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In 1081 Stanley Ave., LLC . Bank of New York Mellon Trust Company, N.A. , Supreme Court, Appellate Division, Second Department, New York, January 29, 2020, 2020WL 465549; 2020 NY Slip Op. 00559, the Appellate Court reversed and the plaintiff’s motion for summary judgment on the complaint was granted and defendant’s cross motion for summary judgment dismissing the complaint was denied.https://law.justia.com/cases/new-york/appellate-division-second-department/2020/2017-06386.html

The instant action was commenced pursuant to RPAPL 1501(4) to cancel and discharge a mortgage in the sum of $551,200.00. In March 2009, Bank of New York Trust Company, NA commence an action against Batista to foreclose the mortgage. (Mortgage was thereafter further assigned). By order dated November 14, 2013, the Supreme Court dismissed the 2009 action as abandoned under CPLR 3215(c).

The Plaintiff herein, acquired the premises pursuant to a deed dated June 22, 2015, and commenced an action against Bank of New York Trust pursuant to RPAPL article 15 to cancel and discharge the mortgage. In the complaint is was alleged that any interest of the defendant was barred by the statute of limitations.   Defendant filed an answer alleging, among other items, that the acceleration of the debt was revoked prior to expiration of the statute of limitations and that Batista had acknowledged the debt, thereby restarting the statute of limitations. The plaintiff moved for summary judgment on the complaint, and the defendant cross-moved for summary judgment dismissing the complaint. The Supreme Court denied the plaintiff’s motion and granted the defendant’s cross motion. The plaintiff then appealed.

A lender may revoke its election to accelerate the mortgage, but, it must do so by an affirmative act of revocation occurring during the six-year statute of limitations period. The defendant submitted the affidavit of Mark Syphus, a Document Control Officer of Select Portfolio Servicing, Inc., the defendant’s attorney-in-fact and loan servicer, to which was annexed a letter addressed to Batista, dated December 29, 2014, stating that the acceleration of the mortgage debt was “hereby rescinded.” However, the defendant failed to show that the letter dated December 29, 2014, constituted an affirmative act revoking the acceleration, since the defendant submitted no evidence that the letter was sent to Batista.

Additionally, defendant failed to show that certain authorizations signed by Batista constituted acknowledgments sufficient to revive the statute of limitations. The authorizations were attempts to negotiate loan modifications and not unqualified acknowledgments of the debt sufficient to reset the running of the statute of limitations.

Another lesson in the necessity of documentary evidence of mailing for a de-acceleration letter to have the intended effect.

For more information regarding this case, please contact  Deborah Gallo, Director of Operations at [email protected]

In U.S. Bank Nat’l Ass’n as Tr. for Structured Adjustable Rate Mortg. Loan Tr., Mortg. Pass-Through Certificates, Series 2005-23 v. Haskins, 2019 WL 6888654 (S.D.N.Y. Dec. 18, 2019). The District Court for the Southern District of New York granted the plaintiff’s motion for summary judgment on a strict foreclosure claim against a junior lienholder not named in the foreclosure.

The junior lien was filed in March 2014. The foreclosure’s initial lis pendens was filed in February 2011, expired on February 2014 and was not refiled until April 2014. Thus, the judgment lien was filed during the gap period in the lis pendens. The foreclosure was completed, and plaintiff purchased the property at foreclosure sale.Thereafter, the Plaintiff brought a strict foreclosure in order to extinguish the missed judgment. The parties moved for cross summary judgment.

The Court found that defendant’s lien was junior to plaintiff’s mortgage, and that the lien survived the foreclosure sale and remained on the property since it was filed during the gap period.   The Court differentiated between the fact that the plaintiff brought the action under RPAPL 1352 (strict foreclosure), versus RPAPL 1503 (re-foreclosure), and 1352 does not require the plaintiff prove the absence of fraud or willful neglect. Thus, defendant’s allegation that re-filing of the lis pendens was negligent was found irrelevant.The Court granted the plaintiff’s motion for summary judgment, denied defendant’s cross motion, and ordered that defendant had… “60 days to notify of his intent to exercise his right of redemption, pay the mortgage debt, along with the value of improvements made to the property, to maintain his interest in the property.”

