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Second Department Decides an Issue of “First Appellate Impression” Related to the Sufficiency of an RPAPL 1304 Notice in a Residential Mortgage Foreclosure Action

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  • Posted on: Apr 22 2022

By Jonathan H. Freiberger

The readers of this Blog know that we frequently discuss numerous aspects of residential mortgage litigation.  See, e.g., [here] and the articles linked therein.  A related subtopic that gets much attention in this Blog is the pre-foreclosure notice requirements of RPAPL 1304.  See, e.g., [here], [here], [here], [here], [here], [here], [here], [here], [here] and [here].

Briefly, and as noted in prior Blog articles, RPAPL 1304 requires that at least ninety days before commencing legal action against a borrower with respect to a “home loan” (as defined in the relevant statutes), 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 offer 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.  One purpose of RPAPL 1304 is to enable defaulted borrowers to “benefit from the information provided in the notice and the 90–day period during which the parties could attempt to work out the default without imminent threat of a foreclosure action, in an effort to further the ultimate goal of reducing the number of foreclosures”.  CIT Bank N.A. v. Schiffman, 36 N.Y.3d 550, 555 (2021) (citation and internal quotation marks omitted).

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).  

As specifically relates to this article, RPAPL 1304 sets forth the precise text of the pre-foreclosure notice that must be sent to a borrower, which requires the lender to, inter alia, advise the borrower that “[a]s of ____, your loan is ____ days and ____ dollars in default.”  Whether an alleged inaccuracy in the dollar amount of the default “filled-in” on the RPAPL 1304 notice sent to the borrower provided a defense to a mortgage foreclosure action, was one of the issues decided on April 20, 2022, by the Appellate Division, Second Department, in Emigrant Bank v. Cohen.

The facts of Emigrant are typical.  Emigrant Mortgage Corp. (“EMC”) loaned borrower $2.1 million secured by a mortgage on real property in Brookville, New York.  Emigrant Bank (“Plaintiff”), successor by merger with Emigrant Savings Bank-Long Island (“ESB-LI”), commenced a foreclosure action after borrower’s default.  Borrower answered the complaint and asserted affirmative defenses, including lack of standing and failure to comply with the requirements of RPAPL 1304.  Plaintiff moved for summary judgment on its complaint, to strike borrower’s answer and for an order of reference.  Among other things, Plaintiff annexed to its moving papers a copy of the RPAPL 1304 notice which “identified the default amount as $64,862.12 over 57 days.”  Supreme court granted the motion, finding that Plaintiff had standing to commence the action and that the RPAPL 1304 notices were proper.  Borrower appealed.  The Second Department affirmed supreme court on the RPAPL 1304 issues but reversed on the issue of standing.

RPAPL 1304

As to the RPAPL 1304 notice, borrower argued that the proper mailing was not established, and that the inaccuracy of the default amount rendered the notice defective.  The Court disagreed with borrower on both counts.  Issues related to proof of proper mailing and business records are discussed in the Emigrant decision and in numerous prior Blog articles linked herein.

On appeal, borrower disputed the accuracy of the amount allegedly due because “a $10,636.81 monthly obligation which is overdue by 57 days cannot possibly amount to $64,862.12.”  Borrower argued, therefore, that “an alleged inaccuracy in the default amount set forth in the plaintiffs RPAPL 1304 notice warrants denial of the plaintiff’s motion for summary judgment, as an inaccuracy represents a lack of strict compliance with the requirements of the statute.”  The Second Department described this issue as one “of first appellate impression,” and promptly rejected same.  In so doing, the Court concluded that “strict compliance with RPAPL 1304 is satisfied so long as the duration and an amount of the default is contained in the notice, and that any continuing dispute over the specific amount is an issue that must await the parties’ later litigation.”

