Recitation, as required by CPLR §2219(a), of the papers considered:Papers NumberedNotice of Motion/Affirmation/SupplementalAffirmation/Affidavits Annexed 1-2Answering Papers 3Reply 4 Plaintiff, CITIMORTGAGE, INC. (“Plaintiff,” “CitiMortgage”), moves by Notice of Motion for an order striking the Amended Answer and affirmative defenses interposed by Defendant Charmaine Haye (“Defendant Haye,” “Defendant”) and the original Answer of Defendant Kevin Bennett (“Mr. Bennett”). Plaintiff further requests summary judgment; an order appointing a referee to compute the mortgage indebtedness; and to amend the caption to remove the names of fictitious Defendants John Doe #1 through John Doe #12.Plaintiff commenced this foreclosure matter by the filing of a Summons and Complaint on June 9, 2009, wherein it alleged that Defendant Haye and Mr. Bennett (referred to collectively as “Defendants”) executed and delivered to its predecessor in interest FB, LLC d/b/a Fidelity Borrowing Mortgage Bankers (“original mortgagee,” “Fidelity”), a note in the amount of $530,337 and, as collateral security for the payment of the note, a mortgage against the property known as 591 East 86 Street, Brooklyn, New York 11236 (Block 7965, Lot 13).Plaintiff previously moved for summary judgment and Defendant Haye cross moved for dismissal based upon her contention that CitiMortgage failed to send a proper 90-day, pre-foreclosure notice in accordance with Section 1304 of the RPAPL. CitiMortgage argued that it was not obligated to send any such notice to the Defendants under the version of RPAPL §1304 in effect when this action was commenced on June 9, 2009. The parties’ respective motions were addressed in an order dated August 9, 2017, wherein predecessor justice, Hon. Peter Sweeney, determined that Defendant Haye’s mortgage was not a “subprime” or “non-traditional” home loan. However, Justice Sweeney opined that neither party adequately addressed the issue of whether the loan was a “high cost” home loan within contemplation of Section 6-l(1)(g) of the Banking Law. Justice Sweeney denied Defendant Haye’s cross motion to dismiss on that ground but granted Plaintiff’s motion to the extent of awarding default judgment against the non-appearing defendants. Justice Sweeney further granted that branch of Plaintiff’s motion to discontinue the action against the John Doe and Jane Doe defendants. Justice Sweeney struck Mr. Bennet’s lack of standing defense but granted leave for Mr. Bennett to file an amended answer1.In support of the instant motion, Plaintiff submitted the affidavit of Susan Knoepfler (“Ms. Knoepfler”), its Vice President-Document Control, who asserts that the Plaintiff has been in physical possession of the original note since June 24, 2008. Ms. Knoepfler states that the Defendants defaulted on the loan by failing to tender payments for the monthly installment due on January 1, 2009 and every month thereafter. Ms. Knoepfler states that Plaintiff accelerated the loan due to nonpayment and that a 30-day Notice of Default was mailed to the Defendants in a correspondence dated March 5, 2009. Ms. Knoepfler further states that the notice was mailed by first-class mail and contained a demand for payment by April 5, 2009 in accordance with paragraph 18 of the mortgage. Ms. Knoepfler also avers that the Plaintiff was not required to send a 90-day pre-foreclosure notice to the Defendants, because the loan was not a sub-prime, high cost, or non-traditional home loan.Defendant Haye argues that the Plaintiff lacks standing to bring this action and its affiant, Ms. Knoepfler, is without “direct personal knowledge” of the facts underlying this case. Defendant Haye contends that the Plaintiff also violated the Equal Credit Opportunity Act (ECOA) and Section 349 of the New York General Business Law during the underlying credit transaction. Defendant Haye explains that she was given an unaffordable loan with unfavorable terms. Defendant Haye states that she was also given a monthly mortgage payment of approximately $4,000, even though she told the mortgage broker who orchestrated the loan that she could only pay $2,300 per month. Defendant Haye alleges that the appraiser, inspector, and the attorney who represented her at the closing, were all chosen by the mortgage broker and protected only the broker’s interests. Defendant Haye insists that CitiMortgage treated her “badly because of [her] race and [the] neighborhood [in which she lives] (Haye Affidavit, para. 20).Defendant Haye maintains that the Plaintiff was required to send a 90-day pre-foreclosure notice to her and Mr. Bennett in accordance with the 2009 version of RPAPL §1304, because she received a high-cost home loan. Defendant Haye explains that the aggregate amount of points and fees assessed for her loan ($58,110.37) is more than 10 percent of the total loan amount ($530,337). Defendant Haye annexed a copy of her HUD-1 settlement to show that she paid the following points and fees: a mortgage broker fee ($35,000); loan origination fee ($10,450); a loan discount fee ($5,303.37); an appraisal fee ($650); underwriting fee ($995); processing fee ($795); document preparation fee ($250); a title insurance binder fee ($2,975); a fee for “departmentals” ($495); “endorsements” ($75.00); bankruptcy search/patriot/conlin ($315); a survey fee ($250); a building plan search fee ($250); a market value rider fee ($232); and an escrow service fee ($75).Defendant Haye contends that the Plaintiff sent only one 90-day pre-foreclosure notice addressed to her and Mr. Bennett, rather than separate notices as required under the rule. Defendant Haye argues that the instant case is subject to dismissal, because strict compliance with the pre-foreclosure notice requirement is a condition precedent to commencing a foreclosure proceeding. In further support of that point, Defendant Haye cites two cases in which the Appellate Division upheld the decisions of nisi prius courts that dismissed foreclosure cases for lesser infractions of the rule. According to Defendant Haye, in Hudson City Savings Bank v. DePasquale, 113 AD3d 595 [2d Dept 2014], the court dismissed the plaintiff-bank’s foreclosure action because the 90-day notice contained factual inaccuracies, and, in Tuthill Finance v. Candlin, 129 AD3d 1375 [3d Dept 2015], the court dismissed the plaintiff-bank’s foreclosure action because the 90-day notice was not written in a 14-point font size.In response, Plaintiff maintains that it was not required to send a 90- day notice to Defendant Haye, because the subject loan is not a high-cost home loan. Plaintiff argues that Defendant Haye included items in her calculation that do not constitute points and fees. Plaintiff explains that Defendant Haye only paid “points and fees” in the amount of $23,388.37, which is less than 6 percent of the total loan amount. Plaintiff further explains that the APR for the subject loan is also below the percentage rate that would qualify the loan as high cost.In addressing the issues presented herein, the court will first discuss whether the Plaintiff has established prima facie entitlement to summary judgment as a matter of law by producing the mortgage, unpaid note, and showing evidence of the Defendants’ default (Plaza Equities, LLC v. Lamberti, 118 AD3d 688, 689 [2d Dept 2014]; Argent Mtge. Co., LLC v. Mentesana, 79 AD3d 1079, 1080 [2d Dept 2010]). Justice Sweeney, in the August 9, 2017 decision and order, did not explicitly address whether CitiMortgage met its prima facie burden. However, the Defendants did raise standing as a defense in opposition to the underlying motion and therefore, CitiMortgage had to demonstrate that it was the holder or assignee of the note prior to commencement of this action (See Aurora Loan Services, LLC v. Taylor, 114 AD3d 627 [2d Dept 2014]). Since the mortgage passes with the debt as an inseparable incident (Id.), the court finds that two prongs of CitiMortgage’s prima facie burden was already resolved in its favor, when Justice Sweeney struck the Defendants’ standing defense. In fact, Justice Sweeney held that the Defendants’ lack of standing defense was palpably insufficient and patently devoid of merit.The third prong of Plaintiff’s prima facie case requires a showing of the Defendants’ default. However, this court finds that CitiMortgage has failed to submit evidence in admissible form sufficient to establish this point. Ms. Knoepfler’s affidavit is insufficient to lay a proper foundation for admission of CitiMortgage’s documents under the business record exception to the hearsay rule. Ms. Knoepfler initially states that she has personal knowledge of how CitiMortgage’s loan documents are created and kept, then equivocates when discussing the specifics of CitiMortgage’s practices and procedures. Specifically, Ms. Knoepfler averred that “loan records for the [b]orrowers are maintained by CitiMortgage in the course of its regularly conducted business activities and are made at or near the time of the event, by, or from information transmitted by, a person with knowledge” (Knoepfler Affidavit, para 4). The court finds that this statement ambiguous, and it begs the question. Ms. Knoepfler fails to plainly state that she has personal knowledge of CitiMortgage’s record keeping practices and procedures, as it