BILL NUMBER: S5829

SPONSOR: SALAZAR
 
TITLE OF BILL:

An act to amend the real property actions and proceedings law, in
relation to notices required prior to mortgage foreclosure

 
PURPOSE AND INTENT OF BILL:

There is an ongoing problem of homeowners not receiving accurate infor-
mation regarding their potential options to avoid foreclosure.  This is
addressed in RPAPL § 1304, however mortgage lenders and loan servicers
regularly dilute the impact of this important notice requirement by
augmenting the statutory text with boilerplate language regarding, for
instance, ancillary rights. These unauthorized additions to this care-
fully-crafted legislatively mandated notice distract homeowners and
increase the chances of a homeowner disregarding the notice as yet
another dunning letter.

Accordingly, this remedial bill amends RPAPL § 1304 to overturn a recent
court decision to ensure that important homeowner protection laws of
this state apply equally to all litigants, including those currently
              

involved in mortgage foreclosure actions. The aim of the bill is to
restore the law to its intended meaning, as it existed before the recent
court decision, and provide certainty to all parties involved in an
action to enforce a mortgage loan.

 
SUMMARY OF SPECIFIC PROVISIONS:

Sections 1 amends RPAPL § 1304 to reverse and negate the deleterious and
onerous effect of a recent decision of the Court of Appeals in Bank of
Am., N.A. v Kessler,__NY3d__, 2023 NY Slip Op 00804 (2023), which effec-
tively erases the requirement to constrain the notice's content to the
language specified by the statute, making a mockery of the well-settled
case law which gave the legislature's intended force and effect to the
requirement that such a notice be sent "in a separate envelope from any
other mailing or notice" (RPAPL § 1304 (2))

Section 2 amends RPAPL § 1304 to ensure the foregoing protections apply
equally to reverse mortgages.

Section 3 of the bill amends RPAPL § 1304 to add a new subdivision clar-
ifying that a notice required by this section shall not be sent by a
lender, assignee or servicer who lacks authority to enforce the mortgage
loan.

Section 4 contains a severability clause.

Section 5 contains the effective date and makes it clear that this
legislation will apply immediately, and will apply to all such actions
commenced where a final judgment of foreclosure and sale has not been
enforced.

 
JUSTIFICATION:

As a direct result of the Kessler decision, lenders and loan servicers
are now free to dilute and weaken the impact of one of the most impor-
tant tools to help struggling homeowners.It was always the intention of
the legislature to control form and content of the RPAPL § 1304 notice
with exacting detail, prescribing not only its necessary language, but
also proscribing all other potential notices from accompanying this
important letter. This bill restores the law as it existed prior to the
February 14, 2023, Kessler decision from the Court of Appeals, and
confirms the continuing importance for the financial services sector to
observe strict compliance with consumer protection statutes. Applying
this bill to existing actions ensures.that homeowners currently facing
foreclosure may continue to rely on the protections which this legisla-
ture intended, as articulated by the Appellate Division in Bank of Am.,
N.A. v Kessler, 202 AD3d 10, 12-19 (2d Dept 2021) and its progeny.

 
PRIOR LEGISLATIVE HISTORY:

New Bill.

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None.

 
EFFECTIVE DATE:
Immediately and will apply to all such actions commenced where a final
judgment of foreclosure and sale has not been enforced.

                                 
BILL NUMBER: S5829A

SPONSOR: SALAZAR
 
TITLE OF BILL:

An act to amend the real property actions and proceedings law, in
relation to notices required prior to mortgage foreclosure

 
PURPOSE AND INTENT OF BILL:

There is an ongoing problem with homeowners and borrowers receiving
accurate information regarding their potential options to avoid foreclo-
sure, which RPAPL § 1304 addresses. However, contrary to the intent of
the legislature, mortgage lenders and loan servicers regularly dilute
the impact of this important notice by augmenting the statutory text
with boilerplate language regarding, for instance, ancillary rights.
These unauthorized additions to the carefully crafted statutory notice
distract homeowners and borrowers and increase the likelihood that they
will disregard the notice as yet another dunning letter.

