2015 time-barred.​

 

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RETROACTIVE APPLICATION OF THE FORECLOSURE ABUSE PREVENTION ACT (FAPA) WHERE FINAL JUDGMENT HAS NOT BEEN RENDERED DOES NOT VIOLATE PLAINTIFF’S DUE PROCESS RIGHTS; HERE THE DEBT WAS ACCELERATED IN 2008 AND THE CURRENT FORECLOSURE PROCEEDING IS THEREFORE UNTIMELY PURSUANT TO THE FAPA (THIRD DEPT). ​

The Third Department, in a full-fledged opinion by Justice Clark, determined the Foreclosure Abuse Prevention Act (FAPA) applied retroactively to render the foreclosure action untimely because the debt had been accelerated by a prior foreclosure proceeding in 2008. The Third Department determined the retroactive application of the FAPA to foreclosure actions where final judgment has not been rendered did not violate plaintiff’s due process rights:

In drafting FAPA, the Senate and Assembly sponsors both expressed an urgent need to correct judicial interpretation with unintended consequences which allowed noteholders to unilaterally “manipulate statutes of limitations to their advantage” and to the detriment of homeowners … . … [W]e find that FAPA should be applied retroactively to effect its beneficial purpose … . * * *

… [W]e find that retroactive application of FAPA to foreclosure actions where a final judgment has not been enforced does not violate plaintiff’s due process rights … . U.S. Bank N.A. v Lynch, 2024 NY Slip Op 05261, Third Dept 10-24-24

Practice Point: Where there has been no final judgment, retroactive application of the Foreclosure Abuse Prevention Act (FAPA) to render a foreclosure action untimely does not violate a plaintiff’s due process rights.

 

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THE BANK SUFFICIENTLY PROVED COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 IN THIS FORECLOSURE PROCEEDING; STRONG DISSENT (SECOND DEPT).

The Second Department, affirming summary judgment in favor of plaintiff in this foreclosure action, over a detailed dissent, determined plaintiff had demonstrated compliance with the RPAPL 1304 mailing requirements for the notice of foreclosure. The dissent argued the notice requirements were not strictly complied with. The decision is too detailed to fairly summarize here, but it should be consulted for its discussion of the proof a bank must present on the “RPAPL 1304” notice requirements to warrant summary judgment. U.S. Bank N.A. v Romano, 2024 NY Slip Op 05235, Second Dept 10-23-24

Practice Point: For at least a decade, the appellate courts have reversed summary judgment in foreclosure cases because proof of the bank’s compliance with the notice requirements of RPAPL 1304 was found deficient. Here, over a strong dissent, the proof was deemed adequate. The detailed discussion of the proof requirements, in the majority decision and in the dissent, is instructive on the issue.

 

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THE BANK FAILED TO PROVE STANDING TO FORECLOSE BECAUSE THE NECESSARY BUSINESS RECORDS WERE NOT ATTACHED TO THE FOUNDATIONAL AFFIDAVITS; HOWEVER, THE DEFENDANTS WERE NOT ENTITLED TO SUMMARY JUDGMENT BECAUSE THEY FAILED TO AFFIRMATIVELY PROVE THE BANK DID NOT HAVE STANDING (SECOND DEPT)

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action failed to prove it had standing to foreclose because the necessary business records were not attached to the foundational affidavits. The court noted that Supreme Court properly denied defendants’ motion for summary judgment because the defendants did not prove the bank did not have standing:

“Although [t]he foundation for admission of a business record usually is provided by the testimony of the custodian, the author or some other witness familiar with the practices and procedures of the particular business, it is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” … . Without the introduction of the records themselves, “a witness’s testimony as to the contents of the records is inadmissible hearsay” … .

