How Does the Kessler Decision Impact a 90-Day Notice?

If you live in New York, the decision of a recent court case could unexpectedly give you more time to fight against a possible foreclosure. In the case of Bank of America v. Kessler, the courts chose to follow the exact wording of New York’s Required Prior Notices law (RPAPL 1304). What does that mean for you? If your lender sent you a 90-Day Notice letter in the mail, and put anything else in the envelope, you may be able to have their foreclosure case dismissed.

What is RPAPL 1304?

RPAPL (Real Property Actions and Proceedings Law) §1304 is also known as the Required Prior Notices law. Also called a “90-Day Notice”, this law states that entities that hold a mortgage (banks or other lenders) must send you notice if you are behind on your mortgage payments and that you have 90 days (from the date the letter was mailed) to catch up on their payments or face foreclosure.

The 90-Day Notice is a standardized form the lender will send you containing the following information:

• How many days you are behind on your mortgage payments
• How many dollars you are behind
• Contact information for the NYS Office of the Attorney General’s Homeowner Protection Program (HOPP)
• Contact information to speak to someone at the bank directly
• A statement that “You legally remain the owner of and are responsible for the property until the property is sold by you or by order of the court at the conclusion of any foreclosure proceedings. This notice is not an eviction notice, and a foreclosure action has not yet been commenced against you.”

 The lender must follow these rules when it comes to this notice:

• It must be sent via 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
• It must be sent in a separate envelope from any other mailing or notice
• It must 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 the NY Department of Financial Services

The Bank of America skipped one of the above rules and a very long, contentious mortgage case was dismissed.

What Is the Kessler Decision?

On September 1, 2013, The Bank of America (BoA) alleged that Andrew and Reiko Kessler (Kessler) were in default of their mortgage, and as part of the bank’s procedure, sent the Kessler’s a 90-Day Notice. What followed was several years of back and forth over specifics of the case. On August 7, 2017, BoA filed a motion for summary judgment (asking the court of end all the back and forth and to find for the bank). Three weeks later, Kessler opposed the bank’s motion and asked to dismiss the complaint altogether because the 90-Day Notice the bank had sent them contained other notices in the same envelope.

After some additional arguments, the Supreme Court of Westchester County finally concluded that “… the plaintiff did not strictly comply with RPAPL §1304 and thus, a condition precedent to the foreclosure action was not met. Therefore, the complaint must be dismissed.” (Bank of Am. v. Kessler, No. 2017-33343 (N.Y. Sup. Ct. Nov. 30, 2017)

BoA was not pleased with this finding and appealed to the Appellate Division of the Supreme Court of New York, Second Department. On December 15, 2021, after reviewing the case, it was determined that “the Supreme Court properly determined that the plaintiff failed to comply with the strict requirements of RPAPL 1304, and thus, a condition precedent to this foreclosure action was not met. As such, the court properly denied those branches of the plaintiff’s motion which were for summary judgment on the complaint insofar as asserted against the defendants.” Bank of Am. v. Kessler, No. 2018-00886 (N.Y. App. Div. Dec. 15, 2021)

On May 23, 2022, the Supreme Court of Westchester County “…ORDERED that the branch of the motion which is for leave to reargue or renew the appeal is denied; and it is further, ORDERED that the branch of the motion which is for leave to appeal to the Court of Appeals from the opinion and order of this Court is granted…” meaning that BoA has the right to try and appeal the Second Department verdict. Bank of Am. v. Kessler, 2022 N.Y. Slip Op. 66274 (N.Y. App. Div. 2022)

Using the Kessler Decision as a Defense

Many lenders, especially in earlier foreclosure matters that are still pending, did not strictly abide by the exact words of RPAPL 1304. The Kessler decision surprised lenders with its strict approach, and many did not regard the words “separate envelope” strictly and instead might have done the following:

1. Sent the 90-Day Notice with Other Notices – It was not unusual for lenders to send the 90-Day Notice with the default notice and/or with an application for a loan modification and/or with the last invoice.
2. Included Extraneous Information as Part of the 90-Day Notice – It was not unusual for lenders to include, at the end of the 90-Day Notice, additional information and language beyond the boilerplate 90-Day Notice. For example, the warning language given by debt collectors on communications and other language devised by a bank to inform clients of their options.

Kessler makes these practices, if they can be shown, open to a motion to dismiss – even at a late stage in the foreclosure action. 

Presently, the Kessler decision is a powerful defense. However, it will most likely be appealed, which may shed further light on how this ruling will be ultimately interpreted.

How Can This Affect My Own Foreclosure?

Foreclosures can be a very long, very complicated process. You need to make sure you have the right foreclosure attorney by your side. Sometimes, dismissing a case against you can be as simple as pointing out a basic mistake by your lender (like putting one extra piece of paper in an envelope). Other times, your foreclosure lawyer will have to dig deeper into mortgage law and precedent. Either way, having the right foreclosure lawyer with you can give you the extra time you need to set everything straight.

What to Do Next

If you have received a 90-Day Notice from your lender, the time to act is now. Reach out to New York foreclosure attorney Ronald Weiss for a free consultation. He can tell you what you need to know about the foreclosure process in New York, and, if you have a valid legal argument, help you get your case started. Call 631-271-3737 and take the first step to a fresh start.