Opinion
08-43062.
December 3, 2009.
DE ROSE SURICO, Attorneys for Plaintiff, Bayside, N.Y.
Upon the reading and filing of the following papers in this matter: ex parte application for an order of reference filed on February 27, 2009, and supported by the affirmation of Vincent P. Surico, Esq. dated December 3, 2008, and now
UPON DUE DELIBERATION AND CONSIDERATION BY THE COURT of the foregoing papers, the motion is decided as follows: it is
ORDERED that plaintiff's application (seq. # 001) for an order of reference in this foreclosure action is considered under 2008 NY Laws, Chapter 472, enacted August 5, 2008, as well as the related statutes and case law, and is hereby denied without prejudice and with leave to resubmit upon proper papers, for the following reasons: (1) The plaintiffs failure to submit proper evidentiary proof, including an affidavit from one with personal knowledge, as to whether or not the loan in foreclosure in this action is a "subprime home loan" as defined in RPAPL § 1304 or a "high-cost home loan" as defined in Banking Law § 6- 1; (2) The plaintiff's failure to submit evidentiary proof of compliance with the requirements of CPLR § 3215(f), including but not limited to a proper affidavit of facts by the plaintiff [or by plaintiff's agent, provided there is proper proof in evidentiary form of such agency relationship], or a complaint verified by the plaintiff and not merely by an attorney or non-party, such as a servicer, who has no personal knowledge; (3) The plaintiff's failure to submit proper evidentiary proof, including an affidavit from one with personal knowledge, of the proper assignment of the subject consolidated mortgage sufficient to establish the plaintiff's ownership of the note and mortgage; (4) The plaintiff's failure to submit evidentiary proof, including an affidavit from one with personal knowledge, of proper compliance with the time and content requirements specified in the notice of default provisions set forth in the mortgage, and evidentiary proof of proper service of said notice; (5) The plaintiff's failure to submit evidentiary proof, including an attorney's affirmation, of compliance with the form, type size, type face, paper color and content requirements for foreclosure notices, pursuant to RPAPL § 1303, which applies to actions commenced on or after February 1, 2007 (as amended August 5, 2008), as well as an affidavit of proper service of such notice; (6) The plaintiff's failure to submit evidentiary proof, including an attorney's affirmation, of compliance with the form, content, type size, and type face requirements of RPAPL § 1320 regarding special summonses in residential foreclosure actions, and evidentiary proof of proper service of said special summons; and it is further
ORDERED that, inasmuch this action was commenced after September 1, 2008 and inasmuch as the plaintiff has failed to properly show that the subject loan in foreclosure is not a "subprime home loan" as defined in RPAPL § 1304 or a "high-cost home loan" as defined in Banking Law § 6- 1, the defendant homeowner is entitled to a settlement conference under CPLR 3408, which is hereby scheduled for __________________ at 9:30 a.m. before the undersigned, located at Room A-259, Part 17. One Court Street, Riverhead, NY 11901 (631-852-1760), for the purpose of holding settlement discussions pertaining to the rights and obligations of the parties under the mortgage loan documents, including but not limited to, determining whether the parties can reach a mutually agreeable resolution to help the defendant avoid losing his or her home, and evaluating the potential for a resolution in which payment schedules or amounts may be modified or other workout options may be agreed to, and for whatever other purposes the Court deems appropriate; and it is further
ORDERED that at this conference, the plaintiff shall appear in person or by counsel, and if appearing by counsel, such counsel shall be fully authorized to dispose of the case; and it is further
ORDERED that at this conference, the defendant shall appear in person or by counsel and if the defendant is appearing pro se, the court shall advise the defendant of the nature of the action and his or her rights and responsibilities as a defendant; and it is further
ORDERED that the plaintiff shall promptly serve a copy of this Order upon all defendants via certified mail (return receipt requested), and by first class mail, and shall provide proof of such service to the Court at the time of any scheduled conference, and annex a copy of this Order and the affidavit(s) of service of same as exhibits to any motion resubmitted pursuant to this Order; and it is further ORDERED that with regard to any future applications by the plaintiff, if the Court determines that such applications have been submitted without proper regard for the applicable statutory and case law, or without regard for the required proofs delineated herein, the Court may, in its discretion, deny such applications with prejudice and/or impose sanctions pursuant to 22 NYCRR § 130-1, and may deny those costs and attorneys fees attendant with the filing of such future applications.
