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Appellate Division Second Department Tells Foreclosing Residential Lender to “SHOW ME THE EVIDENCE”

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  • Posted on: Sep 29 2017

It is widely known that there is a residential foreclosure crisis throughout the country and New York State is no exception.

The New York State Legislature responded by promulgating a series of rules designed to protect residential homeowners.  These rules, however, place additional burdens on foreclosing lenders and courts throughout New York State have demonstrated little sympathy for foreclosing lenders that fail to follow these rules.

For example, section 1303 of the Real Property Actions and Proceedings Law (“RPAPL”) requires that, under certain circumstances relating to residential property, a foreclosing mortgagee must send statutory notice to the mortgagor and tenants advising them, among other things, that they are in danger of losing their home and how to avoid foreclosure rescue scams.

Similarly, RPAPL 1304 requires that at least ninety days prior to commencing legal action against a borrower with respect to a “home loan” (as defined in the relevant statutes (a “Home Loan”)), a lender must: send written notice to the borrower by certified and regular mail that the loan is in default; provide a list of approved housing agencies that provide free or low-cost counseling; and, advise that legal action may be commenced after ninety days if no action is taken to resolve the matter.

In residential foreclosure actions involving a Home Loan, CPLR 3012-b requires that the complaint be accompanied by a certification signed by the foreclosing lender’s counsel that the underlying facts and documents have been reviewed, that based on such review there is a reasonable basis for the commencement of the action and that the foreclosing lender is the proper party plaintiff to the action.

The Appellate Division, Second Department, in M&T Bank v. Joseph, 152 A.D.3d 579, 58 N.Y.S.3d 150 (2017), reminds all foreclosing lenders with respect to certain residential mortgages, that the rules established to protect homeowners are to be followed.  In M&T, the Bank loaned the defendant approximately $425,000 and secured the loan with a mortgage on defendant’s residential real property.  The defendant defaulted under the loan in June of 2010 and M&T commenced its action in December of that year.  After the defendant answered and the parties attended a mandatory settlement conference, M&T moved for, and was granted, summary judgment.

On defendant’s appeal, the Second Department reversed the supreme court and, in so doing, reiterated that M&T was required to prove its strict compliance with RPAPL 1304 by tendering sufficient evidence in admissible form.  The Appellate Court was unmoved with the “unsubstantiated and conclusory” statement from a bank officer that “a 90-day default letter was sent in accordance with [] RPAPL 1304” as urged by M&T in the papers supporting its motion for summary judgment. Instead, in order to prove compliance, the Second Department required “an affidavit of service or proof of mailing from the post office evincing that it properly served the defendant pursuant to RPAPL 1304.”

Significantly, the Second Department found that since M&T failed to meet its burden of proof that the requirements of RPAPL 1304 were satisfied, the motion for summary judgment should have been denied “regardless of the sufficiency of the defendant’s opposition papers.”


The failure to follow the residential foreclosure rules can have significant consequences.  In M&T, the Second Department’s reversal of the supreme court’s grant of summary judgment came seven years after the action was commenced.  Substantial interest and legal fees likely accrued during the lengthy pendency of the action to the point where the equity in the real property may have been insufficient to make the bank whole.  Moreover, to the extent that the bank was otherwise entitled to recover its reasonable legal fees under the note and mortgage, the court might not consider “reasonable”, those fees related to litigating the insufficiency of M&T’s compliance with RPAPL 1304.


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