Persistent concerns exist in this area of law regarding a disconnect
between the legislative intent and judicial interpretations. From the
Great Recession until the present, all but one of the fifteen cases
              

decided by the Court of Appeals relating to a lender's enforcement of a
mortgage against an owner benefitted the mortgage holder.1 This bill is
intended to promote faith and trust in the integrity of the residential
mortgage foreclosure process by equipping our courts to meet their most
urgent challenge of averting an emerging crisis of "public confidence in
the judicial process." (Deutsche Bank Nat'l.  Trust Co. v Latamorre, 211
AD 3d 811 (2d Dept 2022)  
(BARROS, J., DISSENTING).):

At the same time, there are positive lower appellate court decisions
reaffirming the sanctity of the protections afforded under the RPAPL by,
for example, holding that a defense under the notice statute may be
raised at any time until the entry of a final judgment of foreclosure
and sale, even if the borrower did not raise RPAPL 1304 in an answer or
in opposition to summary judgment, and even if summary judgment has
,been rendered against the borrower. See, e.g., U.S. Bank N.A. v Maior-
iello, 207 AD3d 428, 428 (1st Dept 2022); Wells Fargo Bank, N.A. v
Davidson, 202 AD3d 880, 881-882 (2d Dept 2022); U.S. Bank N.A. v
Krakoff, 199 AD3d 859, 862 (2d Dept 2021); Wells Fargo Bank, N.A. v
Yapkowitz, 199 AD3d 126, 131-137 (2d Dept 2021).  There are well-rea-
soned decisions that are faithful to the plain language of the statute
that the plaintiff is required to mail a 90-day notice addressed to each
borrower in separate envelopes as a condition precedent to commencing
the foreclosure action. U.S. Bank N.A. v Maioriello, 207 AD3d 428, 428
(1st Dept 2022); Wells Fargo Bank, N.A. v Yapkowitz, 199 AD3d 126, 128
 
2D DEPT 2021). THE SACROSANCT NATURE OF THE RPAPL 1304 DEFENSE IS
FURTHER UNDERSCORED BY THE EXACTING PROOF WHICH A LENDER IS REQUIRED TO
SUBMIT TO DEMONSTRATE THAT THE PROTECTIONS OF THE STATUTE DO NOT APPLY
TO THE BORROWER. SEE WELLS FARGO V WEISZ, 2022 NY SLIP OP 34526(U), *4
(SUP CT, KINGS COUNTY 2022) ("(T)HIS COURT IS NOT PREPARED TO CONCLUDE
THAT THE (SOMEWHAT COMMON) RIDER REMOVING THE RESIDENCY REQUIREMENT IS
ALONE SUFFICIENT TO PLACE A LOAN OUTSIDE THE AMBIT OF RPAPL 1304 ESPE-
CIALLY WHERE, AS HERE, DEFENDANT CLAIMS TO HAVE RESIDED IN THE PROPERTY
SUBSEQUENT TO THE MORTGAGE"); ACCORD BANK OF AM., N.A. V SANDS, 2022 NY
SLIP OP 32875 
U, *3-4 (SUP CT, NY COUNTY 2022).


THIS REMEDIAL BILL AMENDS RPAPL § 1304 TO OVERTURN A CERTAIN COURT DECI-
SION, COURT OF APPEALS IN BANK OF AM., N.A. V KESSLER, 39 NY3D 317
(2023), TO ENSURE THAT IMPORTANT BORROWER AND HOMEOWNER PROTECTION LAWS
OF THIS STATE APPLY EQUALLY TO ALL LITIGANTS, INCLUDING THOSE CURRENTLY
INVOLVED IN MORTGAGE FORECLOSURE ACTIONS.  THE INTENT IS TO RESTORE THE
LAW TO ITS INTENDED MEANING, AS IT EXISTED BEFORE THE RECENT KESSLER
DECISION, AND PROVIDE CERTAINTY TO ALL PARTIES INVOLVED IN ACTIONS TO
ENFORCE A MORTGAGE LOAN. THIS BILL ALSO RESOLVES THE TENSION BETWEEN OUR
LEGISLATIVE INTENT AND CERTAIN DECISIONS ADDRESSING AN ENTITY'S AUTHORI-
TY TO SEND THE NOTICE.

