Court Decides if Separate Envelopes Required for Each Borrower

A recent case raised a micro-cosmic issue of first impression before the Court: whether a plaintiff in a foreclosure action may satisfy the requirements of RPAPL 1304 by mailing a single 90-day notice jointly addressed to two or more borrowers.

Micro, because it required a deep dive into the minutia of foreclosure law. Cosmic, because a negative answer could be fatal to the suit.

On May 6, 2005, Fred J. Yapkowitz and Elaine M. Yapkowitz (husband and wife) borrowed $532,000 from Argent Mortgage Company, LLC., which was secured by a mortgage encumbering their real property in Pomona. The loan was memorialized by a note which was signed by each of the Yapkowitz as “Borrower.”

On or about January 1, 2009, the Yapkowitz defaulted on their payment obligations. On January 22, 2009, Wilshire Credit Corporation, the loan servicer at that time, mailed separate 30-day notices of default to each of them. The 30-day notices advised each that they were obligated to pay the sum of $6,189.30 by February 26, 2009, and that the failure to make payment by that date could result in acceleration of the entire indebtedness of the loan and the commencement of a foreclosure action.

In a jointly addressed letter dated February 26, 2010, America Home Loans notified them that servicing of the loan was transferred from Wilshire to BAC Home Loans Servicing, LP. They were subsequently notified that servicing of the loan was transferred from BAC to Bank of America, N.A.  Thereafter, the Yapkowitz were notified that servicing of the loan was transferred from BANA to Nationstar Mortgage, LLC.

In April 2013, Argent assigned the mortgage to Wells Fargo Bank, N.A.—which thereafter commenced the foreclosure action against, among others, the Yapkowitz. In their answer, they asserted affirmative defenses, including that Wells Fargo failed to comply with the requirements of RPAPL 1304.

In June 2017, Wells Fargo moved for summary judgment on the complaint. In support of the motion, they submitted a copy of a 90-day notice pursuant to RPAPL 1304, sent by BANA via certified and first-class mail to the Yapkowitz at their address, and a certified mail receipt for the 90-day notice signed for by “F. Yapkowitz. The 90-day notice was jointly addressed to both of the Yapkowitz.

Wells Fargo also submitted an affidavit from Edward Hyne, a litigation resolution analyst for Nationstar, who asserted that Nationstar’s business records, which incorporated the records of the prior loan servicer, BANA, reflected that “90-day pre-foreclosure notices . . . were sent, via certified and first class mail, to Defendants,” that “each 90-Day Notice was sent in a separate envelope from any other mailing,” and that “F. Yapkowitz” “signed for and accepted the delivery of the . . . 90-Day Notice.” Hyne also indicated that “each 90-Day Notice listed in the upper left-hand corner the name of the recipients (the Borrowers), the recipient’s address . . . and the specific Mortgage Loan number.”

In opposition to the motion, the Yapkowitz submitted an affidavit from both of them, in which they that stated that “[n]either of us remembers receiving and reading any 90-day notice of default,” or “whether the 90-day notice . . . addressed to both of us, . . . and signed for by Fred [Yapkowitz,] . . . was ever shown to Elaine [Yapkowitz].” Their attorney argued that Wells Fargo failed to establish its strict compliance with RPAPL 1304, a condition precedent to the commencement of the foreclosure action, since the 90-day notice submitted by the Wells Fargo was addressed to both them jointly. And Wells Fargo only presented a certified mail receipt signed by “F. Yapkowitz.” Thus, the Yapkowitz asserted that apparently “only one 90-day notice was mailed, rather than single notices addressed to each of [them] individually and in separate envelopes, as required by RPAPL 1304.”

Supreme Court denied the motion. The Court determined that Wells Fargo failed to establish its prima facie entitlement to judgment as a matter of law by relying on the affidavit of Hyne, who had no personal knowledge of the mailing of the 90-day notice, and relied on inadmissible hearsay.

At a pretrial conference on February 7, 2018, the parties stipulated to the submission of papers in lieu of testimony on the issue of whether Wells Fargo complied with RPAPL 1304. And the bank submitted an affidavit from Jamie Turner, assistant vice president of BANA, the former loan servicer, who stated that BANA’s business records reflected that “BANA sent 90-day pre-foreclosure notices . . . via certified and first class mail to Defendants . . . in accordance with BANA’s established and routinely followed business practices and procedures designed to ensure that documents [were] properly addressed and mailed,” and that the 90-day notice was signed for by “F. Yapkowitz.” Turner added that “each 90-Day Notice listed in the upper left-hand corner the names of the recipients…the recipients’ mailing address . . . and the specific Mortgage Loan number.”

