The 90-Day Notice – Still More Mischief!
Can this be possible? The requirement to send the defaulting borrower in a home loan mortgage case a 90-day pre-foreclosure notice has been in force since 2008. One might surmise that most conceivable issues have been uncovered and adjudicated in the hundreds (and hundreds) of decisions where the statutory obligation of RPAPL § 1304 has been raised as a defense. Not yet. Seventeen years of borrowers asserting this most fertile of defenses has proven insufficient to calm the mayhem. Three recent cases underscore the point.
An underlying problem with all this, which might not be so apparent, is that should a lender lose on the issue of notice in Supreme Court, it might need to appeal. Even if it wins at the trial court level, it is the borrower who typically pursues appeal. The likely net result of that is years of litigation, much legal fee expenditure and an uncertain result. This assures that some percentage of mortgage foreclosure cases will be bogged down in extensive delay beyond the lengthy durations that foreclosure cases already consume.
Regarding one of the recent cases, should a foreclosing lender have failed to comply with RPAPL § 1304, the foreclosure is subject to dismissal. Assuming no intersession of the statute of limitations, initiating the action anew may be unpalatable, but not fatal. However, in Wells Fargo Bank, N.A. v. Palaigos, 2025 WL 610598, ____ N.Y.S.3d ____ (2d Dept. 2025) the trial court, in finding that the plaintiff was unable to demonstrate compliance with mailing of the notice, dismissed the case with prejudice. That of course was fatal.
On appeal the Second Department ruled that failure to satisfy a condition precedent, i.e., the notice pursuant to RPAPL § 1304, is not a final judgment on the merits. Therefore, the case should not have been dismissed with prejudice and the plaintiff was entitled to start the action anew (pursuant to CPLR § 205(a) or CPLR § 205-a). Yes, the plaintiff ultimately prevailed, but at the cost of the aforementioned years of delay and incurrence of substantial expense.
In another case, the lender encountered the “Kessler Doctrine” relating to the separate envelope rule. That is, that the 90-day notice had to be in a separate envelope from any other information that the foreclosing party desired to send. Ultimately Kessler was reversed by New York’s highest court – the Court of Appeals – which ruled that accurate statements that furthers the underlying statutory purpose of providing information to borrowers that is or may become relevant to avoiding foreclosure do not constitute any “other notice” violative of the separate envelope rule. Undaunted by such a holding, the borrower in Wells Fargo Bank, National Association v. Smart, 234 A.D.3d 1016, 225 N.Y.S.3d 699 (2d Dept. 2025) received the largess of the trial court which denied summary judgment to the foreclosing party on the ground that inclusion of a HAMP notice in the 90-day envelope violated the statute. On appeal, the HAMP information was deemed relevant to avoiding foreclosure, and not false or misleading – therefore not in violation of the separate envelope requirement.
Again, the plaintiff ultimately prevailed, but still suffered the practical setback of time and expense. Thus, the notice requirement of RPAPL § 1304 still remains a potent weapon.
In Federal National Mortgage Association v. Williams-Jones, 2025 WL 610563, ___ N.Y.S.3d ___ (2d Dept. 2025) the foreclosing lender really stumbled.
The statute requires that the 1304 notice be written verbatim as the statute recites. One aspect is that the borrower is alerted to call the New York State Department of Financial Services at its toll-free helpline with a required recitation of that phone number. This one was tough to get wrong, but here the lender prepared the notice but omitted the mandated phone number. This was easy to avoid but the lender managed to fail nonetheless, resulting in success in the trial court and reversal in the Appellate Division. Here, the lender lost and suffered the delay and expense.
A conclusion: the 90-day pre-foreclosure notice requirement remains a formidable, commonplace defense for defaulting borrowers. Even if mortgagees prevail, although they lose with frequency, they still waste excessive time and money in resisting the onslaughts.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2024), is a partner with Berkman, Henoch, Peterson & Peddy, P.C. in Garden City, New York. He is also a member of the The American College of Real Estate Lawyers, a fellow of 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.