Here, the plaintiff relied on the affidavits from Jackson and Smith to demonstrate that it had possession of the note prior to commencing this action. The defendants correctly contend that neither Jackson nor Smith attached any business records to their affidavits. Thus, the assertions of Jackson and Smith that the plaintiff had possession of the note prior to commencing this action were inadmissible hearsay and insufficient to establish, prima facie, the plaintiff’s standing … . Bank of N.Y. v Levy, 2024 NY Slip Op 05085, Second Dept 10-16-24

Similar failure of proof in the context of the confirmation of the referee’s report in a foreclosure proceeding, i.e., the failure to produce the business records relied upon by the affiant. Deutsche Bank Natl. Trust Co. v Quaranta, 2024 NY Slip Op 05090, Second Dept 10-16-24

​Practice Point: In a foreclosure proceeding, the failure to attach or produce the business records relied upon by an affiant renders the affidavit inadmissible hearsay.

Practice Point: The bank’s failure to prove it has standing to foreclose (due to the failure to attach the relevant business records to a foundational affidavit) does not entitle defendants to summary judgment on the standing issue. Defendants must affirmatively prove the bank does not have standing to warrant summary judgment in their favor.

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DISMISSAL OF THE COMPLAINT IN THIS FORECLOSURE ACTION WAS NOT IN COMPLIANCE WITH CPLR 3216 OR 22 NYCRR 202.7, AND THERE WAS INSUFFICIENT JUSTIFICATION FOR A “SUA SPONTE” DISMISSAL (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the prerequisites for the dismissal of the complaint in this foreclosure action were not met:

… [T]he Supreme Court failed to serve a written demand upon the plaintiff to resume prosecution of the action and to serve and file a note of issue within 90 days of receipt of the demand (see CPLR 3216[b][3]). Since at least one precondition set forth in CPLR 3216 was not met here, the court was without power to direct dismissal of the complaint pursuant to that statute … .

Pursuant to 22 NYCRR 202.27, a court has discretion to dismiss an action where a plaintiff fails to appear “[a]t any scheduled call of a calendar or at any conference” … . In this case, however, the court attorney referee did not recommend dismissal of the complaint based upon a failure to appear at a conference, but rather for failure to move for an order of reference by a date certain without good cause shown. Thus, the dismissal order, which confirmed the report of the court attorney referee, did not direct dismissal of the complaint based upon a default in appearing at a scheduled conference or calendar call, and 22 NYCRR 202.27 could not have provided the basis for dismissal of the complaint … .

Moreover, “‘[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 a court conference order directing the plaintiff to move for an order of reference was not a sufficient ground upon which to direct dismissal of the complaint … . Bank of Am., N.A. v Banu, 2024 NY Slip Op 04940, Second Dept 10-9-24

Practice Point: The appellate courts will not affirm dismissals of complaints when the statutory and regulatory requirements for dismissal have not been met.

 

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ONCE AGAIN THE FAILURE TO PROVE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 REQUIRED REVERSAL IN A FORECLOSURE ACTION; THE SECOND DEPARTMENT CAREFULLY EXPLAINED ALL THE FLAWS IN THE PROOF (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the proof requirements for sending the RPAPL 1304 notice of foreclosure to the defendants were not met. This frequently recurring error was carefully explained by the Second Department, perhaps in an effort to instruct the bar:

… [T]he plaintiff submitted an affidavit of Kimberly Dutchess, an authorized representative of M & T Bank (hereinafter M & T), the plaintiff’s loan servicer and attorney-in-fact, along with a power of attorney authorizing M & T to act on the plaintiff’s behalf … . Although Dutchess laid a proper foundation for the admission of various business records annexed to her affidavit, inter alia, by attesting to her “familiar[ity] with business records maintained by M & T for the purpose of servicing mortgage loans,” she “failed . . . to attest that [s]he personally mailed the subject notices or that [s]he was familiar with the mailing practices and procedures of [M & T]” at the time the notices were sent … . Nor was Dutchess’s assertion that she “acquired personal knowledge of the matters stated in [her] affidavit by examining the [relevant] business records” sufficient to demonstrate her personal knowledge of M & T’s mailing procedures, since “a review of records maintained in the normal course of business does not vest an affiant with personal knowledge” … . Therefore, Dutchess “failed to establish proof of a standard office practice and procedure designed to ensure that items are properly addressed and mailed” … .

