Well here is a striking non-surprise: The 90 day notice newly required for non-judicial co-op foreclosure is to be strictly enforced. So says a new case, Stern-Obstfeld v. Bank of America, 30 Misc.3d 901,915 N.Y.S.2d 456 (Sup. Ct. 2011).
Our quarrel with what might otherwise be obvious is our view that the decision should not have gone the way it did.
Before we explain that, let’s just do a quick refresher on the notice requirement. Lenders and servicers will be by now quite familiar with the imposition of the 90-day notice for foreclosure of all home loans in New York. (Remember there is a difference between a “home loan” and “residential property”.) As part of the various changes in the statutes, the 90-day requirement was extended to co-ops as well – even though co-ops are not real estate. And while many servicers rarely encounter co-ops, many do and so there is considerable meaning associated with this.
In any event, when the issue of whether the 90-day notice had been sent or not has arisen in foreclosure cases, the courts have been quite strict in mandating it – deeming it to be an absolute condition precedent to bringing a foreclosure, regardless of facts involved. Insofar as the idea of the 90-day notice surely was to alert borrowers to their default (assuming they didn’t really know about it) and to give them extra breathing room to find a way to solve their problems, voiding a foreclosure if the notice wasn’t sent where a borrower was not prejudiced seems inappropriate. Indeed, and as we have discussed in any number of alerts, there is much case law in New York for the proposition that mistakes that are not prejudicial can be deemed ministerial and ignored. Nonetheless, the trend is clear.
In the case at issue, that the borrowers had defaulted on their loan was clear and admitted. Indeed, the sale had been set prior to the effect of the statute requiring the 90-day notice for a co-op foreclosure (January 14, 2010). Still further, the borrower had entered into a forbearance agreement with the lender and many months of discussions concerning a possible modification or a new loan ensued. When finally nothing came of these attempts, and in September, 2011, the co-op sale was noticed – albeit without the 90-day letter.
It was the neglect to send that letter which led the court to vacate the actual sale of the co-op unit. Again, it is apparent that the borrower had almost a year’s worth of warning and knew full well what was occurring. But for want of the 90-day notice in this case, the sale was voided.
So as noted at the outset, there is no surprise here, distasteful though it be. For those servicers who will prosecute co-op defaults, this extra reminder about the importance of the 90-day notice may be of value.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.