30-Day Notice Still A Problem For Lenders

Is this possible?  Sadly for lenders and servicers it is!

We are constrained to devote a fair amount of emphasis to the problem of the 90-day notice as a condition precedent to home loan foreclosures in New York.  In that regard, foreclosures are much too often dismissed when the foreclosing plaintiffs are unable to prove that the notice was actually mailed – but as noted this is a problem we have addressed in any number of alerts and articles.

But the 30-day notice?  This is an ancient creature, a function of the Fannie Mae / Freddie Mac uniform instrument providing that a certain 30-day notice must be sent by regular mail to the borrower.  Because this obligation has been around for so long, one might assume that lenders and servicers decades ago established procedures to demonstrate the mailing of the 30-day notice because if they are unable to do that, any savvy borrower will claim lack of receipt. The simple fact then is that the foreclosure will be dismissed for want of demonstrating the mailing of that notice.

Some twenty years ago (before the 90-day notice came to the fore), the defense of lack of mailing of the 30-day notice was commonplace.  Borrowers jumped on this and used it to their advantage. Over time, however, lenders victimized by the defense tightened procedures enough so that the issue faded away.  But that is not to say that it disappeared entirely.  Indeed, very recently, there were four reported cases where borrowers claimed lack of 30-day notice.  In two of those, the lender was successful [Suntrust Bank v. Morris, 169 A.D.3d 961, 92 N.Y.S.3d 710 (2d Dept. 2019); PennyMac Holdings, LLC v. Lane, 171 AD.3d 774, 97 N.Y.S.3d 194 (2d Dept. 2019)] but in two the lender lost and the foreclosures were dismissed [US Bank National Association v. Cope, 167 A.D.3d 965, 90 N.Y.S.3d 227 (2d Dept. 2018); Bank of America, N.A. v. Kljajic, 2019 N.Y. App. Div. LEXIS 107, 91 N.Y.S.3d 231 (2d Dept. 2019)].  A fifty percent success ratio isn’t very good when it ought to be one hundred percent.

In the first mentioned defeat, the foreclosing lender’s proof was close to non-existent.  The court found that the evidence submitted failed to show that the required 30-day notice of default was in fact submitted to the defendants by first-class mail or actually delivered to the designated address if sent by some other means which was required by the terms of the mortgage – all as a condition precedent.

In the second case there was an affidavit from the plaintiff’s loan servicer claiming that notice of default was sent to the defendant on a certain day, but this was found to be conclusory and unsubstantiated, even when considered together with a copy of the notice of default.  Thus, the lender was unable to prove that the notice was sent in accordance with the mortgage dictates.

In each case the lender or servicer claimed that the notice was sent, but simply lacked any proof of the act.  Lenders and servicers, however, should know the answer here.  There can be either an affidavit of service or in the alternative, testimony as to the system which assures that notices are mailed, an affidavit of the practices and procedures in the office that handles the notices.  Failing in one of those, anytime a borrower wishes to assail the mailing of the 30-day notice, there will be a danger to the foreclosure.

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.