Moreover, although Dutchess’s affidavit laid a proper foundation for the admission of the business records annexed thereto, the content of those records did not demonstrate, prima facie, the plaintiff’s strict compliance with RPAPL 1304 … . The only purported proof of first-class mailing attached to Dutchess’s affidavit was a letter log, which “failed to establish that the 90-day notice was actually mailed to both of the defendants . . . by first-class mail” … . Among other issues, the letter log did not contain any information regarding the method of mailing for any of the documents contained therein. It also contained only one entry for the 90-day notice allegedly mailed to both of the defendants in February 2018, notwithstanding that a “plaintiff must separately mail a 90-day notice to each borrower as a condition precedent to commencing the foreclosure action” … . Furthermore, although the letter log listed Alexander W. Swanson III as the borrower, it did not mention Nancy L. Swanson’s name, and the plaintiff did not provide any records showing that the 90-day notice was mailed to Nancy L. Swanson by first-class mail … . Notably, “[i]t is the business record itself, not the foundational affidavit, that serves as proof of the matter asserted” … . In any event, even if Dutchess had established that she had personal knowledge of M & T’s mailing procedures, her affidavit did not sufficiently clarify any of these issues … . Since the plaintiff did not demonstrate that it mailed the 90-day notices to both of the defendants by first-class mail, it failed to establish, prima facie, its strict compliance with RPAPL 1304 … . Lakeview Loan Servicing, LLC v Swanson, 2024 NY Slip Op 04952, Second Dept 10-9-24

Practice Point: It is not easy to prove compliance with the foreclosure notice requirements in RPAPL 1304 by affidavit. The same flaws in the proof have been the basis for foreclosure reversals for a decade now.​

 

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THE FACT THAT A MORTGAGE IS MERELY INSURED BY HUD OR THE FHA DOES NOT MAKE THE BANK WHICH HOLDS THE MORTGAGE AN ASSIGNEE OF A FEDERAL AGENCY SUCH THAT NEW YORK’S STATUTE OF LIMITATIONS DOES NOT APPLY; A BANK IS NOT AN ASSIGNEE OF HUD OR THE FHA IF IT WAS NOT ASSIGNED THE AUTHORITY TO FORECLOSE THE INSURED MORTGAGE (SECOND DEPT).

The Second Department, affirming Supreme Court, in a full-fledged opinion by Justice Maltese, determined New York’s six-year statute of limitations applied to the foreclosure of a mortgage insured by the US Department of Housing and Urban Development (HUD). The bank argued that, as an assignee of a federal agency, it is immune from New York’s statute of limitations:

“‘There is no federal statute of limitations applicable to mortgage foreclosure actions brought by the United States or its federal agencies'” … . “That rule applies equally to an assignee of a federal agency, including a commercial lender, and includes the benefit of immunity from a state limitations period” … . * * *

The relevant distinction in this case is that between a loan that was merely insured by a federal agency and a loan that was held by a federal agency, such that the federal agency had a right to foreclose the mortgage, and then assigned to the plaintiff. A plaintiff seeking to foreclose a mortgage that was merely insured by a federal agency is not entitled to immunity. Allowing immunity in such instances would inappropriately expand its application and would be inconsistent with the purpose of “allow[ing] the government to maintain belated actions to enforce public rights,” where the government never had the ability to maintain such an action … . * * *

Although [the] evidence demonstrated that the loan at issue was insured by HUD and/or the FHA, the plaintiff failed to establish that either of those agencies ever had the right to foreclose the mortgage “unfettered by [the] statute of limitations” or that such a right was ever assigned to the plaintiff … . … [T]he plaintiff was not an assignee of a federal agency merely because the loan was insured by federal agencies. Bank of Am., N.A. v Reid, 2024 NY Slip Op 04942, Second Dept 10-9-24

Practice Point: An assignee of a federal agency is immune from New York’s statute of limitations. Here the bank which held the mortgage which was insured by HUD was not an assignee of the federal agency (HUD) because it was not assigned the authority to foreclose the insured mortgage.​