relates to the subject loan documents and payment history. Ms. Knoepfler’s reference to another “person with knowledge,” rather than her own personal knowledge, is inadequate (Knoepfler Affidavit, para 4). As a result, the alleged payment history included with Plaintiff’s motion papers (at Exhibit G) constitutes inadmissible hearsay.The court next turns to that branch of the Plaintiff’s motion to strike Defendant Haye and Mr. Bennett’s combined Answer with affirmative defenses and counterclaims.In reviewing a motion to dismiss an affirmative defense, the court must liberally construe the pleadings in favor of the party asserting the defense and give that party the benefit of every reasonable inference (Fireman’s Fund Ins. Co. v. Farrell, 57 AD3d 721 [2d Dept 2008]). If there is any doubt as to the availability of a defense, it should not be dismissed (Id.). A defense not properly stated or one that has no merit, however, is subject to dismissal pursuant to CPLR §3211(b) and thus, may be the target of a motion for summary judgment after joinder of issue (Feinstein v. Levy, 121 AD2d 499 [2d Dept 1986]). In order for a defendant to successfully oppose such motion, the defendant must show the existence of a bona fide defense that the defendant will be able to establish, and it should be a “plausible ground of defense, something fairly arguable and of substantial character (Id.). Self-serving and conclusory allegations do not raise issues of fact (Rosen Auto Leasing, Inc. v. Jacobs, 9AD3d 789, 799-800 [3d Dept 2004].Defendant Haye contends the Plaintiff failed to send a 90-day notice pursuant to RPAPL §1304, which must be sent by registered or certified mail and via first-class mail to the last known address of the borrower(s), and if different, to the residence that is the subject of the mortgage. The notice is considered given as of the date it is mailed and must be sent in a separate envelope from any other mailing or notice and the notice must be in 14-point type (RPAPL §1304). Proper service of the RPAPL §1304 notice on the borrower(s) is a condition precedent to the commencement of a foreclosure action, and the plaintiff has the burden of establishing that it satisfied the condition (Aurora Loan Servs., LLC v. Weisblum, 85 AD3d 95 [2d Dept 2011]).To recap, the original mortgagee in this case sent one, 90-day notice addressed to both borrowers, rather than each borrower separately. The version of RPAPL §1304 that was in effect when this matter was commenced provided that such notices be sent only to borrowers with subprime, non-traditional, or high cost home loans. Since Justice Sweeney already determined that the subject loan is not a sub-prime or non-traditional home loan, in deciding whether Defendant Haye’s first affirmative defense should be dismissed, this court must address whether Defendant Haye can establish that the subject loan was a high cost home loan.Under New York Banking Law §6-l(d), a “high-cost home loan” means a home loan in which the terms of the loan exceed one or more of the thresholds as defined in paragraph (g). The “thresholds” under paragraph (g) are defined in two sub-parts as follows:(i) For the first lien mortgage loan, the annual percentage rate of the home loan at consummation of the transaction exceeds eight (8) percentage points over the yield on treasury securities having comparable periods of maturity to the loan maturity measured as of the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the lender; or for a subordinate mortgage lien, the annual percentage rate of the home loan at consummation of the transaction equals or exceeds nine percentage points over the yield on treasury securities having comparable periods of maturity on the fifteenth day of the month immediately preceding the month in which the application for extension of credit is received by the lender; as determined by the following rules: if the terms of the home loan offer any initial or introductory period, and the annual percentage rate is less than that which will apply after the end of such initial or introductory period, then the annual percentage rate that shall be taken into account for purposes of this section shall be the rate which applies after the initial or introductory period; or(ii) The total points and fees exceed: five percent of the total loan amount if the total loan amount is fifty thousand dollars or more; or six percent of the loan amount if the total loan amount is fifty thousand dollars or more and the loan is a purchase money loan guaranteed by the federal housing administration or the veterans administration; or the greater of six percent of the total