How Divorce Complicates Your Mortgage Disclosures

July 12, 2016 at 9:30 am Leave a comment

Divorce increases the number of pitfalls for lenders who have the audacity to attempt to collect delinquent debt. Nowhere is this more true than in the great state of New York,  where a series of legal landmines masquerading  as consumer protection statutes  are waiting to attack the unaware lender.  Consistently applied and well drafted policies and procedures are crucial when it comes to loss mitigation and foreclosures .

The latest example of the dangers posed by New York’s foreclosure defense laws comes from M&T Bank v. Farrell, 2014-1913 decided July 12 in which the bank moved to foreclose on property  that a separated  Binghamton Dr. and his wife had jointly purchased in 1994.

I’ve talked about NY’s Real Property Actions and Proceedings Law Section 1304 before but it’s worth talking about again. It requires that mortgage lenders “ give notice to the borrower” at least 90 days before commencing a foreclosure. It’s  also important to keep in mind that the notice must be sent “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. Such notice shall be sent by the lender, assignee or mortgage loan servicer in a separate envelope from any other mailing or notice “(N.Y. Real Prop. Acts. Law § 1304 (McKinney).

Remember the pre-foreclosure notice is in addition to the traditional summons and complaint required to start a foreclosure action. Courts have demanded strict compliance with 1304 and as more attorneys get involved in foreclosure defense 1304 defenses are  becoming more frequent.

In this case, at the time the pre-foreclosure notice was sent to the mortgaged property  Dr. Farrell no longer lived at the family  home and a separate  pre-foreclosure. notice was not  sent to his new address.  This invalidated the foreclosure.   M&T argued that it complied with the statute by sending the notice to the mortgage address. But the prevailing view of New York’s courts is that, as explained by the judge in this case,  the 1304  notice must be sent to the borrower’s last known address which may or may not be the mortgaged property. M & T had to start from scratch without passing Go and collecting $200

The case also underscores why it’s crucial to properly coordinate between your staff and your foreclosure attorney.  In this case M & T’s attorney submitted an affidavit stating that the 1304 notice was sent by personal and first class mail.  But this statement was inadequate to demonstrate compliance with the law since the attorney had no “first hand” knowledge of the mailing.

Cases like this demonstrate why your credit union should  have the person who prepares and sends out the 1304 notice on behalf of your credit union to swear out an affidavit the day the notice is sent to the delinquent members demonstrating compliance with 1304 based on her personal knowledge.


Entry filed under: Legal Watch, New York State. Tags: , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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