Duration Of The 90-Day Notice And Why It Matters

That holders of defaulted mortgages are beset with problems and a surfeit of statutory roadblocks to prosecuting foreclosure actions is hardly a cause for widespread sympathy.  Nor is there any outcry to rescue lenders facing foreclosure durations of three and four years, with the resultant accrual of interest, costs and protective advances for insurance and taxes, then rendering losses as certain.  Nonetheless, it may be reasonable to urge that there should still not be confusion or uncertainty interpreting foreclosure statutes in such a way as to impose yet further detainment.

A particular case in point is RPAPL §1304, which requires that where the subject is a home loan, a certain ninety day notice must be sent to the borrower before a foreclosure action can begin.  This notice mandate has been widely discussed and reviewed in our alerts in recent years.

But there is an aspect of the ninety day imperative which does merit remedial analysis, RPAPL §1304(4), which provides that:

“The notice and the ninety day period required by subdivision one of this section need only be provided once in a twelve month period to the same borrower in connection with the same loan.”

What this means was immediately manifest to experienced practitioners and represented a welcome avoidance by the legislature of abusive borrower shell games.  When the ninety day notice is sent, should the borrower cure the default, as in remitting the sums in arrears for example, then of course the mortgage is reinstated.

If, however, a month thereafter the borrower defaults again, the mortgage holder need not send a new ninety day notice as a prerequisite to foreclosure.  This then averts the bizarre exercise of a default followed by a ninety day hiatus, followed by cure, then another notice with concomitant three month delay, all repeated ad nauseam.  Such a scenario would effectively change the payment requirements of the mortgage loan and permit wily borrowers to constantly, indeed interminably, postpone payment obligations.

So, any subsequent default within a year does not elicit a notice obligation.  If, however, the borrower has cured and more than a year has passed, then it is simply a new situation and a notice would be required.

This is quite different, though, from saying that if a year has gone by and the borrower has ignored the notice, the mortgage holder is obliged to send the notice yet again in order to initiate a foreclosure.  The statute does not say that, although it readily could have done so.  In other words, a ninety day notice never cured does not lose its efficacy merely with the passage of time.

Nevertheless, there is some prevailing view in the wind that if a foreclosure is not begun within a year of the notice, initiating the action is barred unless a new ninety day notice is sent and has expired.  Indeed, the Department of Financial Services takes this position, in a desultory fashion.  The issue of this interpretation, however, has never been adjuducated by the courts.

While it might be surmised that mortgage holders would surely institute their home loan foreclosures the moment the ninety days expired, there are any number of circumstances which can impede such exactitude, a few among them: (a) difficulties in obtaining information to support the now cancelled attorney affirmation required by Administrative Order 548/10, as amended by AO 431/11 or by the new certificate of merit obligation of CPLR §3012-b; (b) governmental imposition of rules or suits as to the foreclosure process; (c) compelling pressures to settle or compromise mortgage defaults.

Faced with such demands and impositions, some foreclosure actions may just not be ready for more than a year after the notice has expired.  Must the now poised mortgage holder first send a new notice and wait yet another ninety days, or is it free to proceed?  We posit here that the second path is correct, because:

• The legislature could readily have stated that the notice expired after one year, but did not do so.
• The statute is not ambiguous and statutory construction dictates that it must be interpreted as written.
• This is required as well because the statute is in derogation of the common law.
• The Department of Financial Services posture does not have the force of law.
• The statute’s bill jacket offers no interpretation that a ninety day notice expires after one year.

An examination of the law as to why the statute needs to be interpreted as suggested in this alert appears at some length in the article penned by this writer and Peter Sullivan, a lead partner in Berkman, Henoch’s litigation department, in the February 19, 2014 issue of The New York Law Journal at page 5.  If that level of detail will be helpful, reference there is invited.

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.