January 14, 2022

Written by: Michael Manniello and Eric Kelner 

The defenses du jour in New York residential foreclosures are lack of standing, statute of limitations, and failure to comply with the New York statutory condition precedent mandated by NY RPAPL §1304 (the 90 Day Notice). All three of these areas have been the subject of recent decisions from the Appellate Division, Second Department which covers the 10 downstate counties of Richmond (Staten Island), Kings (Brooklyn), Queens, Nassau, Suffolk, Westchester, Duchess, Orange, Rockland, and Putnam – an area which includes one-half of the state’s population. However, the Court has recently focused its attention on the mailing procedure and content of the 90 Day Notice.

RPAPL §1304 requires a mortgage loan servicer send a certain pre-foreclosure notice to “the borrower … in a separate envelope from any other mailing or notice” at least 90 days prior to commencement of the foreclosure action. The statute provides, among other things, the exact language which the notice is to include and in what type point, and requires same be sent, registered or certified mail and also by first class mail, to the last known address of the borrower and to the mortgaged premises. The servicer must strictly comply with the statute – which means courts have little if no leeway to forgive any deviation from the statutory mandates. Failure to strictly comply results in a dismissal of the action. 

Trial and appellate courts have grappled with what constitutes strict compliance since soon after the statute was enacted in 2008, but the Second Dept. has been the most active in dismissing action after action applying what many would describe as hyper-technicalities. Each appeal is typically heard by a panel of five justices, but due to short staffing, the Court has been functioning with panels of only four justices. Its two most recent decisions in this area could be the most extreme and unsubstantiated application of strict compliance – so much so that each of the decisions included a very critical dissent from two separate justices.

The first decision Wells Fargo v. Yapkowitz, 199 AD3d 126 (2^nd Dept 2021) held that a 90 Day Notice jointly addressed (both on the notice and the envelope) to more than one recipient did not strictly comply with the statute. For example, a notice and envelope addressed to:

John Smith
Jane Smith
123 Main Street
Anytown, NY 12345

where 123 Main Street was the last known address (not the mortgaged premises) did not strictly comply with the statute. The Court reasoned that the 90 Day Notice was not sent separately to each borrower because it was jointly addressed and sustained the lower court’s dismissal of the foreclosure action. This holding resolved a dispute among several trial courts – some finding such a notice sufficient and others not.

The dissent set forth ten separate requirements of the statute with which the servicer complied and criticized the majority’s reasoning that a separately addressed envelope is more likely to reach the addressee than one that is jointly addressed. Once the servicer mails the envelope it has no control over who retrieves the household’s mail, whether the person retrieving the mail passes the notice onto the addressee, or if it is “placed in a file, round or otherwise.”

On December 15, 2021, the Court issued its decision in Bank of America v. Kessler, ___  AD3d ___ ,N.Y. Slip Op. 06979 (2^nd Dept 2021). In Kessler, the Court dealt with what constitutes “any other mailing or notice” which the statute prohibits from inclusion with the 90 Day Notice. As was the case in Yapkowitz, over the years trial courts have expressed differing views as what constituted an “other mailing or notice.” The items reviewed by the various trial courts included language pursuant to federal statute, language regarding a possible discharge in bankruptcy, language regarding the Servicemembers Civil Relief Act, and language advising the mortgagor that certain loss-mitigation options might be available – any of which provided some benefit to the recipient. The Court considered whether it mattered that the alleged non-complying language was actually part of the 90 Day Notice in a continuous paginated document or on separate sheets of paper placed after the form notice and found that it did not. The Court found that application of the “strict compliance” doctrine mandated a finding that including any of these additional notices, which in the Court’s view could have very easily been sent in additional mailings separate from the 90 Day Notice, violated the statute and once again mandated dismissal of the foreclosure action.

New York has two appellate levels, therefore under certain conditions these holdings could be the subject of further appeal. However, the present state of the law in the NY area covered by the Second Department (one half of the state’s population) is that the 90 Day Notice, and only the 90 Day Notice, must be sent in a separate envelope, separately addressed to each borrower. Deviation from this, will most likely result in dismissal of the action. Such a dismissal is based on a failure to meet a condition precedent, and provided the action was commenced with the statute of limitation, the action can be recommenced under certain conditions without a statute of limitations issue. 

If you have questions, contact Michael Manniello or Eric Kelner in the firm's Creditors' Rights/Bankruptcy practice group.       

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