In this foreclosure action, the plaintiff filed a summons and complaint on December 2, 2008, which essentially alleges that the defendant-homeowners, Stephen Mattera and Lori Christiano, defaulted in payments with regard to an original mortgage dated December 11, 2000 in the principal sum of $500,000, and a subsequent mortgage in the principal sum of $158,505.02, which were consolidated to form a single lien in the principal sum of $650,000 pursuant to a consolidation, extension and modification agreement dated December 12, 2001, and given by the defendant-homeowners for the premises located at 27 Wilderness Road, Nissequogue, New York 11780. There is an undated allonge to the note dated December 11, 2000 whereby the original lender, ABN AMRO MORTGAGE GROUP, INC. ("ABN") endorsed the note without recourse and in blank. ABN assigned the mortgage and note dated December 11, 2000 to the plaintiff, CitiMortgage, Inc. successor by merger to ABN by corporate assignment dated November 25, 2008. Parenthetically, the assignment dated November 25, 2008 does not include or even mention the subsequent mortgage loan in the sum of $158,505.02 or the consolidation, extension and modification agreement dated December 12, 2001. The plaintiff now seeks a default order of reference and requests amendment of the caption deleting the fictitious named defendants. For the reasons set forth herein, the plaintiff's application is denied.
On August 5, 2008, Senate Bill 8143 was approved and enacted as 2008 NY Laws, Chapter 472, which has unofficially been referred to as the Subprime Lending Reform Act. With regard to foreclosure actions such as the one herein commenced after September 1, 2008, the relevant statute, RPAPL 1302, sets forth several pleading requirements that must be satisfied in any mortgage foreclosure action " relating to a high-cost home loan or a subprime home loan ". Further, as a result of this legislation, CPLR 3408 was added [effective 8/5/08], mandating that a settlement conference be scheduled and conducted by the court within sixty [60] days of the filing of proof of service with the clerk, if the foreclosure action involves a subprime, non traditional or high cost loan. Finally, the Rules of Court were amended after the enactment of L. 2008, ch. 472 to require that a special RJI form be utilized by the plaintiff seeking judicial intervention in any foreclosure action relating to a subprime or high cost loan. The utilization of the special RJI serves to alert the court in the very first instance that a mandatory conference under CPLR 3408 may need to be scheduled.
RPAPL 1304(c), defines "subprime home loan" as "a home loan consummated between [January 1, 2003] and [September 1, 2008] in which the terms of the loan exceed the threshold as defined in [RPAPL 1304(d)]." Whether or not a loan satisfies one of the "thresholds," as defined in RPAPL § 1304(d), depends upon whether the loan is a first lien mortgage loan or a subordinate mortgage lien, and upon various other factors, such as annual percentage rate, time of loan consummation, periods of maturity, percentage points over yield on treasury securities, and any applicable initial or introductory period. The definition specifically "excludes a transaction to finance the initial construction of a dwelling, a temporary or 'bridge' loan with a term of twelve months or less, such as a loan to purchase a new dwelling where the borrower plans to sell a current dwelling within twelve months, or a home equity line of credit." The meaning of the term "consummated" is not specifically defined in any of the foreclosure-related statutes. Generally, with regard to a business transaction, for example, the transaction is "consummated" when it is actually completed. Accordingly, with regard to a loan agreement, the date of consummation may be construed to mean the date on which a loan transaction is final, or when the loan is actually funded; however, in analyzing the legislation applicable to foreclosure actions, this Court finds that, as used in the statutes relevant to foreclosures, a loan is "consummated" at the time the borrower executes the note and mortgage. Since the subject mortgage was executed between January 1, 2003 and September 1, 2008, pursuant to Section 3-a, the Court must ascertain whether or not this action involves a "high-cost home loan" or "subprime home loan" as defined by statute.
Banking Law 6- 1(d) defines "high-cost home loan" as "a home loan in which the terms of the loan exceed one or more of the thresholds as defined in [Banking Law 6- 1(g)]." Pursuant to Banking Law § 6- 1(g), whether or not a loan satisfies one of the "thresholds" depends upon several factors, such as interest rates, loan types, loan amounts, loan periods, periods of maturity, annual percentage rates, percentages of total points and fees, yields on treasury securities, and bona fide loan discount points. Any combination or permutation of the "threshold" variables set forth in RPAPL § 1304(d) or Banking Law 6- 1(g) may cause a mortgage to meet the definition of a "subprime home loan" or a "high-cost home loan."
