A decision by the New York Court of Appeals, Bank of America, N.A. v. Kessler (2023) has now made home mortgage foreclosures somewhat easier, and removed what has often been a stumbling block for lenders.
As a result of the 2009 recession, the New York legislature enacted a law that regulates home mortgage foreclosures. Among other things, the law requires a lender to send a notice 90 days before commencing legal action. That notice must contain seven items of mandated information or warnings set out in the statute. RPAPL § 1304. The same law requires that the notice be sent “in a separate envelope from any other mailing or notice.”
The latter provision has vexed lenders, who have often included other information not required by the statute, such as a notice about rights of a recipient that is in bankruptcy, or rights of military personnel under federal law.
Furthermore, federal law, specifically, the Fair Debt Collection Practices Act requires that an “initial written communication with the consumer,” and any “subsequent communications,” must state that the “debt collector is attempting to collect a debt and that any information obtained will be used for that purpose.” 15 U.S.C. § 1692e(11). This potentially creates a conflict between New York law, which arguably would bar inclusion of this language, and federal law which requires it.
In the Kessler case, the Second Department of the Appellate Division interpreted the “separate envelope rule” very strictly, which resulted in many lender notices being invalidated for inclusion of additional notices or warnings. The Court of Appeals, however, rejected the strict, bright line rule adopted by the Second Department, holding that the phrase “other mailing or notice” refers not to other information or warning, but rather other information ‘of a different kind.’ Thus while extraneous information would still invalidate the notice, warnings or information pertinent to the notice or the borrowers’ rights would not.
“[S]ection 1304 does not prohibit the inclusion of additional information that may help borrowers avoid foreclosure and is not false or misleading. . . . Where a lender includes false, misleading, obfuscatory, or unrelated information in the envelope together with the 1304 notice, courts may void such notices. But where, as here, the additional information was not false, misleading, obfuscatory, or unrelated, it should not render the notice void.”
The result of this decision will be to obviate what until now has been a vexing issue for lenders – what kind of warnings to include in the 90-day notice, and whether they are invalidated by inclusion of such information.
As a result of the 2009 recession, the New York legislature enacted a law that regulates home mortgage foreclosures. Among other things, the law requires a lender to send a notice 90 days before commencing legal action. That notice must contain seven items of mandated information or warnings set out in the statute. RPAPL § 1304. The same law requires that the notice be sent “in a separate envelope from any other mailing or notice.”
The latter provision has vexed lenders, who have often included other information not required by the statute, such as a notice about rights of a recipient that is in bankruptcy, or rights of military personnel under federal law.
Furthermore, federal law, specifically, the Fair Debt Collection Practices Act requires that an “initial written communication with the consumer,” and any “subsequent communications,” must state that the “debt collector is attempting to collect a debt and that any information obtained will be used for that purpose.” 15 U.S.C. § 1692e(11). This potentially creates a conflict between New York law, which arguably would bar inclusion of this language, and federal law which requires it.
In the Kessler case, the Second Department of the Appellate Division interpreted the “separate envelope rule” very strictly, which resulted in many lender notices being invalidated for inclusion of additional notices or warnings. The Court of Appeals, however, rejected the strict, bright line rule adopted by the Second Department, holding that the phrase “other mailing or notice” refers not to other information or warning, but rather other information ‘of a different kind.’ Thus while extraneous information would still invalidate the notice, warnings or information pertinent to the notice or the borrowers’ rights would not.
“[S]ection 1304 does not prohibit the inclusion of additional information that may help borrowers avoid foreclosure and is not false or misleading. . . . Where a lender includes false, misleading, obfuscatory, or unrelated information in the envelope together with the 1304 notice, courts may void such notices. But where, as here, the additional information was not false, misleading, obfuscatory, or unrelated, it should not render the notice void.”
The result of this decision will be to obviate what until now has been a vexing issue for lenders – what kind of warnings to include in the 90-day notice, and whether they are invalidated by inclusion of such information.