THAT THIS BILL DOES NOT ADDRESS OTHER ASPECTS OF RPAPL 1304-FOR EXAMPLE,
THE PROOF REQUIRED TO ESTABLISH MAILING OF THE NOTICE (SEE, E.G. CIT
BANK, NA V SCHIFFMAN, 36 NY3D 550 (2021))DOES NOT CONNOTE ACCEPTANCE OF
JUDICIAL DECISIONS SUCH AS SCHIFFMAN (CF. JENSEN V.  GENERAL ELEC. CO 82
NY2D 77, 86 (1993)), WHICH STRAYED FROM EARLIER PRECEDENT HOLDING THAT
DENIAL OF RECEIPT OF NOTICE COUPLED WITH A SHOWING THAT ROUTINE OFFICE
PRACTICE FOR THE PREPARATION, POSTING AND MAILING OF NOTICES WAS NOT
FOLLOWED REBUT ANY PRESUMPTION OF RECEIPT OF A NOTICE. SEE, E.G., NASSAU
INS. CO. V MURRAY, 46 NY2D 828, 829-30 (1978).

 
SUMMARY OF SPECIFIC PROVISIONS:


SECTION 1 AMENDS RPAPL § 1304 TO REVERSE AND NEGATE THE DELETERIOUS AND
ONEROUS EFFECT OF A RECENT DECISION OF THE COURT OF APPEALS IN BANK OF
AM., N.A. V KESSLER (39 NY3D 317  
2023) (KESSLER 2023), WHICH EFFEC-
TIVELY ERASES THE REQUIREMENT TO CONSTRAIN THE NOTICE'S CONTENT TO THE
LANGUAGE SPECIFIED BY THE STATUTE, DISTURBING THE WELL-ARTICULATED CASE
LAW WHICH GAVE THE LEGISLATURE'S INTENDED FORCE AND EFFECT TO THE
REQUIREMENT THAT SUCH A NOTICE BE SENT "IN A SEPARATE ENVELOPE FROM ANY
OTHER MAILING OR NOTICE" (RPAPL § 1304 (2)).

SECTION 2 AMENDS RPAPL § 1304 TO ENSURE THE FOREGOING PROTECTIONS APPLY
EQUALLY TO REVERSE MORTGAGES.

SECTION 3 OF THE BILL AMENDS RPAPL § 1304 TO ADD A NEW SUBDIVISION CLAR-
IFYING THAT A NOTICE REQUIRED BY THIS SECTION SHALL NOT BE SENT BY A
LENDER, ASSIGNEE OR SERVICER WHO LACKS AUTHORITY TO ENFORCE THE MORTGAGE
LOAN.

SECTION 4 CONTAINS A SEVERABILITY CLAUSE.

SECTION 5 CONTAINS THE EFFECTIVE DATE, WHICH IS IMMEDIATELY, SO TO MAKE
CLEAR THAT SAME APPLIES TO ALL CASES SUB JUDICE, CONSISTENT WITH BINDING
PRECEDENT SEE GLEASON V MICHAEL VEE, LTD., 96 NY2D 117, 122 (2001)).

 
JUSTIFICATION:

AS A DIRECT RESULT OF KESSLER, LENDERS, ASSIGNEES AND MORTGAGE LOAN
SERVICERS ARE NOW FREE TO DILUTE AND WEAKEN THE IMPACT OF ONE OF THE
MOST IMPORTANT TOOLS TO HELP STRUGGLING BORROWERS AND HOMEOWNERS AVOID
FORECLOSURE. IT WAS ALWAYS THE INTENTION OF THE LEGISLATURE TO CONTROL
THE FORM AND CONTENT OF THE RPAPL § 1304 NOTICE WITH EXACTING DETAIL
(INCLUDING THE PRECISE FONT SIZE), PRESCRIBING NOT ONLY ITS NECESSARY
LANGUAGE, BUT ALSO PROSCRIBING ALL OTHER POTENTIAL NOTICES FROM ACCOMPA-
NYING THIS IMPORTANT LETTER (SEE E.G., YAPKOWITZ, 199 AD3D AT 131-137).
FOR EXAMPLE, WHILE THE INTENT OF RPAPL 1304 HAS ALWAYS BEEN TO AVOID
FORECLOSURE FILINGS BY BRIDGING THE COMMUNICATION GAP BETWEEN
LENDERS/ASSIGNEES/MORTGAGE LOAN SERVICERS AND BORROWERS/ HOMEOWNERS, THE
INCLUSION OF AN ADDITIONAL NOTICE, SUCH AS " 
THIS IS AN ATTEMPT TO
COLLECT A DEBT AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT
PURPOSE," EMBEDDED WITHIN THE CONTENT OF THE ACTUAL RPAPL 1304 NOTICE,
OR OTHERWISE INCLUDED AS A SEPARATE NOTICE WITHIN THE SAME ENVELOPE,
UTTERLY DEFEATS THE INTENDED PURPOSE BY NOT ONLY VIOLATING THE EXPRESS
TEXT OF THE STATUTE, BUT DESTROYING IMPORTANT SAFETY APPURTENANCES TO
THE COMMUNICATION BRIDGE WE SOUGHT TO BUILD. NAMELY, BORROWERS AND HOME-
OWNERS ARE MUCH LESS LIKELY TO RESPOND TO A RPAPL 1304 NOTICE, OR COMMU-
NICATE WITH THEIR LENDER/MORTGAGE LOAN SERVICER IN AN OPEN AND HONEST
MANNER, WHERE THE VERY SAME NOTICE WARNS THEM THAT ANY/ALL INFORMATION
THEY PROVIDE WILL BE USED AGAINST THEM IN FURTHERANCE OF COLLECTION
ACTIVITIES, I.E., COMMENCEMENT OF JUDICIAL FORECLOSURE PROCEEDINGS.

