The 90 Day Notice of Default

December 1, 2015 By Elliot S. Schlissel

A recent case in Kings County before Justice Yvonne Lewis sitting in the Supreme Court, Foreclosure Part, deals with the 90 day notice of default. New York Real Property Actions and Proceedings Law Section 1304 requires that a financial institution must serve a 90 day notice accelerating the mortgage and calling it due and payable before a foreclosure proceeding can be initiated.

In this case the bank sought to confirm the appointment of a referee granting a judgment of foreclosure and sale. The lawsuit alleged the defendants defaulted under the terms of the note and mortgage. In addition, the suit claimed it was not a “high cost” or “sub-prime” loan and it was actually a commercial mortgage made to a commercial borrower. The financial institution claimed the mortgage was made for investment purposes.

Bank’s Failure to Serve A 90 Day Notice

The defendant maintained the bank had failed to comply with Section 1304 concerning the serving of a 90 day notice of default. Counsel for the plaintiff presented arguments alleging there was no need for service of a notice of default under Section 1304. They claimed they were exempt from this requirement because this was a commercial loan and not a residential loan. The bank’s position was that Section 1304 only applied to residential mortgages. The defendant contended the loan was a personal loan and the mortgaged property was used as his place of principle residence.

Judge Yvonne Lewis found there was a question as to whether the 90 day notice was required, and if it was required, was it properly served upon the defendant. Due to her concern regarding this issue, she denied the bank’s request for a judgment of foreclosure.

Conclusion

The 90 day notice needs to be served in all residential foreclosure proceedings. The failure of financial institutions to serve it can be plead as an affirmative defense in the defendant’s Answer to foreclosure lawsuit brought by a bank.