The debate about the mandated 90-day notice to borrowers as a pre-requisite to initiate a foreclosure has long been over. Although there have never been statistics published to support the notion that the notice helps borrowers in any way – just to delay enforcement by the mortgage holder for 90 days – it is ruled essential and failure to prove that it was properly sent will either force the foreclosure back to the beginning or cause it to be outright dismissed, as occurred in a recent case which elicits this alert. [Bear Stern Asset-Backed Securities I Trust 2006-IMI v. Ceesay, 80 A.D.3d 504, 119 N.Y.S.3d 104 (1st Dept. 2020)]
That the 90-day notice would prove to be a trap for lenders was apparent and predictable the day the statute was passed. The prediction proved to be true and we have explored the subject in these alerts on a number of occasions because lenders so often fail to prove compliance which the notice dictates and thereby lose the case. That happened again in the recent decision mentioned, but under even more painful circumstances.
There, the borrower answered the complaint, in turn necessitating a motion for summary judgment (and to appoint a referee) by the lender. (This, of course, incurs extra time and legal expense.)
The borrower, however, failed to respond to the motion for summary judgment and so it was granted. But later the borrower moved to vacate his default in response to the summary judgment, offering the obligatory excuse and meritorious defense; here is where the lender’s pain is exacerbated. The excuse – found reasonable by both the trial court and on appeal – was claimed difficulties with the court’s e-filing system! The borrower had been able to file its answer, but somehow not its answer to the motion.
The immediately manifest peril to lenders is that they can never know when borrowers will make such an assertion – which the courts have blessed as a reasonable excuse for default. Moreover, it can come somewhat later in a case (here on summary judgment) thus imposing more delay as lender’s defeat occurs later in the case, and in this instance on appeal no less.
The balance of the case underscores the usual, and it would seem incessant, problems lenders have in proving the 90-day notice. Here were the lender’s shortcomings:
To conclude the miscues, the lender argued that the loan was not even a home loan so the notice would not be required – a good argument if true. But here, the lender raised the argument for the first time on appeal which the court need not entertain; it had to be raised at the trial court level.
So, still and again, much room for lenders to stumble.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2019), 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.