THE PROTECTIONS AFFORDED BY THIS LEGISLATION-INCLUDING ITS PROHIBITION
OF THE INCLUSION IN AN RPAPL 1304 NOTICE OF THE "MINI-MIRANDA" WARNING
CREATED BY THE FEDERAL FAIR DEBT COLLECTION PRACTICES ACT (15 USC 1692
ET SEQ) (HEREINAFTER THE FDCPA)-ARE NOT PRE-EMPTED BY THE FDCPA. FIRST,
THE FDCPA ONLY REQUIRES THE INCLUSION OF THE "MINI-MIRANDA" WARNING IN
THE "INITIAL COMMUNICATION" WITH THE DEBTOR. 15 USC 1692E  
11. NOTHING
IN RPAPL 1304 REQUIRES THE NOTICE CREATED THEREBY TO BE THE "INITIAL
COMMUNICATION" WITH THE BORROWER.  SEE BAYVIEW LOAN SERVICING, LLC V
ALTOMONTE, 77 MISC 3D 703, 706  
SUP CT ROCKLAND COUNTY 2022. THUS, THE
"SEPARATE ENVELOPE" OF RPAPL 1304 AND THE MINI-MIRANDA REQUIREMENT OF 15
USC 1692 CAN PEACEFULLY CO-EXIST. SEE 15 USC 1692N (PRE-EMPTING STATE
LAWS ONLY TO THE EXTENT OF ANY INCONSISTENCY WITH THE FDCPA). SECOND, AN
RPAPL 1304 NOTICE IS "IN THE FORM OF A FORMAL PLEADING IN A CIVIL
ACTION" AND HENCE IS EXEMPT FROM THE FDCPA'S "MINI MIRANDA" REQUIREMENT.
SEE 15 U.S.C. § 1692G (D); COHEN V ROSICKI, ROSICKI & ASSOC., P.C., 897
F3D 75, 87-88 (2D CIR 2018); SEE ALSO CARLIN V DAVIDSON FINK LLP, 852
F3D 207, 213 (2D CIR 2017). THIRD, RPAPL 1304 AFFORDS BORROWERS GREATER
PROTECTIONS THAN THE FDCPA, AND THUS BY THE EXPRESS TERMS OF THE FDCPA,
THERE IS NO PRE-EMPTION. SEE 15 USC § 1692N.; BAYVIEW LOAN SERVICING,
LLC V ALTOMONTE, 77 MISC 3D 703, 706 (SUP CT ROCKLAND COUNTY 2022).

FINALLY, THIS BILL CLARIFIES THAT NOTICE UNDER RPAPL 1304 MAY ONLY BE
SENT BY AUTHORIZED ENTITIES, I.E., ENTITIES WITH THE LAWFUL ABILITY TO
COLLECT PAYMENT OF THE DEMANDED ARREARS SET FORTH IN THE RPAPL 1304
NOTICE, WHICH SHALL BE THE LENDER, ASSIGNEE, OR MORTGAGE LOAN SERVICER,
AND THAT MAILINGS BY A VENDOR OR ANY OTHER THIRD PARTY CANNOT SUFFICE
(SEE SIEGEL V KENTUCKY FRIED CHICKEN, 108 AD2D 218, 221 (2D DEPT 1985)
AFF'D 67 NY2D 792 (1986); CONTRA OCWEN LOAN SERVICING LLC V SIAME, 185
AD3D 408, 409 (1ST DEPT 2020); FLAGSTAR BANK, FSB V MENDOZA, 139 AD3D
898, 900 (2D DEPT 2016)).

