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THE BANK’S AFFIDAVIT IN THIS FORECLOSURE ACTION DID NOT LAY A SUFFICIENT FOUNDATION FOR THE ADMISSIBILITY OF BUSINESS RECORDS, INCLUDING PROOF OF COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the bank’s proof of compliance with the notice requirements of RPAPL 1304 was deficient because the foundation for the admission of business records was not laid:

… [T]he plaintiff submitted … an affidavit of an employee of its current mortgage loan servicer, along with copies of the 90-day notice, which was generated by the plaintiff’s prior loan servicer, along with alleged proof of mailing, which was also generated by the prior loan servicer. The affiant averred … that the current mortgage loan servicer is responsible for maintaining the books and records pertaining to the subject mortgage, “including, but not limited to, the account ledgers, and prior servicer’s records.” However, the affiant did not aver to her familiarity with the prior loan servicer’s business practices and procedures, or that the prior loan servicer’s records were incorporated into the current loan servicer’s records. Thus, the plaintiff’s moving affidavit failed to satisfy the admissibility requirements of CPLR 4518(a) … , and the prior loan servicer’s records, including the 90-day notice, were not admissible … . “Accordingly, the plaintiff failed to demonstrate, prima facie, that it complied with the notice provision of RPAPL 1304” … . Bank of N.Y. Mellon v Basta, 2022 NY Slip Op 02971, Second Dept 5-4-22

Practice Point: In a foreclosure action, at the summary judgment stage, even if business records demonstrating the bank’s compliance with the notice requirements of RPAPL 1304 are submitted, they are not admissible unless a proper foundation (CPLR 4518(a)) is laid in the accompanying affidavit.

 

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THE BANK IN THIS FORECLOSURE ACTION DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304; I.E., THE NOTICE MUST BE MAILED IN A SEPARATE ENVELOPE WITH NO OTHER MATERIALS, AND THE NOTICE MUST BE SENT SEPARATELY TO EACH BORROWER (SECOND DEPT).

The Second Department, reversing Supreme Court in this foreclosure action, determined plaintiff did not comply with the RPAPL 1304 requirements that the 90-day notice of foreclosure be mailed in a separate envelope and that the notice be sent separately to both borrowers:

… [T]he plaintiff failed to establish … that it strictly complied with RPAPL 1304, since additional material was sent in the same envelope as the 90-day notice required by RPAPL 1304 … , and a single notice was jointly addressed to both defendants … . HSBC Bank USA, N.A. v DiBenedetti, 2022 NY Slip Op 02983, Second Dept 5-4-22

Practice Point: RPAPL 1304, which must be strictly complied with by the bank in any foreclosure action, requires (1) that the 90-day notice of foreclosure be sent in a separate envelope which includes nothing else and (2) that the 90-day notice be sent separately to each borrower.

 

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THE BANK DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1303, INCLUDING THE REQUIRED TYPE SIZE; THE BANK’S MOTION FOR SUMMARY JUDGMENT IN THIS FORECLOSURE ACTION SHOULD NOT HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action did not demonstrate compliance with the notice requirements of RPAPL 1303:

“RPAPL 1303 requires that a notice titled ‘Help for Homeowners in Foreclosure’ be delivered to the mortgagor along with the summons and complaint in residential foreclosure actions involving owner-occupied, one- to four-family dwellings” … . “The statute mandates that the notice be in bold, 14-point type and printed on colored paper that is other than the color of the summons and complaint, and that the title of the notice be in bold, 20-point type” … .

Here, the plaintiff failed to establish, prima facie, that it provided notice in compliance with RPAPL 1303. The plaintiff’s submissions did not demonstrate that the notice served upon the defendant complied with the type-size requirements in RPAPL 1303 … . Bank of Am., N.A. v Keefer, 2022 NY Slip Op 02776, Second Dept 4-27-22

Practice Point: In foreclosure actions, the bank must demonstrate strict compliance with the notice provisions of the Real Property Actions and Proceedings Law. Here the bank did not demonstrate compliance with RPAPL 1303, included the required type size.