For more information regarding this case, please contact Deborah Gallo, Director of Operations at [email protected]

In Wells Fargo Bank, N.A. v. Valerie J. Portu aka Valerie M. Portu, et al, the Appellate Division Third Department partially granted Defendant’s cross motion for summary judgment dismissing the complaint.http://decisions.courts.state.ny.us/ad3/Decisions/2020/528559.pdf

In April 2006, defendant Valerie Portu and her now deceased husband execution a note in the amount of $147,962 in favor of First Alternative Mortgage Corp.   The note was secured by a mortgage held by MERS as nominee for lender.   After defendant defaulted on the October 2008 payment, plaintiff sent a letter statement the loan was in default and cautioned that failure to make a payment “will result in acceleration of the Mortgage Note.”.

In August 2015, the Supreme Court found plaintiff failure to provide a reasonable excuse for default, and, lacked standing. The Court went on to dismiss the complaint by order entered July 13, 2016.

On March 2, 2016, plaintiff notified defendant as follows: “Previously your loan was accelerated and all sums . . . were declared immediately due and payable. [Plaintiff] hereby de-accelerates the [l]oan, withdraws its prior demand of immediate payment of all sums. . . and reinstates the [l]oan as an installment loan.” The letter further advised that defendant was still in default, and that plaintiff had “a variety of homeowners’ assistance programs” to discuss. No further payments were made by defendant and plaintiff commenced this second foreclosure action on October 11, 2016. Thereafter, plaintiff moved for summary judgment and defendant cross-moved to dismiss the complaint as barred by the statute of limitations. Supreme Court partially granted defendant’s cross motion by finding that the foreclosure action was time-barred, while allowing the action to continue as to plaintiff’s claim seeking reimbursement for taxes and insurance paid on the property. Plaintiff appealed.

Plaintiff’s purported de-acceleration letter was issued on the eve of the expiration of the statute of limitations. Although the letter expressly “reinstates the [l]oan as an installment loan,” it does not demand the resumption of monthly payments or provide monthly invoices for payment due. Instead, the letter specifies that defendant remained in default for failing to make the required monthly installment payments since November 1, 2008 and offers to discuss “a variety of homeowner’s assistance programs.” Not to be overlooked is that the March 2, 2016 letter was followed by two June 13, 2016 letters providing 30 days to cure the default by making a payment due of $101,831, as well as a 90-day notice required under RPAPL 1304 — a condition precedent to initiating a foreclosure action. In our view, this proffer does not constitute a valid de-acceleration, as plaintiff simply put defendant on notice of its obligation to cure an eight-year default and then promptly embarked on the notices required to initiate a second foreclosure action. It followed that plaintiff’s second action was properly dismissed as untimely.

Thus, the Court issued a firm warning against pre-textual de-acceleration letters. A reasoned that “a de-acceleration letter is not pretextual if….. it contains an express demand for monthly payments on the note, or, in the absence of such express demand, it is accompanied by copies of monthly invoices transmitted to the homeowner for installment payments, or other comparable evidence”.

For more information regarding this case, please contact Deborah Gallo, Director of Operations at [email protected]

New York Senate Bill S5160 amends the real property actions and proceedings law, in relation to the failure to raise the defense of lack of standing in a mortgage foreclosure action. It has been signed by the Governor and is effective immediately. https://www.nysenate.gov/legislation/bills/2019/S5160

Section 1 amends the Real Property Actions and Proceedings Law by adding a new section 1302-a, which would provide that any defense based on a plaintiff’s lack of standing in a foreclosure proceeding related to a home loan cannot be waived by a defendant’s failure to raise such a defense in a responsive pleading or pre-answer motion.  A defendant would not be able to raise the defense after a foreclosure sale, unless the judgment of foreclosure and sale was issued upon the defendant’s default.

