No 90-Day Letter For Action To Cancel Erroneous Satisfaction

While the purpose of the sundry borrower friendly foreclosure statutes in New York is a desire to focus upon protection for borrowers during the foreclosure process itself, the sometimes ambiguous language of those statutes opens the door for borrowers to assault other actions and to generally assail the foreclosure process.  Part of our railing against such statutes, and their sometimes unfortunate interpretation, arises from an awareness that borrowers are only too ready to seize any opportunity to block foreclosures and anything related to them.

The 90-day notice is one area fertile for litigation; borrowers will deny its receipt or will insist upon its application even when the case is not a home loan; recall that the 90-day notice is confined to a home loan situation.  Unfortunately, the statute requires the 90-day notice before commencing “an action against the borrower, including mortgage foreclosure…”

This broad language then ensnares even an action upon the mortgage note – which does not threaten the borrower’s title.  Might this rather open ended verbiage apply to an action whereby a lender seeks to cancel an erroneous satisfaction?  Of course a borrower averred that it did.

First, it is worth mentioning that satisfactions which should never be generated too often are indeed created.  While this typically arises out of CEMAs, it can happen at any time.  When it does, either a lender needs to begin a separate action to quiet title (in New York this is pursuant to RPAPL Article 15) or add such a cause of action to a mortgage foreclosure complaint.  Obviously, if a mortgage to be foreclosed is satisfied of record, disposing of that satisfaction will be essential.

In such a case, a borrower might seize upon lack of a 90-day notice, claiming that it applies to “any action against a borrower”.  Does it?  No, and fortunately case law so provides; the court was not bamboozled here.  [HSBC Bank USA, N.A. v. Saleemi, 48 Misc.3d 1206(A) 20 N.Y.S. 3d 292 (Sup. Ct. 2015)]

The court observed that although the notice statute’s language suggests its applicability to actions begun against a borrower who has taken out a “home loan”, the required notice warns of the risk of loss of the borrower’s home and the need to cure a default upon the loan.  First in that regard, as long as a mortgage satisfaction demonstrating full payment is of record, there is no risk to the borrower of loss of his or her home.  Thus the notice is not required.

In actuality, the decision, we respectfully suggest, should have been based upon the proposition that the nature of the action itself – to discharge a satisfaction – was not to cause a loss of the home.  It was simply to revivify a mortgage.  While the explanation of the case, therefore, might be somewhat imprecise, the end result is correct and certainly welcome to see.  Of course, this will hardly be the last time that borrowers endeavor to twist the notice requirement to apply to anything that excites their fancy.

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.