Pre-Foreclosure Notice – Lender Actually Wins!

We are of the unfortunate habit of reporting with great regularity those seemingly uncountable occasions where foreclosing lenders are defeated by their inability to demonstrate compliance with RPAPL § 1304 – service of the 90-day pre-foreclosure notice.  A controlling rule here is that strict compliance with RPAPL § 1304 regarding notice to borrowers is a condition precedent to the commencement of a foreclosure action upon a home loan.

The common-place problem or road block encountered by foreclosing plaintiffs is the inability to prove that the required notice was actually mailed.  But there are other aspects to this equation as a recent case addresses, U.S. Bank National Association v. Simmons, 230 A.D.3d 621, 216 N.Y.S.3d 675 (2d Dept. 2024).

One of those additional factors – and it is dispositive – is that the variety of loan which elicits the obligation to send the 90-day notice is a “home loan”, in turn defined in relevant part as a loan that is secured by a mortgage on real estate which is or will be occupied by the borrower as the borrower’s principal dwelling.  Whether mortgage holders are careful enough to establish a record establishing one way or the other whether the loan fits the definition can vary.  But in the recent case the issue was clear – and in the lender’s favor.

The plaintiff established prima facie that the 1304 notice was inapplicable because the subject loan was not a home loan within the meaning of the statute.  The record showed that the borrower executed a second home rider as an addendum to the mortgage which provided that he would occupy and use the property only as a second home.  Critically, that meant that the 90-day notice was not required.

The lender did not aid its cause in neglecting to raise the issue of it being a non-home loan before the trial court, arguing it instead for the first time on appeal.  That usually excludes consideration of an issue not previously litigated, but this case happened to be within the exception where a concept may be reached because it involves a question of law apparent on the face of the record which could not have been avoided by the court if had been brought to its attention.

This latter principle prevailed to rescue the lender. That, combined with the actuality that this was not a home loan, defeated the borrower’s claim of failure to send the 90-day notice.  This is certainly a refreshing result for foreclosing plaintiffs.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2024), is a partner with Berkman, Henoch, Peterson & Peddy, P.C. in Garden City, New York. He is also a member of the The American College of Real Estate Lawyers, a fellow of 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.