loan amount of fifteen hundred dollars, if the total loan amount is less than fifty thousand dollars; provided, the following discount points shall be excluded from the calculation of the total points and fees payable by the borrower:(1) Up to an including two bona fide loan discount points payable by the borrower in connection with the loan transaction, but only if the interest rate from which the loan’s interest rate will be discounted does not exceed by more than one percentage point the yield on United States treasury securities having comparable periods of maturity to the loan maturity measured as of the fifteenth day of the month immediately preceding the month in which the application is received;(2) Any and all bona fide loan discount points funded directly or indirectly through a grant from a federal, state or local government agency or 501(c)(3) organization.The phrase “points and fees” includes all of the finance charges described under 15 USCA §1605 (a)(1 through 4), which are payable directly or indirectly by the person to whom the credit is extended, and imposed directly or indirectly by the creditor as an incident to the extension of credit. The items provided in sections 1 through 4 include (1) any amount payable under a point, discount, or other system of additional charges, (2) service or carrying charges, (3) loan fee, finder’s fee, or similar charge, and (4) any fee for an investigation or credit report. The finance charges accounted for under 15 USCA §1605(a) do not include fees and amounts imposed by third-party closing agents, such as settlement agents, attorneys, and escrow or title companies, if the creditor does not require the imposition of the charge or the services provided and does not retain the charges (Banking Law §6-l(1)(f)(i)).Moreover, “points and fees” contemplate real-estate related fees as defined under Section 226.4(c)(7) of Title 12 of the Code of Federal Regulations, if the lender receives direct or indirect compensation in connection with the charge, or when the charge is paid to an affiliate of the lender. These fees include (i) fees for title examination, abstract of title, title insurance, and property surveys, (ii) fees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents, (iii) notary and credit-report fees, (iv) appraisal or inspection fees to assess the value or condition of the property, if the service is performed prior to closing, and (v) the amounts required to be paid into escrow or trustee accounts if the amounts would not otherwise be include in the finance charge (Banking Law §6-l(1)(f)(ii)).Subsections (iii) and (iv) further define “points and fees” as all compensation paid directly or indirectly to the mortgage broker and the cost of all payments or premiums financed by the lender, directly or indirectly, except insurance premiums that are calculated and paid on a monthly basis (Banking Law §6- l(1)(f)(iii), (iv)).Here, CitiMortgage provided insufficient information to establish what the yields on treasury securities were for 30-year mortgages on the 15th day of the month immediately preceding the month in which it received the Defendants’ application for a home loan. The loan constitutes a statutory, “high cost home loan” if the Defendants’ Annual Percentage Rate was more than eight percentage (8 percent) points higher than the yield curve rate that was in effect on the aforementioned day. Plaintiff submitted the U.S. Department of the Treasury, Daily Treasury Yield Curve Rates for every calendar day in 2008. However, this is not the information called for in the analysis, because CitiMortgage needed to show the interest rate (the cost of borrowing a loan) that was in effect on the 15th day of the month before the Defendants’ submitted their application for a home loan. Despite this omission, it logically follows that the Defendants’ APR of 7.711 percent could not have been eight percentage (8 percent) points higher than any interest rate, or cost of borrowing, that was in effect one month prior to submission of their application for a home loan, because the interest rate, or the cost to borrow funds, would have been less than zero. Thus, the court finds that Defendant’s Haye’s loan is not a high cost loan under the New York Banking Law §6-l(1)(g)(i).The second threshold category caps the total amount for “points and fees” at six percent (6 percent) of the total loan amount, which is $30,416.92 based on Defendants’ loan2 of 506,948.63 (Banking Law 6-l (1)(h)). The charges paid by the Defendants that constitute “points and fees” consist of: a 2 percent loan origination fee ($10,450); 1 percent loan discount fee ($5,303.37); processing fee ($795.00); underwriting fee ($995.00); title insurance binder ($2,975); document preparation fee ($250); property survey fee ($250); building plan search fee ($250); market value rider ($232); escrow service/filing fee ($75); Departmentals ($495); endorsements ($75); bankruptcy search ($315) and Taxes ($928). The aggregate amount of points and fees is $23,388.37. This number is less than 6 percent ($30,416.92), of the total loan amount and thus, the loan is not a “high cost home loan” within contemplation of Section 6- l(1)(g)(ii) of the New York Banking Law.Because Plaintiff triggered neither of the two thresholds that would qualify the subject loan as a high cost home loan, it was under no obligation to send separate 90-day notices to Defendant Haye and Mr. Bennett in accordance with the 2009 version of RPAPL §1304. Based on these findings, the court finds that Defendant Haye’s first affirmative defense cannot be established. Defendant Haye’s second affirmative defense alleges that the original mortgagee (Fidelity) violated General Business Law §349(h). It should be noted at the outset that Section 349(h) of the General Business Law is directed at wrongs against the consuming public and provides a private right of action for any person who has been injured by a violation of the section. To assert a viable claim under GBL §349, a plaintiff must plead that the challenged conduct was consumer-oriented, materially misleading, and that he or she sustained damages (Emigrant Mortg. Co., Inc. v. Fitzpatrick, 95 AD3d 1169 [2d Dept 2012]). Defendant Haye alleges, as a defense to this action, that Fidelity misrepresented that the subject loan would be affordable based on her income. Defendant Haye further asserts that Fidelity misrepresented details of the transaction and nature of the documents that were presented to her at the closing. These assertions are conclusory and vague but more importantly, the evidence annexed to both parties’ motion papers establishes that Defendant Haye and Mr. Bennett were presented with documents at the closing that laid bare details of their loan, including the mortgage, note, Truth in Lending Disclosure Statement, and a HUD-1 Settlement Statement. Therefore, an alleged violation of GBL §349 cannot be established, even it could be defensively in this action.Defendant Haye’s third affirmative defense of unconscionability is patently insufficient. An unconscionable contract is one which “is so grossly unreasonable or unconscionable in the light of the mores and business practices of the time and place as to be unenforceable according to its literal terms” (Gillman v. Chase Manhattan Bank, 73 NY2d 1, 10 [1988]). A determination of unconsionability generally requires a showing that the contract was both procedurally and substantively unconscionable when made, such that there was an absence of meaningful choice for one of the parties together with contract terms which are unreasonable favorable to the other party (id.). Defendant Haye asserts that the original mortgagee deliberately targeted her based on a disparity in bargaining power and for the purpose of inducing her to obtain an unaffordable mortgage, so the mortgage could be bundled and sold as a package with other mortgages. These allegations, even if true, do not assert a defense based upon unconscionability. Moreover, there is no showing that Defendant Haye’s 30-year mortgage at 7.711 percent was grossly unreasonable or unconscionable when she obtained the loan on June 13, 2008. There is also no allegation that Defendant Haye lacked a meaningful choice when the subject loan was consummated.Defendant Haye’s fourth affirmative defense of unfair dealing is insufficiently particular to give the court and the Plaintiff notice of the transactions that are intended to be proved or the material elements of the defense.Defendant Haye states,“Plaintiff failed to act in good faith or deal fairly with [Defendant Haye] by failing to follow the applicable standards of residential single family mortgage lending and servicing as described in these Affirmative Defenses thereby denying this Defendant access to the residential mortgage servicing protocols applicable to the subject note and mortgage.”Defendant Haye further states,“Plaintiff…sought to profit from [the] disparity in bargaining power and sophistication by deliberately targeting [Defendant Haye] with misinformation” via…”false documents intended to induce her to enter into an unaffordable mortgage so [the] mortgage could be bundled and sold as a package to purchasers of securities.”It is unclear which “residential mortgage servicing