Scott E. Mollen

Foreclosures—U.S. Court of Appeals for the Second Circuit Certifies Questions to New York Court of Appeals—Issues Involved Whether the Lender Proved Compliance With RPAPL §§1304 and 1306's Pre-Foreclosure Notice and Filing Requirements—§1306 Does Not Specify Whether Each Borrower Must Be Named in a §1306 Notice to the Superintendent of Financial Services—Approximately One-Year Gap Between a Default and Notice of Default May Cast Doubt on Whether Lender Provided Adequate Proof of Standard Office Mailing Procedure

This decision by the U.S. Court of Appeals for the Second Circuit (court) involved an appeal from a trial court decision which granted summary judgment in favor of a lender in a foreclosure action against two defendants. The defendants argued that the lender "failed to prove compliance with pre-foreclosure notice requirements of New York Real Property Actions and Proceedings Law (RPAPL) §1304" (§1304) and "the pre-foreclosure filing requirements of RPAPL §1306" (§1306). Since the appeal "turn[s] on questions of New York law for which no controlling decisions of the New York Court of Appeals exist," the court certified two questions to the New York Court of Appeals.

The lender had commenced a foreclosure action against the two defendants and they had moved for summary judgment. The District Court had granted the lender's motion after adopting a "Report and Recommendation" by a magistrate judge. The defendants argued that the lender failed to prove compliance with §§1304 and 1306. With respect to §1304, they contended that the lender "failed to show that it followed standard mailing procedures to ensure that pre-foreclosure notices were properly addressed and mailed." They also argued that the lender failed to comply with §1306 because it failed to include information on its filing about one of the borrowers.

The borrower's wife had taken a loan secured by a note and mortgage given by the wife and her husband on their home. On the same day that the wife executed the note, the defendants both executed a "consolidation, extension and modification agreement," whereby they agreed to combine "into one set of rights and obligations all of the…agreements stated in the note and mortgage," and they agreed to "take over all of the obligations under the note and mortgage as consolidated and modified by this agreement as borrower." The mortgage was ultimately assigned to the plaintiff lender. Approximately six years later, the defendants executed a loan modification agreement, in which they were both listed as "borrower."