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On February 14, 2023, the New York Court of Appeals issued its decision in the case of Bank of America v. Kessler. As you are aware, last year, the Kessler decision issued by the Second Department resulted in a significant upheaval in the state, resulting in a plethora of dismissals or voluntary discontinuances due to 90 day notices containing additional information including disclosures required by Federal law.

NYMBA was one of multiple trade organizations that filed an Amicus Brief with the Court of Appeals on this case, recognizing the impact that the case had on its members and industry as a whole. Today, we are excited to announce to our members that the Court of Appeals reversed the decision issued by the Second Department Appellate Division, holding that the inclusion of concise and relevant additional information did not void the notice sent pursuant to Real Property Action and Proceedings Law §1304.

In reviewing the objectives of the legislature in enacting §1304, the Court identified two parts to review: (1) that the notice “shall include” the specified language; and (2) the notice must be sent in a separate envelope. Relying on the plain language and reading of the statute, the court determined that, in reference to the wording “shall include,” the legislature did not intend for the notice to only include the statutorily required language. As such, as the notice in Kessler included the required language per §1304, the notice complied with the requirements.

The focus then shifted to the main issue at the heart of the case as to whether the additional language violated the separate mailing requirement by constituting “other mailing or notice.” The Court of Appeals noted that to read this provision as the lower courts and apply a bright line rule “would lead to nonsensical results.” The Court clarified that “other mailing or notice” refers to notices such as default notices, interest rate changes, monthly statements, or servicer change letters. However, again looking to the legislative purpose of §1304, the Court concluded that since §1304 was designed to help borrowers avoid foreclosure, the inclusion of additional rights actually furthered the purpose of §1304. Finally, the Court noted that applying the bright-line rule also would conflict with the disclosure requirements of federal law.

Please note, the Court was conscious to note that additional language should not be “false, misleading, obfuscatory, or unrelated to the purpose of the notice”, and inclusion of such language could still void the notice.

By Natalie Grigg, Partner

Woods Oviatt Gilman, LLP

NYMBA’s newly formed Communications Committee has been hard at work! Our newsletter has been expanded and improved to bring members more information on important issues and industry happenings. Quarterly issues will feature the new format and continue to provide updates on upcoming events, Legislative Issues, Loan Servicing, Technology, Affordable Housing, Education and more! Check it out HERE and let us know what you think!

The Bureau issued this interim final rule to amend Regulation X. The amendments temporarily permit mortgage servicers to offer certain loss mitigation options based on the evaluation of an incomplete loss mitigation application. Eligible loss mitigation options, among other things, must permit borrowers to delay paying certain amounts until the mortgage loan is refinanced, the mortgaged property is sold, the term of the mortgage loan ends, or, for a mortgage insured by the Federal Housing Administration, the mortgage insurance terminates. These amounts include, without limitation, all principal and interest payments forborne through payment forbearance programs made available to borrowers experiencing financial hardships due, directly or indirectly, to the COVID-19 emergency, including a payment forbearance program offered pursuant to section 4022 of the Coronavirus Aid, Relief, and Economic Security Act. These amounts also include principal and interest payments that are due and unpaid by borrowers experiencing financial hardships due, directly or indirectly, to the COVID-19 emergency.

See INTERIM FINAL RULE

The Hardship Declaration requirements of the New York COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020, scheduled to expire on August 31, 2021, were extended by the legislature until at least January 15, 2022.  Click HERE for a complete copy of the legislation.   

Additional language was added to the foreclosure Hardship Declaration as of September 2, 2021.  Hardship Declarations included with the 90 day notice sent in after September 2, 2021 must include the additional language.  Click HERE for copy of the new Hardship Declaration for foreclosure and HERE for a copy of the Hardship Declaration for Eviction. The additional language is highlighted in yellow.

The legislation adds three new provisions that allow a Plaintiff to challenge the claimed hardship.  These additions were added to meet the requirements of an August 12, 2021 U.S. Supreme Court Ruling that found that the eviction Hardship Declaration “scheme violates the court’s longstanding teaching that ordinarily ‘no man can be a judge in his own case’ consistent with the Due Process Clause.”  The Hardship Declaration includes notice that the Plaintiff can challenge the declaration of hardship. New foreclosures and residential evictions can be filed even if a Hardship Declaration was returned by the mortgagor if an affidavit is provided that states that “… the foreclosing party believes in good faith that the hardship certified in the hardship declaration does not exist.”  In pending cases the Plaintiff can challenge the Hardship Declaration by making a motion asking the court to hold a hearing to determine whether the defendant’s hardship claim is invalid.  The Plaintiff must have a good faith belief that the defendant has not experienced a hardship to make this motion.

The remainder of the foreclosure related requirements of the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 were not changed.

Click HERE to read the NY Senate Press Release.

More information on the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 and the foreign language translations of the Hardship Declaration, when updated by the Office of Court Administration, are located on the NY Court’s website at:

HTTPS://WWW.NYCOURTS.GOV/COVID-EEFPA.SHTML
HTTPS://WWW.NYCOURTS.GOV/EEFPA/

by Adam Gross, Partner
Gross & Polowy, LLC