Lack Of Pre-Acceleration Notice Defeats Lender


15 July, 2017


Mortgage Lender and Servicer Alerts

This is not so obscure, but it is a concept which cannot be emphasized too often, as a new case startlingly maker clear.  (U.S. Bank National Association v. Singh, 147 A.D.3d 1007, 47 N.Y.S.3d 437 (2d Dept. 2017)].  In the simplest of terms, if notice is required as a condition precedent to declaring the full mortgage balance due (acceleration) then upon challenge, failure to prove compliance with the notice provision will defeat the foreclosure – which in the cited case was denial of summary judgment.  Although the case did not say so, unless the foreclosing plaintiff will be more precise with proof at a trial on the issue, the entire action would be dismissed – a significant waste of time and expense for the lender.

As an overview, it may be perceived that there are three versions of pre-acceleration notice which might be required:

  • The 90-day notice mandated by statute (RPAPL § 1304) in a home loan foreclosure;
  • The 30-day notice imposed by the Fannie/Freddie form of mortgage (typically employed for the residential situation);
  • A notice provision as part of a particular mortgage, possibly applicable to commercial loans

In the new case, it happened to be an instance of (c), there the negotiated mortgage provision.  The mortgage necessitated the sending of a notice before the balance could be accelerated.  When the borrower-defendant disputed lender’s compliance with the notice obligation, the issue came before the court on plaintiff’s summary judgment motion.

The ruling was that the plaintiff failed to establish its prima facie entitlement to judgment by not demonstrating sending of the notice.  Specifically, the plaintiff did not show that the notice was mailed by first class mail or actually delivered to the borrower’s notice address if sent by other means – all as required by the mortgage.

Had the lender sent the notice?  It is not possible to tell.  They may have, but didn’t maintain records enabling them to prove it – a second vital part of the message.

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.