In reaching its conclusion, the Court noted that while the RPAPL 1304 notice is a “condition precedent to the commencement of” certain mortgage foreclosure litigations, the “notice is not jurisdictional and does not represent the litigation itself.”  (Citations omitted.)  Stated differently, “the notice provides homeowners with required and useful ‘information’ to protect their interests, but is not ‘adjudicative’ in nature since there is no litigation between the parties during its statutory 90-day period.”  The adjudication of the amounts due occurs, as noted by the Court, after the order of reference “when a referee hears and reports on the amount due under the note and when the court thereafter entertains a motion for a judgment of foreclosure and sale using the referee’s sum or other sum in a judgment.”  (Citations omitted.)  

The Court acknowledged its prior recognition that “there must be strict compliance with the mandates of RPAPL 1304”, but found that “where RPAPL 1304 requires that homeowner to be informed of the duration and dollar amount of a mortgage-related default, and the creditor provides a notice that includes the number of days of the default, a dollar amount of claimed arrears, and the cure date, the plaintiff has met its burden of demonstrating strict compliance with the statute.”  (Citations omitted.)  Explaining its decision, the Court stated:

The language of RPAPL 1304 necessarily requires the creditor to unilaterally determine the default amount that it believes due at that snapshot in time, and advise the homeowner of that sum and of other rights and warnings. No provision of the statute, which has otherwise been written with great legislative detail, care, and precision, requires that there be any breakdown about how the default amount is mathematically computed. The statute does not infuse into the notice procedure an adjudicative mechanism or penalty in the event that the homeowner takes issue with the amount of the identified default sum. The sum, once set forth in the notice, will necessarily change with time. It may be discussed and negotiated with the mortgagee post-notice, consistent with the statute’s public policy purpose of helping the mortgagor bridge the communication gap to potentially avoid a foreclosure litigation and retain the home. Here, the plaintiff satisfied the requirements of RPAPL 1304 by advising [borrower] in the RPAPL 1304 notice of the number of days of the default and the sum claimed then to be due. If this Court were to accept [borrower]’s argument that an RP APL 1304 notice is rendered defective because of an alleged inaccuracy in the stated default amount, then we would elevate it from a notice statute to one which determines the merits of the dispute and, at the same time, eviscerate the purpose of the provisions of RPAPL 1321.

This is not to say that an RPAPL 1304 notice survives scrutiny if it is actually defective on its face.  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.  

Citations omitted.


This Blog has also addressed the issue of standing in mortgage foreclosure actions.  See, e.g., [here], [here], [here], [here].  As previously noted in this Blog’s articles, where “a plaintiff’s standing to commence a foreclosure action is placed in issue by the defendant, it is incumbent upon the plaintiff to prove its standing to be entitled to relief.”  Wells Fargo Bank, N.A. v. Arias, 121 A.D.3d 973, 973-74 (2nd Dep’t 2014) (citation and internal quotation marks omitted).  A lender establishes standing in a foreclosure action “by demonstrating that, when the action was commenced, it was either the holder or the assignee of the underlying note.”  U.S. Bank National Association v. Seeley, 177 A.D.3d 933, 935 (2nd Dep’t 2019) (citations omitted).  The Emigrant Court explained that “[s]tanding in residential mortgage foreclosure actions may be established any of three ways: (1) where the plaintiff is the original lender in direct privity with the defendant; (2) where the plaintiff is a holder in physical possession of the note prior to the commencement of the action, with an allonge or indorsement in blank or special indorsement to the plaintiff; or (3) when the note underlying an action was assigned to the plaintiff prior to the date of commencement of the action.”  (Citations and internal quotation marks omitted.)

In Emigrant, the Court found that Plaintiff failed to establish standing because “[t]he plaintiff is not the original lender [and t]he subject note, though attached to the complaint, bears no indorsement.”  Additionally, “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.”  In this regard, the Court stated:

while the plaintiff submitted the assignment of the mortgage from the originator, EMC, to its assignee, ESB-LI, “together with the bond or note or obligation described in said mortgage,” the record contains no evidence in admissible form that the note was ever further assigned from ESB-LI to the plaintiff 

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. Procedure aside, the certificate of merger and related documents submitted by the plaintiff indicate that ESB-LI transferred its assets to one or more institutions including Emigrant Bank …, which fails to adequately track the subject note and mortgage specifically to the plaintiff.

Citations and internal quotation marks omitted, emphasis in original.

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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