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In Case of First Impression Amongst New York Appellate Courts, The Second Department Holds That Foreclosing Lender Must Send a Separate RPAPL 1304 90-Day Notice to Each Borrower as a Condition Precedent to Commencing a Foreclosure Action and Sending a Jointly Addressed Notice To Two Borrowers In One Envelope Is “Insufficient”

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  • Posted on: Oct 1 2021

By Jonathan H. Freiberger 

In this Blog, we frequently write about cases and developments related to mortgage foreclosure, in general, and RPAPL 1304, specifically.  Indeed, in our September 24, 2021, blog [here] we discussed the importance of submitting sufficient proof of compliance with RPAPL 1304 on a motion for summary judgment and hyperlinked to prior related articles.

By way of brief background, and as set forth in prior articles, in general, a foreclosing mortgagee demonstrates prima facie entitlement to judgment as a matter of law by “produc[ing] the mortgage, the unpaid note, and evidence of default.”  M&T Bank v. Barter, 186 A.D.3d 698, 700 (2nd Dep’t 2020) (citations omitted).  In and after 2006, the New York State Legislature passed legislation to protect homeowners in “response to the subprime lending crisis and the epidemic of foreclosures at that time.”  HSBC Bank US, Nat. Assoc. v. Ozcan, 154 A.D.3d 822, 825 (2nd Dep’t 2017) (citation omitted).  Some such measures required a lender, under certain circumstances, to provide notices to borrowers in the context of anticipated and pending litigation.  See, e.g., RPAPL 1303 and 1304.

RPAPL 1304 requires that at least ninety days prior to commencing legal action against a borrower with respect to certain loans, 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.  The failure of a lender to comply with RPAPL 1304 will result in the dismissal of a foreclosure complaint (see, e.g., U.S. Bank N.A. v. Beymer, 161 A.D.3d 543 (1st Dep’t 2018)) when the issue is raised as an affirmative defense by the borrower (see, e.g., One West Bank, FSB v. Rosenberg, 189 A.D.3d 1600, 1602-3 (2nd Dep’t 2020) (citation omitted)).  Indeed, “proper service of the notice containing the statutorily mandated content is a condition precedent to the commencement of a foreclosure action.”  U.S. Bank N.A. v. Taormina, 187 A.D.3d 1095, 1096 (2nd Dep’t 2020) (citations omitted).  When failure to comply with RPAPL 1304 is raised as an affirmative defense, the foreclosing lender must demonstrate its compliance with the statute as part of its prima facie case.  Bank of America, N.A. v. Wheatly, 158 A.D.3d 736 (2nd Dep’t 2018) (citations omitted).  

On September 29, 2021, the Second Department decided Wells Fargo Bank, N.A. v. Yapkowitz.  In describing the salient issue in Yapkowitz and its holding, the Second Department stated:

This appeal presents an issue of first impression before this Court as to whether a plaintiff in a foreclosure action may satisfy the requirements of RPAPL 1304 by mailing a 90–day notice jointly addressed to two or more borrowers. We hold that this practice is insufficient to satisfy the requirements of RPAPL 1304, and that the plaintiff is required to mail a 90–day notice addressed to each borrower in separate envelopes as a condition precedent to commencing the foreclosure action.

The facts of Yapkowitz are simplified herein for discussion purposes.  Briefly stated, the borrowers in Yapkowitz were a married couple that defaulted on a loan secured by a mortgage on their home.  [Eds. Note: some facts were obtained from the underlying supreme court decision [here].]  Lender sent to each borrower a contractual 30-day notice of default and opportunity to cure even though the loan documents provided that notice to one borrower is deemed notice to all borrowers.  After some loan assignments and changes in servicing agents, lender commenced action against borrowers.  As expected, one affirmative defense in borrowers’ answer was lender’s failure to comply with RPAPL 1304.  Lender moved for summary judgment and:

[i]n support of the motion, the [lender] submitted, among other things, a copy of a 90–day notice pursuant to RPAPL 1304 sent by [lender] via certified and first-class mail to the [borrowers’] address, and a certified mail receipt for the 90–day notice signed for by [husband] “F. Yapkowitz.” The 90–day notice was jointly addressed to both of the [borrowers]. 

