NY Appeals Court: Failure To Strictly Comply With Notice Requirements Under State Anti-Equity Stripping Statute Enough To Sink Foreclosure Action

A recent ruling by a New York intermediate appellate court (which, by the way, reversed another lower court ruling in a foreclosure action) serves as a reminder that notices required to be served on homeowners facing foreclosure pursuant to the New York State's anti-foreclosure rescue, equity stripping statute are, in fact, mandatory, and failure to comply with the notice requirements is enough to sink the foreclosure action.

The appeals court gives the following summary of the law in the first paragraph of their ruling:

• In First Natl. Bank of Chicago v Silver (73 AD3d 162) (hereinafter Silver), we held that the plaintiff in a foreclosure action has the burden of demonstrating compliance with Real Property Actions and Proceedings Law § 1303 (hereinafter RPAPL 1303), a notice requirement of the Home Equity Theft Prevention Act (see Real Property Law § 265-a [hereinafter HETPA]).
  
  Proper service of RPAPL 1303 notice with the summons and complaint is a condition precedent to the commencement of the action, and noncompliance results in dismissal of the complaint. In the appeal before us, we are called upon to consider another notice pursuant to HETPA which must be served at least 90 days prior to commencement of the foreclosure action pursuant to Real Property Actions and Proceedings Law § 1304 (hereinafter RPAPL 1304).(1)
  
  Consistent with the rationale of Silver, we determine that proper service of RPAPL 1304 notice is also a condition precedent to the commencement of the action. Here, the plaintiff failed to establish compliance with RPAPL 1304, requiring dismissal of the complaint insofar as asserted against the mortgagors.

For the ruling, see Aurora Loan Servs., LLC v Weisblum, 2011 NY Slip Op 04184 (NY App. Div. 2d Dept. May 17, 2011).

(1) The court elaborated on its position, and described the contents of, and requirements surrounding, the mandatory RPAPL 1304 notice in this excerpt (bold text is my emphasis):

• In holding that compliance with RPAPL 1303 is a mandatory condition precedent to the commencement of a foreclosure action, we were persuaded by the explicit statutory requirements and mandatory language of RPAPL 1303, as well as the Legislative purpose behind HETPA (see Silver, 73 AD3d at 165, 169).
  
  In the case before us, unlike Silver, the notice provision of RPAPL 1304 is at issue. The Supreme Court here determined that "actual or constructive notice" of the content of RPAPL 1304 suffices under circumstances where the borrower has not shown prejudice from the lender's failure to strictly comply with the statute. We disagree.
  
  Thus, we now make clear what is implicit in Silver, namely, that proper service of the RPAPL 1304 notice containing the statutorily-mandated content is a condition precedent to the commencement of the foreclosure action. The plaintiff's failure to show strict compliance requires dismissal.
  
  We reach this determination for reasons similar to those stated in Silver. RPAPL 1304, like RPAPL 1303, contains specific, mandatory language in keeping with the underlying purpose of HETPA to afford greater protections to homeowners confronted with foreclosure (see Silver, 73 AD3d at 165).
  
  Both statutes have titles containing the word "required" (RPAPL 1304 ["Required prior notices"]; RPAPL 1303 ["Foreclosures; required notices"]). Content, timing, and service provisions of RPAPL 1304 are very specific and couched in mandatory language. "[A]t least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower, including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower in at least fourteen-point type" of certain statutory-specific information (RPAPL 1304[1]).
  
  The notice must be prefaced with the warning, "YOU COULD LOSE YOUR HOME. PLEASE READ THE FOLLOWING NOTICE CAREFULLY," and must contain the specific language set forth in RPAPL 1304(1), including information concerning the homeowner's right to cure a default and access to counseling agencies to obtain financial help. Indeed, as noted, the RPAPL 1304 notice must include "a list of at least five housing counseling agencies as designated by the division of housing and community renewal, that serve the region where the borrower resides" with their "last known addresses and telephone numbers" (RPAPL 1304[2]).
  
  With regard to the manner of service, RPAPL 1304 is equally precise: "Such notice shall be sent by such lender, assignee or mortgage loan servicer to the borrower, by registered or certified mail and also by first-class mail to the last known address of the borrower, and if different, to the residence that is the subject of the mortgage . . . in a separate envelope from any other mailing or notice" (RPAPL 1304[2]).