Based on the variables and the complexities of the parameters involved in defining these terms, as well as the less-than-complete nature of the plaintiff's submissions, the Court will not (nor should it be expected to) flippantly draw its own conclusions as to whether or not the loan at issue meets the definition of a "subprime home loan" or a "high-cost home loan." This is particularly true, given the legislative intent of and express protections afforded to homeowners under the statutes related to foreclosure actions. Indeed, the determination of whether the pleadings are sufficient under RPAPL 1302 and/or whether to schedule a mandatory conference under CPLR 3408 should not hinge upon the court reaching a conclusion on anything but compelling and reliable evidence as to the type or character of the subject home loan. As noted below, there must be an affidavit of merit from the party on all substantive aspects of the action. Accordingly, since the plaintiff did not provide proof in evidentiary form, including an affidavit from one with personal knowledge, as to whether or not this matter involves the foreclosure of a "subprime home loan" or a "high-cost home loan," as defined by statute, or that the defendant is not a resident of the subject property and, therefore, does not qualify for the protections under the new laws, the court must proceed on the assumption that the defendant is entitled to the settlement conference under CPLR 3408.
In support of this application, the plaintiff submits an affidavit from Scott Scheiner, Vice President of plaintiff. In his affidavit, Scheiner refers to the original purchase money mortgage dated December 11, 2000 in the principal sum of $500,000. Scheiner alleges that the mortgagor defendants defaulted by failing to make their regular monthly payments due as of July 1, 2008 and that plaintiff sent them a notice of acceleration. Plaintiff's allegations in this regard are conclusory, and in any event, the moving papers do not include a copy of the alleged notice of acceleration. Furthermore, the complaint references the consolidated extended and modified mortgage loan in the sum of $650,000, plaintiff's affidavit of merit only refers to the original mortgage in the sum of $500,000 and alleges that the principal sum sought to be foreclosed is $438,986.88. This inconsistency is not explained in plaintiff's affidavit.
In relevant part, CPLR § 3215(a) states: "When a defendant has failed to appear, plead or proceed to trial of an action reached and called for trial, or when the court orders a dismissal for any other neglect to proceed, the plaintiff may seek a default judgment against him." With regard to proof necessary on a motion for default in general, CPLR 3215(f) states, in relevant part, that "[o]n any application for judgment by default, the applicant shall file proof of service of the summons and the complaint . . . and proof of the facts constituting the claim, the default and the amount due by affidavit made by the party . . . Where a verified complaint has been served, it may be used as the affidavit of the facts constituting the claim and the amount due; in such case, an affidavit as to the default shall be made by the party or the party's attorney. . . . Proof of mailing the notice required by [CPLR 3215(g)], where applicable, shall also be filed."
With regard to a judgment of foreclosure, an order of reference is simply a preliminary step towards obtaining a default judgment ( Home Sav. of Am., F.A. v. Gkanios, 230 AD2d 770, 646 NYS2d 530 [2d Dept 1996]). Without an affidavit by the plaintiff regarding the facts constituting the claim and amounts due or, in the alternative, an affidavit by the plaintiff that its agent has the authority to set forth such facts and amounts due, the statutory requirements are not satisfied. In the absence of either a proper affidavit by the party or a complaint verified by the party, not merely by an attorney with no personal knowledge, the entry of judgment by default is erroneous ( see, Peniston v Epstein, 10 AD3d 450, 780 NYS2d 919 [2d Dept 2004]; Grainger v Wright, 274 AD2d 549, 713 NYS2d 182 [2d Dept 2000]: Finnegan v. Sheahan, 269 AD2d 491, 703 NYS2d 734 [2d Dept 2000]; Hazim v. Winter, 234 AD2d 422, 651 NYS2d 149 [2d Dept 1996]). In the absence of either a verified complaint or a proper affidavit by the party or its authorized agent, the entry of judgment by default is erroneous ( see Mullins v DiLorenzo, 199 AD2d 218; 606 NYS2d 161 [1st Dept 1993]; Hazim v. Winter, 234 AD2d 422, 651 NYS2d 149 [2d Dept 1996]; Finnegan v. Sheahan, 269 AD2d 491, 703 NYS2d 734 [2d Dept 2000]). Therefore, the application for an order of reference is denied.
