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Who is Considered a “Borrower” for Notice Purposes Under RPAPL 1304

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  • Posted on: Jun 28 2024

By Jonathan H. Freiberger

On numerous occasions, this Blog has addressed issues related to RPAPL 1304. [Eds. Note: to view this Blog’s prior articles on RPAPL 1304, kindly type “RPAPL 1304” in the search box of the Blog Tile on Freiberger Haber LLP’s website.]

By way of brief background as discussed in prior 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). 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, 737 (2nd Dep’t 2018) (citations omitted). However, a “defense based on noncompliance with RPAPL 1304 may be raised at any time during the action.” Nationstar Mortgage, LLC v. Matles, 185 A.D.3d 703, 706 (2nd Dep’t 2020) (citations and internal quotation marks omitted). In Wells Fargo Bank, N.A. v. Davidson, 202 A.D.3d 880 (2nd Dep’t 2022), in reversing a judgment of foreclosure and sale and granting summary judgment to the borrowers, the Court stated that “[c]ontrary to the [lender’s] contention, the [borrowers] did not waive their contention that the [lender] failed to comply with RPAPL 1304 as a defense based on noncompliance with RPAPL 1304 may be raised at any time prior to the entry of a judgment of foreclosure and sale.” Davidson, 202 A.D.3d at 882 (citations, internal quotation marks and brackets omitted); see also U.S. Bank Nat. Ass’n v. Zakarin, 208 A.D.3d 1275, 1277 (2nd Dep’t 2022). 

Because RPAPL 1304 notices must be sent to all “borrowers,” knowing who the “borrowers” are is of critical importance. While one might think that the status of borrower is limited to the person executing the promissory note, such is not always the case. Frequently, real property is jointly owned. If one joint owner of real property borrows money from a lender and jointly owned real property is used to secure that repayment obligation, the lender will almost always require all owners to execute the related mortgage. In such cases, all owners are generally listed as “borrowers” on the mortgage even though they did not borrow money from the lender and, accordingly, have no repayment obligations under the promissory note. Nonetheless, non-obligors under the promissory note are deemed to be “borrowers” for the purposes of RPAPL 1304. See, e.g. HSBC Bank USA v. DiBenedetti, 205 A.D.3d 687, 689 (2nd Dep’t 2022); Deutsche Bank Nat. Trust Co. v. Weininger, 206 A.D.3d 882, 883 (2nd Dep’t 2022).

This rule was reinforced on June 20, 2024, by the Second Department in Deutsche Bank Nat’l Trust Co. v. Cincu. Michael Cincu (“Michael”) borrowed money from the plaintiff lender. The loan was secured by a mortgage on property owned by Michael and Edith Cincu (“Edith”). As a result of a default, the lender commenced a foreclosure action. The lender’s subsequent motion for summary judgment was granted and, thereafter, the appointed referee issued a report as to the amounts due. Edith opposed the lender’s motion to confirm the referee’s report and cross-moved for leave to renew her opposition to the lender’s summary judgment motion. The motion court granted the lender’s motion and denied Edith’s cross-motion. Edith appealed.

The Second Department reversed finding that the motion court erred in denying Edith’s cross-motion to renew. The Court pointed out that  motions to renew “shall be based upon new facts not offered on the prior motion that would change the prior determination or shall demonstrate that there has been a change in the law that would change the prior determination” (CPLR 2221[e][2]). (Additional citation omitted). The Court then stated that clarifications of decisional law are “a sufficient change in the law to support renewal.” (Citations and internal quotation marks omitted.)

The Court found that Bank of N.Y. Melon v. Forman, 176 A.D.3d 663 (2nd Dep’t 2019), clarified the law on who is considered a “borrower,” by determining that an individual identified as a “borrower” on the mortgage, although not an obligor on the related promissory, is deemed to be a borrower for RPAPL 1304 notice purposes. Since Forman was decided after the Cincu motion court granted summary judgment to the lender, Edith was entitled to renewal under CPLR 2221. In so holding, the Court stated:

Here, although [Edith] did not execute the underlying note, she was identified as a borrower both on the first page of the mortgage agreement and beneath her signature on the mortgage agreement. Though the [lender] contends that a separate provision of the mortgage agreement indicates that [Edith] is not obligated to pay the amounts due under the note, [she] is nonetheless a borrower entitled to notice pursuant to RPAPL 1304. The record is, therefore, sufficient to establish that [Edith] is a borrower for purposes of RPAPL 1304, and it is undisputed that the [lender] failed to serve [Edith] with the requisite RPAPL 1304 notice. [Edith] thus established a change in the law that would change the [motion court’s] prior determination of that branch of the [lender’s] motion which was for summary judgment on the complaint insofar as asserted against [Edith].

The Supreme Court should have denied the [lender’s] motion, inter alia, to confirm the referee’s report and for a judgment of foreclosure and sale inasmuch as it was predicated on the July 16, 2019 order granting that branch of the [lender’s] motion which was for summary judgment on the complaint insofar as asserted against [Edith]. Moreover, the court should have awarded summary judgment to [Edith] dismissing the complaint insofar as asserted against her. [Edith] established her prima facie entitlement to judgment as a matter of law since it is undisputed that the [lender] failed to serve [Edith] with the requisite RPAPL 1304 notice and [Edith] submitted an affidavit stating that she did not receive the RPAPL 1304 notice. In opposition, the [lender] failed to raise a triable issue of fact. [Citations omitted.]

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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