protocols” that Defendant Haye is referring to in this defense. Defendant Haye also fails to identify the misinformation or false documents that were allegedly used by the original mortgagee to mislead her during the loan transaction.Defendant Haye’s fifth and eight affirmative defenses raise the issue of standing and lack of capacity to sue, respectively. The same defenses are also raised as Mr. Bennett’s first affirmative defense in his original answer. The lack of standing defense was already stricken. Lack of capacity to sue relates to a litigant’s status, i.e., its power to appear and bring its grievance before the court (Community Bd. 7 of Borough of Manhattan v. Schaffer, 84 NY2d 148 [1994]). There is no showing that CitiMortgage is an artificial, unincorporated, or otherwise invalid entity that somehow precludes CitiMortgage from appearing and advancing its claims herein.Defendant Haye alleges that the Plaintiff has unclean hands in her sixth affirmative defense. The doctrine of unclean hands is used only to bar the grant of equitable relief to a party who is guilty of immoral, unconscionable conduct and even then, only when the conduct relied on is directly related to the subject matter in litigation and the party seeking to invoke the doctrine was injured by such conduct (Wells Fargo Bank v. Hodge, 92 AD3d 775 [2d Dept 2012]). Defendant Haye’s allegations are devoid of the elements that would give rise to the equitable defense of unclean hands. Moreover, in the Jo Ann Homes at Bellmore, Inc. v. Dworetz, 25 NY2d 112, 122 [1969] case, the Court of Appeals held that the doctrine of unclean hands does not apply to the statutory procedure of foreclosure. In its discussion, the Court explained that foreclosure proceedings are unlike other cases sounding in equity, because equity acts only [in personam], while a foreclosure case is in the nature of a proceeding in rem to appropriate the land” (JoAnn Homes at Bellmore v. Dworetz, 25 NY2d at 122). Thus, Defendant Haye’s sixth affirmative defense is not viable in this case.In her seventh affirmative defense and third counterclaim3, Defendant Haye alleges that the subject loan is the result of “reverse redlining” in violation of the Equal Credit Opportunity Act (“ECOA”). “Reverse redlining” is a form of predatory lending that targets low-income minority-borrowers, offering them exorbitantly high interest rate loans in large amounts, even though the borrowers do not have the ability to repay, thereby approving a loan designed to fail, and resulting in loss of the home through foreclosure (EquiCredit Corp. v. Turcios, 300 AD2d 344 [2 Dept 2002]). Under New York case law, an ECOA violation based on reverse redlining “does not render the offending instrument void when raised defensively” (U.S. v. Lyons, 292 AD2d 683 3d Dept 2002] citing Integra Bank/Pittsburg v. Freeman, 839 F.Supp. 326). However, when reverse redlining is raised as a counterclaim, the plaintiff must allege (1) that she is a member of a protected class; (2) that she applied and was qualified for the loan; (3) that the loan was given on grossly unfavorable terms; and (4) that the lender either intentionally targeted her for unfair loans or currently makes loans on more favorable terms to others (Emigrant Mort. Co., Inc. v. Markland, 37 Misc3d 1230(A) [Sup. Ct., Kings County 2012] citing Hafiz v. Greenpoint Mtge. Funding, Inc., 652 F Supp 2d [ND Cal 2009]). In this case, Defendant Haye has steadily alleged that the subject loan was unaffordable. Moreover, there is no showing that the terms of the loan were grossly unfavorable to Defendant Haye and Mr. Bennett, nor is there any showing that they qualified for the loan. Other than Defendant Haye’s conclusory statements, there is no evidence tending to show that CitiMortgage intentionally targeted the Defendants, or made similar loans with more favorable terms to other borrowers. Thus, Defendant Haye cannot establish a prima facie case for “reverse redlining” and therefore, the seventh affirmative defense and third counterclaim must be dismissed.Based upon the foregoing analyses, the court hereby grants Plaintiff’s motion to the extent that Defendant Charmaine Haye’s Answer with Counterclaims and Kevin Bennett’s Answer is stricken. That branch of the Plaintiff’s motion to amend the caption to remove “JOHN DOE #1″ through “JOHN DOE #12″ is granted. That branch of Plaintiff’s motion for summary judgment and an order of reference is denied with leave to renew.Plaintiff shall serve a copy of this order with Notice of Entry upon the defendants within thirty (30) days of such entry.This constitutes the Decision and Order of the Court.