 

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ALTHOUGH THE RPAPL 1304 FORECLOSURE NOTICE, TO BE VALID, MUST ACCURATELY STATE THE DEFAULT AMOUNT AND THE LENGTH OF TIME THE BORROWER HAS BEEN IN DEFAULT, THERE WAS NO SHOWING HERE THE STATED AMOUNT WAS INACCURATE; THE BANK DID NOT DEMONSTRATE IT WAS IN POSSESSION OF THE NOTE AT THE TIME THE ACTION WAS COMMENCED AND THEREFORE DID NOT DEMONSTRATE STANDING TO FORECLOSE; THE EVIDENCE OF A MERGER SUBMITTED IN REPLY COULD NOT BE CONSIDERED ON THE STANDING ISSUE (SECOND DEPT).

The Second Department, reversing Supreme Court, in a full-fledged opinion by Justice Dillon, determined the notice of foreclosure required by RPAPL 1304, which, to be valid, must state the default amount and length of time the borrower has been in default, was not shown to be inaccurate. But the plaintiff bank did not demonstrate standing to foreclose. The evidence that the bank’s standing was based on a merger with the holder of the note was not submitted until the reply, and therefore should not have been considered:

Where an RPAPL 1304 notice fails to reflect information mandated by the statute, including but not limited to the duration and an amount of the default, the statute will not have been strictly complied with and the notice will not be valid … . …

… [T]here is no reason for us to conclude at this juncture that the $64,862.12 default sum set forth in the plaintiff’s RPAPL 1304 notice reflects any actual error. The second paragraph of the plaintiff’s 30-day notice explains that the $64,862.12 amount claimed to be due includes principal, interest, escrow payments, and late charges, which would necessarily raise the gross amount due to a sum that exceeds the amount of the missed principal. * * *

… [T]he plaintiff failed to establish, prima facie, that it had standing to commence the action. The plaintiff is not the original lender. The subject note, though attached to the complaint, bears no indorsement. And further, the plaintiff failed to produce evidence in admissible form as part of its prima facie case that the note was assigned to it prior to the date of commencement of the action … . …

The certificate of merger showing that ESB-LI merged into the plaintiff does not demonstrate that the plaintiff is the holder of the subject note. It was submitted to the Supreme Court for the first time in the plaintiff’s reply papers, and therefore, could not be considered as part of the plaintiff’s initial prima facie proof of standing … . Emigrant Bank v Cohen, 2022 NY Slip Op 02532, Second Dept 4-20-22

Practice Point: To be valid, the RPAPL 1304 notice of foreclosure must accurately state the amount of the default and the length of time the borrower has been in default (there was no showing the amount was inaccurate here). If the bank does not demonstrate it was holding the note at the time the foreclosure was commenced in its moving papers, it has not demonstrated standing to foreclose. Evidence of standing submitted in reply papers should not be considered.

 

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THE BANK IN THIS FORECLOSURE ACTION SENT THE RPAPL 1304 NOTICE TO BOTH BORROWERS IN THE SAME ENVELOPE, A VIOLATION OF THE “SEPARATE ENVELOPE” RULE (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the bank’s motion for summary judgment in this foreclosure action should not have been granted. The bank did not comply with the notice requirements of RPAPL 1304, specifically the “separate envelope for each borrower” rule:

…[T]he plaintiff failed to establish its strict compliance with RPAPL 1304. Although the plaintiff demonstrated that it mailed the RPAPL 1304 notice to the defendants by both certified and first-class mail … , and that the contents of the notice complied with RPAPL 1304(1), the plaintiff failed to establish that it sent a 90-day notice individually addressed to each defendant in separate envelopes, as required by the statute … . Instead, as the plaintiff concedes, the notice was mailed in a single envelope jointly to both defendants. Deutsche Bank Natl. Trust Co. v Loayza, 2022 NY Slip Op 02392, Second Dept 4-13-22

​Practice Point: In a foreclosure action, the RPAPL 1304 notice must be sent in a separate envelope to each borrower.