Supreme Court determined that “Turner possesse[d] the requisite knowledge of BANA’s standard office practices and procedures to attest that BANA properly sent the 1304 Notice and . . . substantiate[d] the mailing with documentary proof”. But the Court nevertheless determined that Wells Fargo failed to establish its strict compliance with RPAPL 1304, which “requires a separate notice to each borrower in a separate envelope” and thus, the foreclosure action must be dismissed. The Court rejected Wells Fargo’s contention that it could be presumed that Fred J. Yapkowitz informed his wife, Elaine M. Yapkowitz, of his receipt of the RPAPL 1304 notice, since the lender cannot “shift its responsibility to provide the 1304 Notice to both borrowers from itself . . . [to] the borrower who signed for the certified mailing or opened the first-class mailing”.

Wells Fargo appealed.

An RPAPL 1304 notice is required pursuant to the Home Equity Theft Prevention Act. The purpose of the Act is to afford greater protections to homeowners confronted with foreclosure. Section 1304 was added to the RPAPL in 2008 as part of the legislative response to the subprime lending crisis and the epidemic of foreclosures. RPAPL 1304 requires that at least 90 days before a lender, an assignee, or a mortgage loan servicer commences an action to foreclose the mortgage on a home loan as defined in the statute, such lender, assignee, or mortgage loan servicer must give notice to the borrower. Since an RPAPL 1304 notice must be sent at least 90 days prior to the commencement of an anticipated foreclosure action, its manifest purpose is to aid the homeowner in an attempt to avoid litigation. And the legislative history noted a typical lack of communication between distressed homeowners and their lenders prior to the commencement of litigation. The bill sponsor sought to bridge that communication gap in order to facilitate a resolution that avoided foreclosure by providing the preforeclosure notice  and an additional period of time  to work on a resolution.

Strict compliance with RPAPL 1304 notice to the borrower or borrowers is a condition precedent to the commencement of a foreclosure action. And the plaintiff has the burden of establishing satisfaction of that condition. The statute requires that: (1) the 90-day notice be sent by registered or certified mail, and also by first-class mail, to both (a) the last known address of the borrower and (b) the residence that is the subject of the mortgage; and that (2) the notices required by the section be sent “in a separate envelope from any other mailing or notice”. By requiring the lender or mortgage loan servicer to send the RPAPL 1304 notice by registered or certified mail and also by first-class mail, the Legislature implicitly provided the means for the lender to demonstrate its compliance with the statute, i.e., by submission of proof of mailing by the post office.

The appeals court held in a prior case that each borrower was entitled to be sent notice at least 90 days prior to the commencement of the foreclosure action pursuant to RPAPL 1304. But no court had determined whether each borrower was entitled to receive an individually addressed 90-day notice in a separate envelope from a 90-day notice sent to the other borrowers.

The Court held that the mailing of a 90-day notice jointly addressed to two or more borrowers in a single envelope was not sufficient to satisfy the requirements of RPAPL 1304, and that the notice must separately be mailed to each borrower as a condition precedent to commencing the foreclosure action.

RPAPL 1304(1) provides that giving “notice to the borrower“, in the singular, at least 90 days prior to the commencement of the foreclosure action, is a prerequisite to commencement of the action “against the borrower, or borrowers“. By contrast, RPAPL 1304(2), which sets forth the mailing requirements for the 90-day notice, contains no reference to “borrowers” in the plural. RPAPL 1304(2) requires the 90-day notice to be sent by registered or certified mail, and also by first-class mail, to both  “the last known address of the borrower” and “the residence that is the subject of the mortgage”.  Further, RPAPL 1304(2) provides that “[t]he notices required by this section shall be sent . . . in a separate envelope from any other mailing or notice.” While mailing a notice jointly addressed to multiple borrowers at the property which is the subject of the mortgage would clearly be sufficient to satisfy the requirement of sending the 90-day notice to “the residence that is the subject of the mortgage”, such mailing would not also satisfy the separate requirement under RPAPL 1304(2) to mail “[t]he notices required by this section . . . to the last known address of the borrower” (and to mail each such notice in a separate envelope from any other required notice). Had the Legislature intended the mailing of a notice jointly addressed to two or more borrowers to satisfy the requirements of RPAPL 1304(2), it would have stated, as it did in RPAPL 1304(1) with regard to the commencement of a foreclosure action, that the 90-day notice must be mailed to “the last known address of the borrower or borrowers.”

