Mortgage Lender Penalized for Failure to Comply with Notice Requirements

foreclosure defense lawyersJudge Dolinger sitting in the Supreme Court in Rochester recently ruled a mortgage lender who did not comply with the “consumer friendly notice requirements under New York State law should be given a second chance to comply with the statute.” However, the lender was permanently enjoined from imposing any interest, fees, costs or legal expenses on the borrower from 90 days before the filing of the complaint until the bank complies with the New York notice requirements.

Foreclosure Prevention Tenant Protection and Property Management Act

The Foreclosure Prevention Tenant Protection and Property Management Act of 2009, requires a lender give the homeowner notice prior to the house being foreclosed on. In the case before Judge Dolinger, Citi Mortgage failed to comply with this statute. Judge Dolinger was concerned if the case was dismissed, Citibank would get a second chance to comply with the statute’s notice requirements. However, the judge noted in his decision the bank’s failure to comply with the notice requirements in their first attempt. If they were successful in the second attempt the borrower would be worse off because they would be responsible for the entire amount of the unpaid debt including the portion of the interest penalties and attorneys fees which accrued on the debt during the period of time between Citi Mortgage’s first chance at complying with the statute and their second chance. Judge Dolinger wrote in his decision, “the borrower is worse off because the amount of the debt has been increased during the two year period in which the foreclosure action has been pending making a recasting of the mortgage more costly, if not prohibitively so.” To deal with this, Judge Dolinger entered an order permanently enjoining the bank from imposing any interest, fees or legal expenses on the borrower from 90 before the filing of the complaint until such time as they complied with the statute.

Notice Regarding Foreclosure Lawsuit

New York Real Property Actions Proceedings Law (RPAPL) § 1304 requires a creditor to notify a borrower by registered or certified mail as well as by first class mail, offering assistance on how to avoid foreclosure. Citi Mortgage had failed to comply with this section of the Real Property Actions Proceedings Law. In the case before Judge Dolinger, he stated “there was no sworn statement from any bank official regarding the mailing.” Judge Dolinger, based on the bank’s failure to provide the sworn statement regarding the mailing, could have dismissed the foreclosure lawsuit. He refused to do so because he stated he “will not allow the bank to escape the consequences of its failure to follow” the law. Judge Dolinger went on to state “when and if the bank complies” with this statute it can collect “any principal payments due at any time under the note and mortgage.” Judge Dolinger’s ruling, however, denied the bank the ability to collect interest, fees, costs and attorneys fees during the period of time the bank was in non-compliance with the statute.

Conclusion

This was a victory for the mortgagors, albeit a small victory.assisting homeowners

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