ACCORDINGLY, THIS BILL RESTORES THE LAW AS IT EXISTED PRIOR TO FEBRUARY
14, 2023, I.E., BEFORE THE COURT OF APPEALS DECISION IN KESSLER, AND
CONFIRMS THE CONTINUING IMPORTANCE FOR THE FINANCIAL SERVICES SECTOR TO
OBSERVE STRICT COMPLIANCE WITH CONSUMER PROTECTION STATUTES. APPLYING
THIS BILL TO EXISTING ACTIONS ENSURES THAT BORROWERS AND HOMEOWNERS
CURRENTLY FACING FORECLOSURE MAY CONTINUE TO RELY ON THE PROTECTIONS
WHICH THIS LEGISLATURE INTENDED, AS ARTICULATED BY THE APPELLATE DIVI-
SION IN BANK OF AM., N.A. V KESSLER (202 AD3D 10, 12-19 (2D DEPT 2021)),
AND ITS PROGENY. OF PARALLEL IMPORTANCE, THIS BILL REINFORCES CERTAINTY
FOR THE JUDICIARY REGARDING WHICH ENTITIES ARE AUTHORIZED TO SEND THE
NOTICE BY FURTHER CODIFYING OUR ORIGINAL LEGISLATIVE INTENT.

 
PRIOR LEGISLATIVE HISTORY:

NEW BILL.

 
AMENDED BILL:

THE "A" PRINT OF THE BILL, WHICH MODIFIES THE TEXT OF THE EFFECTIVE DATE
PROVISION,_WAS AMENDED FROM THE INITIAL DRAFT TO ADDRESS CONCERNS BY
COLLEAGUES THAT EXPANSIVE LANGUAGE REGARDING RETROACTIVITY MAY UNDERMINE
THE APPLICABILITY OF OTHER BILLS TO PENDING CASES WHICH OMIT SUCH EXPAN-
SIVE LANGUAGE, AND DILUTE OR ERODE THE EFFECT OF COURT OF APPEALS PRECE-
DENT FINDING THAT STATUTES CLARIFYING LEGISLATIVE INTENT AND CORRECTING
ITS MISINTERPRETATION, OR OTHERWISE REMEDIAL OR PROCEDURAL IN NATURE,
SUCH AS THIS LEGISLATION, SHALL BE APPLIED TO PENDING CASES (SEE GLEA-
SON).  MOREOVER, SECTION 5 WAS AMENDED TO AID THE JUDICIARY BY AFFORDING
IT A CHANCE TO RESTORE TRUST AND FAITH IN THE COURTS' EVENHANDED APPLI-
CATION OF THE LAW TO MORTGAGE FORECLOSURES, SO TO DEMONSTRATE THAT
GENERAL PRINCIPLES OF LAW APPLY WITHOUT EXCEPTION TO SUCH ACTIONS. AS
SUCH, NOTWITHSTANDING THE REMOVAL OF SUCH EXPANSIVE LANGUAGE, PARTIC-
ULARLY GIVEN ITS EXPRESS EXPLANATION HEREIN, THIS AMENDMENT SHALL NOT
GIVE RISE TO THE IMPLICATIONS IDENTIFIED IN MAJEWSKI V BROADALBIN-PERTH
CENT. SCH. DIST., 91 NY2D 577, 587 (1998).

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

NONE.

 
EFFECTIVE DATE:
IMMEDIATELY.
1THERE IS A SIMILAR APPEARANCE OF DAYLIGHT DIVIDING IMPORTANT PRECEDENT
OF THE COURT OF APPEALS (SEE E.G., PERRICONE V NEW YORK, 62 NY2D 661,
663  
1984; IN RE LEON R.R., 48 NY2D 117, 122  
1979) FROM ITS REGULAR
APPLICATION IN RESIDENTIAL MORTGAGE FORECLOSURES BY THE APPELLATE DIVI-
SION.