The problematic circumstances which might arise if the Legislature had drafted RPAPL 1304(2) to permit a mailing to “the last known address of the borrower or borrowers” were not difficult to envision. Ideally, when one of the borrowers received a 90-day notice jointly addressed to two or more borrowers, he or she would inform the other borrower(s). However, that ideal scenario clearly would not always occur, and even a matter as urgently pressing as the receipt of a 90-day notice of foreclosure proceedings might not be communicated if, for instance, there is a breakdown of communication between the borrowers. Since the purpose of RPAPL 1304 was to take measures aimed at ensuring notice to the borrowers of an impending foreclosure action in an attempt to avoid litigation, it would subvert the legislative purpose of the statute to shift the burden of providing notice to each borrower from the lender or mortgage loan servicer to one of the borrowers who happens to sign for the envelope.

RPAPL 1304(2) does not require actual notice to a borrower, or to each of multiple borrowers, insofar as notice is considered given as of the date it is mailed. Nevertheless, the mailing requirements of RPAPL 1304(2) were enacted to assure that the transmitted notice was actually received. Since the Legislature imposed strict mailing requirements aimed at ensuring notice and documenting the delivery of the 90-day notice, it would be difficult to imagine why the Legislature would not also require the simple measure of separately addressing a 90-day notice to each of the borrowers. Moreover, while notice is considered given as of the date it is mailed, that provision cannot be complied with unless and until each notice required by that  section has been sent “in a separate envelope from any other mailing or notice”. Thus, notice cannot be deemed given until the date of mailing, in a separate envelope, of each 90-day “notice to the borrower”, which  the Court read to mean notice to each borrower.

And since strict compliance with RPAPL 1304 was a condition precedent to the commencement of a foreclosure action, the obligation to send all required notices “in a separate envelope from any other mailing or notice” could not be satisfied by including the required notice for each borrower in the same envelope. To permit a single notice jointly addressed to two or more borrowers and mailed in a single envelope to serve in lieu of a separately mailed notice to each borrower would transform the requisite standard of compliance from “strict compliance” to “substantial compliance.”

Here, 30-day notices of default were separately mailed to each of the Yapkowitz. But the 90-day notice, which was sent via certified and first-class mail, was jointly addressed to both of them. That “F. Yapkowitz” signed for and accepted delivery of the 90-day notice sent via certified mail, receipt of the notice was inconsequential. Even assuming, arguendo, that both of the Yapkowitz had signed for and accepted delivery of the 90-day notice, Wells Fargo would not have demonstrated strict compliance with the requirements of RPAPL 1304 by mailing a notice jointly addressed to both of the borrowers in the same envelope. Since it was undisputed that the 90-day notice to each of the Yapkowitz was sent in the same envelope, Wells Fargo failed to establish its compliance with RPAPL 1304, a condition precedent to the commencement of the action.

Accordingly, Supreme Court properly denied Wels Fargo’s motion for summary judgment on the complaint and properly dismissed the complaint as asserted against the Kaplowitz.

Justice Dillon dissented and disagreed as to how the language of RPAPL 1304 should be interpreted where there were two borrowers living at the residence that was the subject of the mortgage. And concluded that Wells Fargo satisfied the requirements of RPAPL 1304 by mailing the required statutory default notice to both Fred J. Yapkowitz and Elaine M. Yapkowitz, with both requisite mailings jointly addressed to each borrower.

The outer envelopes were addressed to Elaine M. Yapkowitz, no less so than they were addressed to her husband, Fred J. Yapkowitz. The certified and regular mailings here expressly named Elaine M. Yapkowitz as an addressee to whom the letters were intended for joint delivery.

The RPAPL 1304 notices contained within the envelopes were likewise expressly addressed to Elaine M. Yapkowitz, no less so than they were addressed to her husband.

The language of RPAPL 1304(1) merely required lenders to “give” a statutory default notice to the borrower or borrowers. According to the business records which the Supreme Court found admissible, the notices were sent to the proper address in the proper mechanistic manner, to the borrowers by both first-class and certified mail. Thus, notice was “given” to not just one of them, but to both of them, upon the mailings addressed to both spouses as co-borrowers.