In opposition, borrowers argued that they did not recall receiving or reading the 90-day notice or whether husband ever showed the notice to wife.  Counsel also argued that since lender sent one joint notice to both borrowers in a single envelope, lender failed to comply with the RPAPL 1304 condition precedent to commencing a foreclosure action.  

Supreme court denied the motion due to the insufficiency of evidence regarding the mailing procedures utilized for the 90-day notice.  [Eds. Note: this issue has been treated by this Blog, inter alia, [here], [here] and [here].]  At a subsequent pretrial conference, the parties agreed to address the issue of compliance with RPAPL 1304 through written submissions to the court.  In the resulting decision, supreme court found that the lender’s affiant’s knowledge and averments regarding lender’s mailing practices and procedures were adequate (in contrast to the submissions made on the summary judgment), however, it determined that “the plaintiff failed to establish its strict compliance with RPAPL 1304, which ‘requires a separate notice to each borrower in a separate envelope’ (Wells Fargo Bank, N.A. v. Yapkowitz, 59 Misc.3d 1227[A], 2018 N.Y. Slip Op 50726[U], *8 [here]), and thus, the foreclosure action must be dismissed.”  (Hyperlink added.)   

On lender’s appeal, the Second Department affirmed and, inter alia, dismissed lender’s complaint.  After analyzing several trial court level decisions on the issue, the Court explained its holding requiring separate mailings for each borrower.  First, the Court, in analyzing the language of RPAPL 1304, contrasted subsections 1 and 2 and stated, inter alia:

RPAPL 1304(1) provides that giving “notice to the borrower” (emphasis added), in the singular, at least 90 days prior to the commencement of the foreclosure action, is a prerequisite to commencement of the action “against the borrower, or borrowers ” (id. [emphasis added]). By contrast, RPAPL 1304(2), which sets forth the mailing requirements for the 90–day notice, contains no reference to “borrowers” in the plural. RPAPL 1304(2) requires the 90–day notice to be sent by registered or certified mail, and also by first-class mail, to both (1) “the last known address of the borrower” and (2) “the residence that is the subject of the mortgage” (id.).

The Court also rejected lender’s assertion that the borrower receiving the jointly addressed notice would likely advise the other borrower of the contents of same.  The Court noted that such a transfer of information may not occur if there “is a breakdown of communications between the borrowers.”  The Court also recognized that relying on one borrower to communicate the substance of the notice to the other would “subvert the legislative purpose of the statute to shift the burden of providing notice to each borrower from the lender or mortgage loan servicer to one of the borrowers who happens to sign for the envelope.”  The Court further recognized that:

Since the Legislature imposed strict mailing requirements aimed at ensuring notice and documenting the delivery of the 90–day notice, it would be difficult to imagine why the Legislature would not also require the simple measure of separately addressing a 90–day notice to each of the borrowers. Moreover, while “[n]otice is considered given as of the date it is mailed” (RPAPL 1304[2]), that provision cannot be complied with unless and until each notice “required by this section” (id.) has been sent “in a separate envelope from any other mailing or notice” (id.). Thus, notice cannot be deemed given until the date of mailing, in a separate envelope, of each 90–day “notice to the borrower” (id. § 1304[1]), which we read to mean notice to each borrower.

Accordingly, “notice cannot be deemed given until the date of mailing, in a separate envelope, of each 90–day “notice to the borrower” (id. § 1304[1]), which we read to mean notice to each borrower.

Finally, the Court recognized that permitting “a single notice jointly addressed to two or more borrowers and mailed in a single envelope to serve in lieu of a separately mailed notice to each borrower would transform the requisite standard of compliance from ‘strict compliance’ to ‘substantial compliance.’”

In light of its analysis the Second Department concluded that supreme court “properly denied the plaintiff’s motion, inter alia, for summary judgment on the complaint and properly dismissed the complaint insofar as asserted against the defendants.”

It should be noted that there was a lengthy dissent by one Justice, who “respectfully depart[ed] company from [his] colleagues as to how the language of RPAPL 1304 should be interpreted where, as here, there are two borrowers living at the residence that is the subject of the mortgage.

Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

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