 

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RPAPL 1301(3) PROHIBITS MORE THAN ONE FORECLOSURE AT A TIME; THE VIOLATION OF THAT STATUTE HERE WAS A MERE IRREGULARITY WHICH SHOULD HAVE BEEN DISREGARDED; THE PRIOR ACTION WAS DISMISSED AFTER THE INSTANT ACTION WAS COMMENCED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the fact that RPAPL 1301(3), which prohibits more than one foreclosure at a time, was technically violated did not warrant dismissing the second action:

Here, the plaintiff failed to seek leave of court to commence this action while the 2010 action was still pending. However, the 2010 action had previously been marked disposed, and no further action occurred in the 2010 action until the administrative dismissal on April 9, 2018. Additionally, by the time the defendants cross-moved in this action for summary judgment dismissing the complaint insofar as asserted against them, the 2010 action had already been dismissed for nearly six months. Thus, the defendants were not prejudiced by having to defend against more than one action, and the plaintiff’s failure to strictly comply with RPAPL 1301(3) should have been disregarded as a mere irregularity … . HSBC Bank USA, N.A. v Kading, 2022 NY Slip Op 02255, Second Dept 4-6-22

Practice Point: Although RPAPL 1301(3) prohibits more than one foreclosure action at a time, if there is no prejudice to the borrowers a violation of that statute will be disregarded as a mere irregularity. Here the inactive first action was dismissed before the borrowers moved for summary judgment in the second.

 

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THE BANK IN THIS FORECLOSURE ACTION DID NOT SEND DEFENDANT THE NOTICE OF DEFAULT IN A SEPARATE ENVELOPE AS REQUIRED BY RPAPL 1304; DEFENDANT’S MOTION TO DISMISS THE COMPLAINT SHOULD HAVE BEEN GRANTED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant in this foreclosure action was entitled to summary judgment because the bank did not send the notice of default in a separate envelope as required by RPAPL 1304:

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.”

The defendant established that the plaintiff failed to strictly comply with RPAPL 1304, on the ground that additional material was sent in the same envelope as the 90-day notice required by RPAPL 1304 … . U.S. Bank N.A. v Hinds, 2022 NY Slip Op 02150, Second Dept 3-30-22

Practice Point: Here the borrower’s motion to dismiss the foreclosure complaint was granted because the bank sent the notice of default required by RPAPL 1304 in an envelope along with other materials, violating the “separate envelope” rule.

 

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AT THE TIME THIS FORECLOSURE ACTION WAS COMMENCED, RPAPL 1304 REQUIRED THAT THE NOTICE OF DEFAULT INCLUDE THE NUMBER OF DAYS THE BORROWER HAD BEEN IN DEFAULT; A DISCREPENCY BETWEEN THE DATE OF THE DEFAULT IN THE 90-DAY NOTICE (JULY 2009) AND THE DATE IN THE NOTICE REQUIRED BY THE MORTGAGE AND IN THE COMPLAINT (MAY 2011) CREATED A QUESTION OF FACT WHETHER THE NOTICE WAS DEFECTIVE ON ITS FACE (SECOND DEPT). ​

The Second Department, reversing Supreme Court, determined the bank in this foreclosure action was not entitled to summary judgment because it failed to demonstrate compliance with the notice requirements of RPAPL 1304. At the time the action was commenced, RPAPL 1304 required the notice to state the number of days the borrower had been in default. The 90-day notice stated defendant had been in default 2330 days, which put the default in July 2009. But the notice required by the mortgage and the complaint stated defendant was in default since May 2011:

The 90-day notice sent to the defendant stated that, as of November 18, 2015, her loan was 2330 days in default—indicating a default date in July 2009. However, both the notice of default required by the mortgage agreement and the complaint alleged that the plaintiff had defaulted on the loan in May 2011. At least one of these three documents, then, contained an error concerning information that was required under RPAPL 1304. Notably, the plaintiff’s response to the defendant’s cross motion for summary judgment did not attempt to clarify this discrepancy; it only addressed the service of the 90-day notice. The plaintiff’s appellate brief likewise does not address this issue. Accordingly, the plaintiff did not eliminate the existence of a triable issue of fact as to whether the RPAPL 1304 notice was defective on its face … . U.S. Bank N.A. v Cox, 2022 NY Slip Op 02149, Second Dept 3-30-22

Practice Point: In this foreclosure action, the 90-day notice put the defendant’s default in July 2009, but the notice required by the mortgage and the complaint put the default in May 2011. This raised a question of fact whether the notice required by RPAPL 1304 was defective on its face.

 

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ALTHOUGH NONPARTY JP MORGAN DID NOT APPEAR IN THE UNDERLYING FORECLOSURE, IT COULD RECOVER SURPLUS FUNDS BASED UPON DEFENDANTS’ DEFAULT ON A CREDIT-LINE LOAN SECURED BY THE PROPERTY; JP MORGAN’S ACTION WAS NOT TIME-BARRED BECAUSE THE CREDIT-LINE DEBT WAS NEVER UNEQUIVOCALLY ACCELERATED (SECOND DEPT).

The Second Department, reversing Supreme Court, determined nonparty JP Morgan was entitled to the surplus funds remaining after a foreclosure sale based upon the defendants’ (Breuers’) default on a credit-line loan secured by the property. The defendants’ argument that the credit-line action was time-barred was rejected because the debt was never accelerated. Pursuant to RPAPL 1361, JP Morgan did not have to appear in the underlying foreclosure action to preserve a claim to the surplus funds:

Where, as here, “the acceleration of the maturity of a mortgage debt on default is made optional with the holder of the note and mortgage, some affirmative action must be taken evidencing the holder’s election to take advantage of the accelerating provision, and until such action has been taken the provision has no operation” … .

… [T]he Breuers failed to demonstrate … that the statute of limitations began to run on JP Morgan’s entire claim at the time of the Breuers’ initial default in 2010. A letter introduced into evidence during the hearing, in which JP Morgan informed the Breuers of its intent to accelerate the maturity of the loan and to commence foreclosure proceedings if the Breuers’ default was not cured, was not sufficient to accelerate the debt, because it did not reflect a “clear and unequivocal” election to accelerate … . …

… [T]he applicable statute which governs proceedings to recover surplus funds from a foreclosure sale, RPAPL 1361, did not require JP Morgan to appear in the action to foreclose the primary mortgage prior to the entry of the judgment of foreclosure and sale, in order to preserve its claim to surplus funds … . Wells Fargo Bank, N.A. v Breuer, 2022 NY Slip Op 02037, Second Dept 3-23-22

Practice Point: Although nonparty JP Morgan did not appear in the underlying foreclosure proceedings, it was entitled to the surplus funds remaining after the foreclosure sale based upon defendants’ default on a credit-line loan secured by the property.

 

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THE AFFIDAVITS SUBMITTED BY THE BANK IN THIS FORECLOSURE ACTION DID NOT DEMONSTRATE COMPLIANCE WITH THE NOTICE REQUIREMENTS OF RPAPL 1304 (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the affidavits submitted by the plaintiff bank to demonstrate compliance with the notice requirements of RPAPL 1304 were insufficient:

… [N]either counsel in her affirmation, nor a contract management coordinator for the plaintiff’s loan servicer in an affidavit submitted in support of the motion, averred that they had personal knowledge of the mailing, or that the mailing was sent by both certified mail and first-class mail. Moreover, neither counsel nor the loan servicer’s representative described any standard office procedure designed to ensure that the notices were mailed, and no domestic return receipts for the mailings were submitted in support of the motion … . Deutsche Bank Natl. Trust Co. v LoPresti, 2022 NY Slip Op 01767, Second Dept 3-16-22

​Practice Point: Proof of compliance with the notice requirements of RPAPL 1304 failed in this foreclosure action.

 

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