Second Circuit Interprets Guidance from New York Court of Appeals on Pre-Foreclosure Mailing Burden of Proof, Filings

Following guidance from the New York Court of Appeals, the United States Court of Appeals for the Second Circuit recently affirmed that a lender complied with the New York Real Property Actions and Proceedings Law (“RPAPL”) when it deviated from its usual mailing procedures, but where that deviation was not material to the proper mailing of the notice, as well as when its filing with the Superintendent of Financial Services only listed information as to one borrower when the loan in question had multiple borrowers. See CIT Bank N.A. v. Schiffman, 2021 WL 2172177 (2d Cir. May 28, 2021).  In the case, the Lender initiated a foreclosure action in the District Court for the Eastern District of New York on a loan which had been assigned to it. The Lender moved for summary judgment, which was granted.

On appeal, Defendant argued that the Lender had failed to prove compliance with § 1304 and § 1306 of the RPAPL.  As to RPAPL § 1304, Defendant argued that the Lender had failed to adequately establish that it had served Defendant with the notice required to give a borrower ninety days’ notice before commencing a foreclosure action. The Lender proffered an affidavit from one of its employees which stated that the company used a standard procedure to generate the notice in question and mailed it to Defendant, which was sufficient to create a presumption that notice was proper. However, Defendant in return countered with evidence that Lender had not followed its standard practice in this instance, because the notice had not been created “upon default” as per Lender’s standard procedures, but nearly one year after the mortgage payment was missed. Finding no cases in New York determining what specific showing a defendant must make to properly rebut proof of compliance, the Second Circuit certified a question to the New York Court of Appeals, asking: “[W]hat showing must the defendant make to render inadequate the plaintiff’s proof of compliance with § 1304?” As to RPAPL §1306, Defendant argued that Lender’s pre-foreclosure filing with the Superintendent of Financial Services was deficient because the loan was a multi-borrower loan, but the filing only contained information as to one of the two borrowers. Again, the Second Circuit found no New York cases clarifying this issue, so it certified the following question to the New York Court of Appeals: “When there are multiple borrowers on a single loan, does RPAPL § 1306 require that a lender’s filing include information about all borrowers, or . . . require that a lender’s filing include information about one borrower?”

The Court of Appeals rendered a decision on the two certified questions on March 30, 2021. See CIT Bank N.A. v. Schiffman, 2021 WL 1177940 (N.Y. March 30, 2021). On the first question, the court found that a presumption of mailing may be rebutted by a “denial of receipt plus proof of a material deviation from an aspect of office procedure that would call into doubt whether the notice was properly mailed, impacting the likelihood of delivery to the intended recipient.” Based on this guidance, the Second Circuit found that Defendant’s showing of a deviation from office procedure did not meet this standard, as when the notice was created was immaterial to whether “the notice was properly prepared and mailed” under the statute. As to the second question, the Court of Appeals found that “RPAPL 1306 is satisfied as long as one borrower is listed.” Therefore, the Second Circuit found in this matter that because Lender timely submitted a filing with all the required information as to one borrower, it had complied with the statute. Lender, the Court held, “is therefore entitled to summary judgment in its favor.”

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Michael Crowley at mcrowley@riker.com, Desiree McDonald at dmcdonald@riker.com, or Andrew Raimondi at araimondi@riker.com.