Borrower Applied for Loan Modification or Filed for Bankruptcy? So What? Doesn’t Matter — Plaintiff Must Still Mail Pre-Foreclosure Notice Under RPAPL 1304

Borrower Applied for Loan Modification or Filed for Bankruptcy? So What? Doesn’t Matter — Plaintiff Must Still Mail Pre-Foreclosure Notice Under RPAPL 1304

At this point, those practicing in the mortgage foreclosure arena should be well-aware of the general application and significance of the pre-foreclosure notice and mailing requirements of RPAPL 1304.1 Although amended seven times since its 2008 enactment, RPAPL 1304, specifically subdivision three, has remained relatively unchanged — providing, in effect, that the 90-day waiting period specified in subdivision one of the statute does not apply, or shall cease to apply, if the borrower filed an application for the adjustment of debts (e.g., bankruptcy) or no longer occupies the residence as his or her principal dwelling.2

Its textual consistency notwithstanding, RPAPL 1304 (3) has been inconsistently interpreted and unevenly applied throughout the state (including here in Suffolk County). To wit, some courts have construed a loan modification application as an “application for the adjustment of debts” within the meaning of RPAPL 1304 (3) and have further interpreted this sub-division as effectively vitiating a foreclosing plaintiff’s obligation to provide the statutory pre-foreclosure notice to a borrower who:
(1) no longer occupies the mortgaged property as a primary residence,
(2) filed a bankruptcy petition, or
(3) applied for a loan modification prior to the commencement of the action.3

Other courts, however, have reasoned that a loan modification application should not be considered an “application for the adjustment of debts,” as the phrase is nothing more than an arcane reference to bankruptcy filing utilized by the Legislature, and that the express language of RPAPL 1304 (3) dictates that the happening of any one or more of the above referenced enumerated events simply eliminates the 90-day waiting period a foreclosing plaintiff must endure before commencing proceedings, but still requires the foreclosing plaintiff to send the statutory notice to the borrower.4

Thankfully, in March and April of 2019, the Appellate Division, Second Department, put to bed any misunderstandings stemming from RPAPL 1304 (3). Specifically, in two separate unanimous opinions, the Second Department clarified that a loan modification application is not an “application for the adjustment of debts” within the meaning of RPAPL 1304 (3),5 and that a borrower’s pre-action filing of a bankruptcy petition, which is considered an “application for the adjustment of debts” under RPAPL 1304 (3), does not vitiate a foreclosing plaintiff’s obligation to provide the borrower with the statutory pre-foreclosure notice, but rather relieves the foreclosing plaintiff of the 90-day waiting period before commencing suit.6

Accordingly, practitioners beware of any summary judgment awarded to a foreclosing plaintiff having successfully argued, in part or in whole, that RPAPL 1304 (3) eliminated the obligation to send the borrower notice under RPAPL 1304 (1) and (2) may be subject to collateral attack by a motion to renew, pursuant to CPLR 2221 (e), based on “a change in law,” which includes a “clarification of decisional law.”7

Note: Justin F. Pane is a litigation attorney at Young Law Group, PLLC, where he provides advice and representation to individuals and businesses in connection with residential and commercial foreclosure actions. Justin’s effectiveness as a trial and appellate court litigator is due, in part, to his 10+ years of professional experience in the real estate and mortgage banking industries, as well as to his passion and pursuit to con-tinually embetter his knowledge and under-standing of the law.”

1. See, generally, Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95, 103-108 (2d Dept 2011); Citibank, N.A. v Conti-Scheurer,___AD3d___, 2019 NY Slip Op 02846, *2-3 (2d Dept 2019).2. See, RPAPL 1304 (3); L 2008, ch 472, § 2; L 2009, ch 507, § 1-a; L 2011, ch 62, § 104 (Part A); L 2012, ch 155, § 84; L 2012, ch 155, § 85; L 2016, ch 73, §§ 6, 7 (Part Q); L 2017, ch 58, § 1 (Part FF); L 2018, ch 58, §§ 1, 3-5 (Part HH).3. See, e.g., Wilmington Sav. Fund Socy. v DeCanio, 55 Misc 3d 1215(A), 2017 NY Slip Op 50585(U), *2 (Sup Ct, Suffolk County 2017) (Whelan, J.); HSBC Bank USA, N.A. v Teramo, 2018 NY Slip Op 31544(U), *6 (Sup Ct, Suffolk County 2018) (Heckman, J.); OneWest Bank. FSB v Corrales, 2018 NY Slip Op 30488(U), *5 (Sup Ct, Suffolk County 2018) (Heckman, J.); U.S. Bank N.A. v Hoffman, 2018 NY Slip Op 32267(U), *5 (Sup Ct, Suffolk County 2018) (Heckman, J.); HSBC Bank USA, N.A. v Janowitz, 2017 NY Slip Op 32754(U), *5-6 (Sup Ct, Suffolk County 2017) (Heckman, J.).4. See, e.g., Wells Fargo Bank, N.A. v Astacio, 62 Misc 3d 1219(A), 2019 NY Slip Op 50177(U), *2 (Sup Ct, Suffolk County 2019) (Quinlan, J.); US Bank N.A. v Loguercio, 62 Misc 3d 1209(A), 2019 NY Slip Op 50077(U), *4 (Sup Ct, Suffolk County 2019) (Quinlan, J.); Deutsche Bank Natl. Trust Co. v Jimenez, 62 Misc 3d 811, 829 (Sup Ct, Suffolk County 2018) (Quinlan, J.); M & T Bank v Rice, 57 Misc 3d 1214(A), 2017 NY Slip Op 51427(U), *3 (Sup Ct, Suffolk County 2017) (Quinlan, J.); accord Deutsche Bank Natl. Trust Co. v Corteselli, 2018 NY Slip Op 31936(U), *4 (Sup Ct, Suffolk County 2018) (Hinrichs, J.).5. See, US Bank N.A. v Lawson, 170 AD3d 1068, 1070 (2d Dept 2019).6. See, Marchai Props., L.P. v Fu,___AD3d___, 2019 NY Slip Op 02511, *3 (2d Dept 2019).7. Dinallo v DAL Elec., 60 AD3d 620, 621 (2d Dept 2009)

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