With regard to a mortgage assignment which is executed after the commencement of an action and which states that it is effective as of a date preceding the commencement date, such assignment is valid where the defaulting defendant appears but fails to interpose an answer or file a timely pre-answer motion that asserts the defense of standing, thereby waiving such defense pursuant to CPLR 3211[e] (see. HSBC Bank, USA v Dammond, 59 AD3d 679, 875 NYS2d 490 1445 [2d Dept 2009]). However, it remains settled that foreclosure of a mortgage may not be brought by one who has no title to it and absent transfer of the debt, the assignment of the mortgage is a nullity ( Kluge v Fugazy, 145 AD2d 537, 536 NYS2d 92 [2d Dept 1988]). Furthermore, a plaintiff has no foundation in law or fact to foreclose upon a mortgage in which the plaintiff has no legal or equitable interest ( Katz v East-Ville Realty Co., 249 AD2d 243, 672 NYS2d 308 [1st Dept 1998]). If an assignment is in writing, the execution date is generally controlling and a written assignment claiming an earlier effective date is deficient, unless it is accompanied by proof that the physical delivery of the note and mortgage was, in fact, previously effectuated ( see, Bankers Trust Co. v Hoovis, 263 AD2d 937, 938, 694 NYS2d 245). Plaintiff's failure to submit proper proof, including an affidavit from one with personal knowledge, that the plaintiff is the holder of the consolidated extended and modified note and mortgage dated December 12, 2001. requires denial of the plaintiff's application for an order of reference.
Concerning default notices, when a mortgage agreement requires that, prior to acceleration of the mortgage, a lender must serve the borrower with a notice to cure a default, mere conclusory assertions from one without personal knowledge, including those contained in an attorney's affirmation, are insufficient to establish that the lender complied with such pre-acceleration requirements ( see, e.g., Norwest Bank Minnesota, N.A. v Sabloff, 297 AD2d 722, 747 NYS2d 559 [2d Dept 2002]; CAB Associates v State of New York, 14 AD3d 639, 789 NYS2d 311 [2d Dept 2005]). Failure of the plaintiff to submit proper proof of such compliance requires denial of the relief requested by the plaintiff ( id).
For foreclosure actions commenced on or after February 1, 2007, RPAPL § 1303(1) requires that the "foreclosing party in a mortgage foreclosure action, which involves residential real property consisting of owner-occupied one-to-four-family dwellings shall provide notice to the mortgagor in accordance with the provisions of this section with regard to information and assistance about the foreclosure process." Pursuant to RPAPL 1303(2), the "notice required by this section shall be delivered with the summons and complaint to commence a foreclosure action . . . [and] shall be in bold, fourteen-point type and shall be printed on colored paper that is other than the color of the summons and complaint, and the title of the notice shall be in bold, twenty-point type [and] shall be on its own page." The specific statutorily required language of the notice is set forth in RPAPL § 1303(3), which was amended on August 5, 2008 to require additional language for actions commenced on or after September 1, 2008.
The plaintiffs summons and complaint and notice of pendency were filed with the County Clerk on or after February 1, 2007, thereby requiring compliance with the notice provisions set forth in RPAPL § 1303 Plaintiff has failed to submit proper evidentiary proof, including an attorney's affirmation, upon which the Court may conclude that the requirements of RPAPL § 1303(2) have been satisfied, specifically regarding the content, type size and paper color of the notice. Merely annexing a copy of a purportedly compliant notice does not provide a sufficient basis upon which the Court may conclude as a matter of law that the plaintiff has complied with the substantive and procedural requirements of the statute. Since the plaintiff has failed to establish compliance with the notice requirements of RPAPL § 1303 its application for an order of reference must be denied.
To provide additional protection to homeowners in foreclosure, the legislature enacted RPAPL § 1320 to require a mortgagee to provide additional notice to the mortgagor-homeowner that a foreclosure action has been commenced. In this regard, effective August 1, 2007 for foreclosure actions involving residential property containing not more than three units, RPAPL § 1320 imposes a special summons requirement, in addition to the usual summons requirements. The additional notice requirement, which must be in boldface type, provides an explicit warning to defendant-mortgagors, that they are in danger of losing their home and having a default judgment entered against them if they fail to respond to the summons by serving an answer upon the mortgagee-plaintiff's attorney and by filing an answer with the court. The notice also informs defendant-homeowners that sending a payment to the mortgage company will not stop the foreclosure action, and advises them to speak to an attorney or go to the court for further information on how to answer the summons. The exact form and language of the required notice are specified in the statute. Plaintiff's failure to submit an attorney's affirmation of compliance with the special summons requirements of RPAPL § 1320, and proof of proper service of the special summons, requires denial of the plaintiff's application for an order of reference.
Accordingly, the motion must be denied on the grounds set forth above.