RPAPL 1304 - Are Mortgagors "Borrowers"?

New York's pre-RPAPL Section 1304 requires lenders to serve a notice to each "borrower" at least 90 days prior to the commencement of a foreclosure. Failure to do so will cause the foreclosure to be dismissed, as the requirement is considered to be a condition precedent to the commencement of the foreclosure. New York’s statute, however, does not define a “borrower" or distinguish between the parties who execute the note and those who execute the mortgage. 
  
When lenders make a loan to only one partner in a marriage, usually based upon the income and credit of each, only that partner executes the note, while both must execute the mortgage (assuming they own the property together). Should they later default, the lender must decide whether to send the required 90-day notice to those who signed only the mortgage, in addition to those who signed the note.

In Aurora Loan Services v. Steven Weisblum, 85 AD 3rd 95, only the husband signed the note, while both husband and wife executed the mortgage. Since the bank sent the notice only to the husband and not to the wife, the Appellate Division determined that it had failed to comply with RPAPL 1304. Importantly, the court determined that the wife, Annie Weisblum, was considered a borrower, even though she did not sign the note, largely because the loan was later modified and a CEMA (Consolidation Extension and Modification Agreement) that expressly referred to her as "borrower" was executed by all parties. Thus, when the mortgage document, whether it be the original note or a subsequent CEMA, refers to a party as a borrower, the courts will require that this party is served with a proper 1304 notice. 
 
Where there is no CEMA subsequently executed, however, a different conclusion may be reached.  

Recently, in US Bank v. Hasan 2014 NY Slip Op 50115(U), decided on February 1, 2014, in Supreme Court, Kings County, Judge Noach Dear, one of the most pro-debtor judges in New York, held that the lender was not required to serve the 90-day notice on a party who executed the mortgage but did not sign the note, because the party was not a "borrower" within the meaning of 1304.
  
It is important to know that if you are facing a potential Statute of Limitations expiration, and a mortgagor has not been served with the 90-day notice, the statutory period within which one must commence the action to satisfy, the Statute of Limitations is tolled for 90 days as a result of the stay imposed by RPAPL 1304, so you will have the additional time needed to comply.

Please feel free to contact me with questions or comments at peter.roach@roachlawfirm.com.

Peter Roach

Peter T. Roach & Associates, P.C.

peter.roach@roachlawfirm.com