Just When You Thought It Went Away… The 30-Day Notice Defense

We have often commented that borrowers’ defenses change over time, some finding fashion then fading away with new ones arising to replace them.  The 30-day notice of default is one of those which some years ago was very popular but then drifted into obscurity, perhaps because the statutory 90-day notice became more prominent.  In any event, the 30-day requirement has arisen in a recent case and it led to dismissal of a foreclosure!  [GMAC Mortgage, LLC v. Bell, 128 A.D.3d 772, 11 N.Y.S.3d 73 (2d Dept. 2015).]

Mortgage lenders and servicers are aware that the Fannie/Freddie uniform instrument contains a provision whereby a mortgage cannot be accelerated unless and until a 30-day notice of default has been sent.  This must be transmitted by regular mail and the dictates of what it must provide are in the text of the mortgage.  We have written on this subject many times and have commented on what a trap it can be.  In any event, a lender must send the letter and must be in a position to demonstrate that it was indeed sent.  It failed in the mentioned case.

Here, there was the usual default, a foreclosure was begun, an answer was interposed, the foreclosing plaintiff moved for summary judgment and the defaulting mortgagor cross-moved for summary judgment on the ground that a condition precedent – the sending of the 30-day default/cure notice – did not take place.

While the trial court granted summary judgment to the lender, the Appellate Division reversed on appeal finding that the borrowers had established that the plaintiff failed to satisfy a condition precedent to the commencement of the action because it failed to provide them with a notice of default in the payment of their mortgage obligation, which was mandated by the terms of the mortgage itself.

And here was the plaintiff’s problem.  In opposition to the cross-motion, the plaintiff relied on the affidavit of its authorized officer as to the mailing, but the court found that it did not raise a triable issue.  The affidavit, which asserted that the notice of default was sent in accordance with the terms of the mortgage, was unsubstantiated and conclusory and even when considered with a copy of the notice of default, failed to show that the required notice was, in fact, mailed by first class mail or actually delivered to the address.

This leads of course to the contemplation by lenders and servicers of how they will actually prove that the 30-day letter was sent.  Preparing an affidavit of service for each one or one blanket affidavit of service for all notices which are sent on a particular day is one way to do it.  Another is to have a set system as to how the notice letter wends its way through the lender or servicer’s office and winds up in a depository maintained by the United States Postal Service.  Then, an officer on behalf of the plaintiff can specify the system and advise that such is always adhered to; that usually should suffice.  Here, though, neither approach was used and it was fatal to the foreclosure.

The lesson is that this remains an area where lenders and servicers must continue to be careful.

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.