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Recent New York Decisions Strictly Interpreting Notice Requirements Serve as Cautionary Tale for Mortgage Lenders and Servicers Everywhere


By Deborah S. Lapin

A “belt and suspenders” approach is appropriate and prudent in many contexts. Often, communications with borrowers attempt to cover multiple bases to comply with a host of statutory requirements and limit the sender’s exposure for non-compliance. But recent cases from New York involving foreclosure notices demonstrate that when a statute places strict limits on what shouldn’t be contained in or with a letter or notice to a mortgagor, any superfluous material can delay and derail foreclosure efforts. These cases serve as cautionary tales for lenders and servicers that meticulous compliance with statutory notice requirements is a foundational and unforgiving obligation.

“A Separate Envelope From Any Other Mailing or Notice”

In a December 2021 opinion, the New York Supreme Court, Appellate Division (Second Department), addressed the 90-day foreclosure notice requirements of RPAPL §1304 for residential home loans. 

Compliance with that statute is a prerequisite to the commencement of foreclosure proceedings in New York. It sets forth specific language (and type-sizes) that must be included in the notices. It also instructs how these notices must be sent to the borrower, including a requirement that “The 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.” 

Compliance with that concluding language was at issue in Bank of America, NA v. Andrew Kessler, __ AD3D ____ (D67785) (2nd Dept. 2021). In addition to the notice and language required by Section 1304, the envelope sent to the borrower contained other information labeled “Important Disclosures,” which included boilerplate language regarding the rights of a debtor in bankruptcy and military service as well as debt collection information.

The Court held that “inclusion of any material in the separate envelope sent to the borrower under RPAPL 1304 that is not expressly delineated in these provisions constitutes a violation of the separate envelope requirement of RPAPL 1304(2).” Accordingly, it concluded that the borrower had “established his prima facie entitlement to judgment as a matter of law dismissing the complaint, insofar as asserted against him by showing that the Plaintiff failed to comply with RPAPL 1304 when it sent additional material in the same envelope as the requisite notice under RPAPL 1304.”

Subsequent cases have followed the same strict interpretation of Section 1304 as the Kessler court. For example, In Wells Fargo v. DeFeo, the New York Supreme Court, Appellate Division (Second Department) held that the plaintiff’s inclusion of an additional notice related to the Federal Home Affordable Modification Program in the same envelope as the 90-day notice violated Section 1304. 

While each state’s notice requirements in foreclosure proceedings may vary in their details, it is those details that lenders and servicers pursuing mortgage defaults must understand and follow to the letter if they wish to avoid costly disruptions to their efforts. Robust compliance programs and policies that address notice requirements in all jurisdictions can reduce the likelihood of such outcomes.