Foreclosure Frustration: Dismissal For Defense Not Even Raised!

We report regularly – and typically rail about the multitude of traps for lenders that New York imposes on the foreclosure process, sundry notices among them.  It has long been an ordeal, and a time consuming one, for a foreclosing plaintiff to slog through a foreclosure in the Empire State.  While some of this, perhaps most, is attributable to borrowers invoking any conceivable defense and endeavoring to delay the process for as long as possible, the courts on their own can add to the dismay, as a recent case discloses: U.S. Bank National Association v. Carey, 137 A.D. 3d 894, 28 N.Y.S. 3d 68 (2d Dept. 2016).

Here, the court itself, without any defense on the point of serving a pre-foreclosure notice having been raised, dismissed a foreclosure.  The Second Department appropriately reversed that, but the travail was still encountered.  The dismaying story follows.

This was a garden variety foreclosure, or so it appeared to be.  After default and initiation of a foreclosure action, the borrowers did not appear or answer.  Accordingly, the plaintiff moved for an order of reference, as is typical.  In support of that motion, the foreclosing plaintiff presented evidence as to the compliance with the mandatory 90 day notice which is a prerequisite to home loan foreclosures in New York.  It submitted an affidavit of the document control officer of the servicer reciting that the 90 day notice was sent on a date certain by the required mailing and copies of the notices were annexed.  Significantly, the borrowers did not oppose the motion.

Nonetheless, the trial court denied the motion, offering leave to renew within sixty days, on the ground that the foreclosing plaintiff’s allegations as to compliance with the notice requirement were merely conclusory.  Therefore, the court said, the plaintiff failed to establish compliance with the requirements or provide a reason why the compliance was not required.  Having expressed that, the court further decreed that if a motion for leave to renew was not made within sixty days the action would be deemed abandoned!

The foreclosing party was constrained to appeal.

The appellate court observed, not surprisingly, that the 90 day notice was indeed a requirement, that failure to serve the notice is not jurisdictional and that the defense could be raised at any time.  Critically though, in this case the defense about some infirmity in the notice had never been raised by the borrowers.  Accordingly, the plaintiff was not required to disprove that defense.  Therefore, the higher court reversed and held that the foreclosing party’s order of reference should have been granted.

Rationality prevailed in the end, but the cases at the trial court level where foreclosures are inappropriately dismissed or stalled are legion.  While in the end the plaintiff succeeded, it suffered the time and expense of having to appeal.  This creates ever greater debt which helps no one.

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.