90-Day Notice and Kessler

The law that governs a lender’s requirement to send a 90-Day Notice before filing a lawsuit is New York RPAPL 1304, which provides:

 

Required prior notices.

 

1. Notwithstanding any other provision of law, with regard to a home loan, at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower, or borrowers at the property address and any other address of record, including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower in at least fourteen-point type which shall include the following:

2. The notices required by this section shall be sent by such lender, assignee (including purchasing investor) 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 to the residence that is the subject of the mortgage. The notices required by this section shall be sent by the lender, assignee or mortgage loan servicer in a separate envelope from any other mailing or notice. Notice is considered given as of the date it is mailed. The notices required by this section shall contain a current list of at least five housing counseling agencies serving the county where the property is located from the most recent listing available from department of financial services. The list shall include the counseling agencies’ last known addresses and telephone numbers. The department of financial services shall make available on its websites a listing, by county, of such agencies. The lender, assignee or mortgage loan servicer shall use such lists to meet the requirements of this section.”

New York RPAPL 1304 “contains specific, mandatory language in keeping with the underlying purpose of the Home Equity Theft Prevention Act to afford greater protections to homeowners confronted with foreclosure” (Aurora Loan Servs., LLC v. Weisblum, 85 A.D.3d 95, 103, 923 N.Y.S.2d 609). The manner of service of the 90-Day notice must be made in a separate envelope from any other mailing or disclosure. With respect to the 90-Day notice, it doesn't matter if the extra disclosure is positioned at the top or bottom of the page, as a header or footer, on the first or last page, on the backside of the page, or as a separate page within the same envelope. The law is clear: Any extra notice or disclosure in the same envelope as the 90-Day notice renders the 90-Day notice defective and is a violation of the separate envelope requirement of RPAPL 1304(2).

This strict approach provides clarity as a bright-line rule to promote stability and predictability in foreclosure proceedings, which otherwise would be left to a court's interpretation of the statute.

Legislative History of New York RPAPL 1304

The strict interpretation of the separate envelope provision is consistent with the Legislature's intent. New York RPAPL 1304 was first enacted by the New York Legislature in 2008, along with a series of additional amendments, requiring that at least 90 days before the commencement of a foreclosure action, a lender must give a borrower certain written notice (see RPAPL 1304[1]). Subdivision (1) of the statute states that the 90–day notice “shall include," and subdivision (2) specifies how the notice must be sent . In 2009, several amendments to New York RPAPL 1304 were enacted, adding a new sentence to RPAPL 1304(2) to include the requirement that the notice shall be sent in a separate envelope from any other mailing or notice. Although the statute has been amended multiple times since its adoption in 2008, the separate envelope condition has consistently remained.

Considerations and Applicability

In Freedom Mtge. Corp. v. Engel, the New York Court of Appeals set forth a bright-line rule in mortgage foreclosure cases that a lender's voluntary discontinuance of a prior foreclosure action constitutes a revocation of its election to accelerate the debt, absent a contemporaneous statement by that noteholder to the contrary. In its discussion of the application of the statute of limitations, the Court of Appeals emphasized the need for clarity permitting consistent application. More significantly, with respect to evaluating the applicability of New York RPAPL 1304, the Court of Appeals expressly recognized that the legislature has imposed stringent standards to bring a foreclosure action — e.g., prescribing the precise method of providing pre-suit notice to the borrower.

In U.S. Bank N.A. v. Haliotis, the court implemented this strict compliance approach with respect to the separate envelope requirement. The Third Department found that a lender's notice was defective as the lender failed to show that the RPAPL 1304 notice was served in an envelope that was separate from any other mailing or notice.

Flexible Standard Unworkable

Legislation adopted the separate envelope requirement to obviate a borrower becoming confused or distracted by extraneous information. The approach taken by the Court of Appeals in Freedom Mtge. Corp. v. Engel is instructive in analyzing compliance with New York RPAPL 1304(2): “The determinative question is not what the lender intended or the borrower perceived," nor for the court to decide what other additional notices might or might not be permissible, but rather, given the clear and unambiguous language of the statute, whether the lender complied with the separate envelope requirement.

Nor does a determination as to strict compliance undermine the legislative goal of providing information about additional protections and foreclosure prevention opportunities to homeowners at risk of losing their homes as nothing in RPAPL 1304 prohibits a lender from mailing, in other envelopes, notices to a borrower—whether such notices be federally mandated or consist of any other notice or information that may assist a homeowner to avoid foreclosure. New York RPAPL 1304(2) simply requires that the notices required by its provisions be mailed in a separate envelope from those other notices.

UPDATE

On February 14, 2023, the New York Court of Appeals reversed the Second Department’s decision and held that the inclusion of additional information with the RPAPL 1304 notice did not invalidate the notice if such notice may help borrowers avoid foreclosure and is not false or misleading. However, where a lender includes false, misleading, obfuscatory, or unrelated information in the envelope together with the 1304 notice, courts may void such notices.

Although not a win for many homeowners where these 90-Day notices were previously deemed defective, the requirements including predicate notices pursuant to the Legislation’s intention of the Home Equity Theft Prevention Act (HETPA) must still be met.