The records in evidence demonstrated that the RPAPL 1304 notice transmitted by certified mail arrived at its intended address, as it was signed for by “F. Yapkowitz.” Thus, while Wells Fargo was not required to prove that its mailings actually reached the intended residential address, its proof nevertheless established that delivery of the certified mail notice marked to the attention of both co-borrowers was actually accomplished. Any efforts that could have been undertaken by “F. Yapkowitz” in response to the RPAPL 1304 notice, such as contacting housing counselors, would necessarily inure to the benefit of both borrowers.

The records in evidence showed that the RPAPL 1304 notice was transmitted by first-class mail as well. The law provides that material placed in an official depository of the United States Postal Service is presumed to be delivered in the due course of the mail. There was an evidentiary presumption that the RPAPL 1304 notice sent by first-class mail arrived at its intended residential destination, addressed to the attention of both co-borrowers. After Wells Fargo established by its business records the presumptive delivery of its first-class mailing, the Yapkowitz never denied receiving the 1304 notice in either the first-class or certified mail forms. Instead, they merely argued a lack of any “recollection” of receiving the notices. Evidentially, they each failed to rebut the legal presumption that the first-class mailing was received by them at their address..

RPAPL 1304(1) and (2) do not contain any language requiring “separate” parallel notices addressed to each separate co-borrower. The language enacted by the Legislature merely required that the lender, assignee, or mortgage loan servicers “shall give such notice to the borrower,” or if applicable, to the “borrowers.” That requirement was satisfied here when Wells Fargo transmitted a certified and a first-class mail envelope addressed to both borrowers, including Elaine M. Yapkowitz, at her proper address, with an RPAPL 1304 notice inside the envelopes also addressed to both borrowers. To require that co-borrowers each be entitled to separately addressed and parallel envelopes containing separate RPAPL 1304 notices, would be reading into RPAPL 1304(1) and (2) language that is simply not contained in the statute itself, and which the state Legislature did not place there.

The requirement that the statutory default notice be given to the “borrower” or the “borrowers” does not require separate mailings to each co-borrower, so long as all co-borrowers are included in the notice procedures

The related subdivisions of RPAPL 1304(1) and (2) must be read together to help determine the scheme of the entire section. While the Legislature directed in the 2016 amendment of subdivision (1) that notice be given to “borrowers,” in the plural, it retained the language in subdivision (2) that the mailings be by first-class and certified or registered mail to the “borrower,” in the singular. The two statutory subdivisions, as amended and read together, suggest that a single notice to both borrowers collectively satisfied the notice and mailing requirements of subdivisions (1) and (2).

RPAPL 1304 is a statute steeped in minutiae, detail, and legislative micro-management. The high level of detail was motivated by the well-intentioned public policy of advising homeowners in default of the risks and remedies they faced in failing to renegotiate or cure their defaults in payment. Perhaps the most prominent example of the Legislature’s micro-management of the subject was the requirement that certain language of the notice be in 14-point typeface rather than the more typical 12-point typeface, and the template language of the overall notice with seven paragraphs of information that is required to be disclosed.

The Legislature  provided painstaking detail in describing the requirements of RPAPL 1304—namely, that the notices: advise that the homeowner was at risk of losing the home; provided a list of housing counselors with specific contact information; invited negotiation with the lender to potentially resolve issues of default; advised the homeowner of the right to remain in the home until a court order is received directing otherwise; and advised the homeowner of the length and amount of the default that needed to be cured. RPAPL 1304 was amended many times and in several different respects since 2008, further underscoring the Legislature’s attention to the form and substance of statutory residential mortgage default notices.

RPAPL 1304 received attention for more than a decade from attentive and well-meaning legislators. But the Legislature had not placed actual language into the statute, at any time, advising lenders, assignees, and mortgage loan servicers that if a note and mortgage were executed by co-borrowers, each co-borrower was entitled to a duplicative, separately enveloped, separately mailed, and separately saluted notice.

Wells Fargo established compliance with RPAPL 1304 and entitlement to judgment in its favor at the conclusion of the trial. In opposition, the Yapkowitz did not deny receipt of the RPAPL 1304 notices, but only claimed that they each had no recollection of their receipt. They failed to refute the delivery of the RPAPL 1304 notice that was signed for by F. Yapkowitz, and neither of them rebutted the presumptive delivery of the RPAPL 1304 notice that had been sent to them by regular mail as well.