 

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THE MOTION TO INTERVENE BY A PARTY WHICH PURCHASED THE PROPERTY IN FORECLOSURE SHOULD HAVE BEEN GRANTED; THE BANK DID NOT PROVE THE BORROWER’S DEFAULT BECAUSE THE RELEVANT BUSINESS RECORDS WERE NOT ATTACHED TO THE VICE PRESIDENT’S AFFIDAVIT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined (1) the motion to intervene by a party (the LLC) which had purchased the property subject to foreclosure should have been granted, (2) noncompliance with the notice requirement of RPAPL 1304 and 1306 and the mortgage agreement cannot be raised by the intervenor, a stranger to the note and mortgage, and (3) the bank did not prove the borrower’s default because the relevant business records were not attached to the bank’s affidavit:

…. [T]he LLC established that the representation of its interest by the parties would be inadequate, that the action involved the disposition of title to real property, and that it would be bound and adversely affected by a judgment of foreclosure and sale (see CPLR 1012[a][2], [3]; 6501 …). …[T]he fact that the LLC obtained its interest in the premises after the action was commenced and the notice of pendency was filed does not definitively bar intervention … . * * *

… [The bank] failed to provide evidence in admissible form of the borrower’s default in payment of the note … . In his affidavit submitted in support of U.S. Bank’s motion, Bennett [vice president of the bank’s servicer] averred that he was personally familiar with Rushmore’s record-keeping practices and that, based on his review of Rushmore’s business records, the borrower “defaulted under the terms of the loan documents by failing to make the monthly installment due on January 1, 2015 and has remained in default to the present date.” However, Bennett’s assertion regarding the borrower’s alleged default constituted inadmissible hearsay, as he failed to annex to his affidavit the business records on which he relied … . U.S. Bank N.A. v Medina, 2024 NY Slip Op 04588, Second Dept 9-25-24

Practice Point: Here the party which purchased the property in foreclosure should have been allowed to intervene.

Practice Point: In foreclosure proceedings affidavits which purport to describe the contents of business records which are not attached constitute inadmissible hearsay.

 

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HERE DEFENDANT’S FAILURE TO UPDATE HIS ADDRESS WITH THE DMV OR USPS WAS NOT “AFFIRMATIVE CONDUCT” DESIGNED TO AVOID SERVICE OF PROCESS; THEREFORE DEFENDANT SHOULD HAVE BEEN AFFORDED A HEARING ON WHETHER HE WAS PROPERLY SERVED (SECOND DEPT).

The Second Department, reversing Supreme Court, over a partial dissent, determined the fact that defendant did not update his address with the Department of Motor Vehicles or the United States Postal Service did not demonstrate “affirmative conduct” designed to mislead a party into serving process at an incorrect address. Here the service was by “nail and mail” and defendant contended he no longer resided at that address. Defendant was entitled to a hearing:

“A defendant may be estopped from contesting the propriety of an address where service was attempted when the defendant has engaged in ‘affirmative conduct which misleads a party into serving process at an incorrect address'” … . However, as the Court of Appeals has recognized, “potential defendants ordinarily have no affirmative duty to keep those who might sue them abreast of their whereabouts” … . Thus, a defendant’s mere inaction—such as failing to update his or her address with the plaintiff, the Department of Motor Vehicles (hereinafter DMV), or the United States Postal Service (hereinafter USPS)—without more, may not be equated with affirmative or deliberate conduct designed to avoid service … . Here, the defendant’s failure to update his address with the plaintiff, DMV, or USPS, or to update his voting records with a new address, did not constitute “affirmative conduct” … , and such failure was insufficient to establish, without a hearing, that the defendant should be estopped from contesting service as a matter of law … . Citimortgage, Inc. v Goldstein, 2024 NY Slip Op 04453, Second Dept 9-18-24

Practice Point: Failure to update one’s address with the DMV or USPS is not affirmative conduct designed to avoid service of process, therefore defendant was not estopped from contesting service.

 

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