This bill fundamentally changes the standing argument in New York.  There is a volume of caselaw which reflects that the Mortgagor waives affirmative defense that mortgagee lacked standing to bring foreclosure action by not raising defense in his answer or in a timely motion to dismiss, but instead raising defense for the first time in opposition to mortgagee’s motion for summary judgment. Wells Fargo Bank Minnesota, Nat. Ass’n v. Mastropaolo, Supreme Court, Appellate Division, Second Department, New York.May 29, 200742 A.D.3d 239837 N.Y.S.2d 2472007 N.Y. Slip Op. 04626.  We can be assured that this change will create a new wave of appeals and litigation as the Courts respond.

For more information regarding this law, please contact Deborah Gallo, Director of Operations at [email protected]

On December 6, 2019, New York Governor Andrew Cuomo signed into law a bill, Assembly Bill 5626 (AB 5626), which, among other things, regulates reverse mortgages issued under FHA’s HECM program.  AB 5626 also appears to require lenders offering reverse mortgages in New York to obtain approval from the Superintendent of the New York Department of Financial Services (Superintendent) in order to make HECMs in New York.  The bill will take effect on March 5, 2020.

AB 5626 provides that an authorized lender, or any other party or entity, is prohibited from engaging in any unfair or deceptive practices in connection with the marketing or offering of reverse mortgage loans and must not: (i) use the words “government insured” or other similar language representing that reverse mortgage loans are insured, supported, and sponsored by any governmental entity in any commercial, mailing, advertisement or writing relating thereto; (ii) use the words “public service announcement” in any commercial, mailing, advertisement or writing relating thereto; or (iii) represent that any such loan is other than a commercial product.

Lenders must include certain consumer protection information, the content and form of which must be specified by the Superintendent, with any solicitation for reverse mortgage products mailed to a physical address in New York.  Lenders must also provide each actual/potential applicant with the telephone number and website address provided by HUD for HECM counseling.  Both the lender and the borrower must be represented by an attorney at closing, and each such party must have at least one attorney present to conduct the closing.

AB 5626 provides various servicing-related requirements and restrictions.  Lenders must inform and provide notice to a borrower, by telephone and first-class mail, when his or her line of credit or life expectancy set aside is depleted to 10% or less of its value.  Such notice must inform the borrower of their obligations relating to the property.  In addition, reverse mortgage lenders are prohibited from making an advance payment for any obligation arising from the borrower’s property.  Additionally, in the event a borrower defaults upon the payment of insurance premiums or real property taxes, the lender may only pay those premiums and/or taxes which are in arrears.

The bill also states that in the event a lender seeks to foreclose on a reverse mortgage loan on the basis that the property is no longer the primary residence of or occupied by the borrower, if during the verification of the borrower’s primary residence and/or occupancy no responses are received in response to mailings relating thereto, such lender must cause a telephone call to be made to the borrower, or if the borrower is unreachable by telephone, to a (designated) third-party contact.  In addition to making such call, prior to the commencement of a foreclosure proceeding, an in-person visit must also be made to the borrower.  Note that the lender may not charge a fee for any such visit and inspection.  The lender must wait at least 30 days following the in-person visit, in addition to any additional time or notice requirements specified by any other provision of law, before initiating a foreclosure action on the basis that the property is no longer the primary residence of the borrower.  If the borrower contacts the lender and provides proof of residence or occupancy after such visit, but before the commencement of the foreclosure action, the lender is barred from initiating such foreclosure action.

The bill also provides that compliance with its requirements is a condition precedent to commencing a foreclosure action, and failure to comply is a complete defense to such action.  Additionally, any person injured by any violation of the bill’s requirements or any violation of the rules and regulations of HUD relating to the HECM program may bring an action to recover treble damages, plus the prevailing plaintiff’s reasonable attorneys’ fees.

For more information regarding this law, please contact Deborah Gallo, Director of Operations at [email protected]