USFN is proud to announce its filing of an amicus brief in the United States Supreme Court supporting the petition for a writ of certiorari in US Bank v. Fox, a case involving constitutional questions about the retroactive application of FAPA in NY. As a supplement to the constitutional arguments raised in the petition, USFN’s amicus brief examines the wide body of case law that FAPA disrupts, the unusual way the legislation came about, and its far-reaching harmful effects.

USFN would like to extend a heartfelt thank you to Rich Haber, Esq, and Brian Scibetta, Esq. of McCalla RaymerLeibert Pierce LLP for their exceptional work drafting on behalf of our organization. Their insight, precision, and commitment helped ensure our industry’s voice was clearly and powerfully represented. We’re proud to stand alongside such outstanding advocates.

Click here for a copy of the brief.

Florida Appellate Court Finds Lenders Must Administer Probate Proceedings in Order to Obtain a Valid Foreclosure Judgment

By Adam Diaz, Esq.

Diaz Anselmo & Associates, PA*

USFN Member (FL, IL, IN, KY, OH, WI)

Florida’s 4th Appellate District reversed a foreclosure judgment for a lender with a groundbreaking decision creating new required steps to foreclose the interest of a deceased party. The Court’s decision in Desbrunes v. US Bank Nat’l Ass’n, as Tr. for Structured Asset Sec. Corp. Mortgage Pass-Through Certificates, Series 2006-AM1, 2024 WL 591432, at *1 (Fla. 4th DCA Feb. 14, 2024) represents a detrimental break in Florida jurisprudence that has governed foreclosure proceedings for decades.

The facts of Desbrunes are like many typical foreclosure proceedings involving a deceased party. US Bank National Association, as Trustee for Structured Asset Securities Corp. Mortgage Pass Through Certificates, Series 2006-AM1 (“Plaintiff”) filed a one count action for foreclosure naming Francois Desbrunes as a defendant. Desbrunes actively litigated the case, but ultimately passed away before the entry of the judgment, wherein his counsel filed a suggestion of death.

The plaintiff sought to Amend the Complaint. The purpose of the amendment was to drop Desbrunes as a party, add known and unknown heirs, as well as appoint a Guardian Ad Litem. This is the standard process in Florida.

However, Desbrunes’ counsel, who was no longer representing any party, filed a Motion to Abate pursuant Fla. R. Civ. P. 1.260(a), requesting the Court require the plaintiff to administer a probate in order to continue the action. The Trial Court denied the motion because Desbrunes’ counsel was not a party to the case, but did not rule on whether a probate is a required task to obtain a valid judgment.

The Trial Court granted judgment in favor of the plaintiff, and an heir, Ronald Desbrunes, appealed the ruling. The heir argued on appeal the denial of the Motion to Abate should have been granted. The 4th District Court of Appeal only considered the arguments regarding 1.260. The Court held that the plaintiff improperly substituted Desbrunes with the heirs pursuant to Rule 1.260(a) despite the fact the plaintiff never moved for substitution under the Rule. The 4th held that only an estate can be substituted in for a deceased party citing non-foreclosure cases involving money judgments.

The 4th went further to find any judgment where a probate was not opened would be a “nullity.” This language causes the most concern as it would open completed cases to attack. Due to the severity of this ruling a rehearing was filed.

The opinion failed to account for Florida Probate law which governs the transfer of title upon a title holder’s death. Under Florida Law when a property is homestead, the property will pass entirely outside of the estate. See Buettner v. Fass, 21 So. 3d 14, (Fla. 4^th DCA 2009). This transfer is codified within Florida Statutes s. 732.401, 731.102, 732.103. Therefore, a deceased borrower’s estate never holds title and would not be a necessary party to the foreclosure. See Citibank, N.A. v. Villanueva, 174 So. 3d 612, 613 (Fla. 4th DCA 2015) (“The fee simple title holder is an indispensable party in an action to foreclose a mortgage on property.”) (citations omitted)

The Firm, on behalf of USFN, also filed an Amicus Curie brief, along with ALFN and Legal League. The purpose of the Amici was to bring to the attention of the Court that if the opinion is not revised, or reversed, it will significantly impact the mortgage industry, and cause severe consequences this Court may not have anticipated or intended.

Currently, the rehearing is under review with the Court.

Copyright © 2024 USFN

USFNews - April 3

* Denotes firm is a 2023 USFN Award of Excellence recipient.

by Megan McNamara, Esq.

and Hillary Prada, Esq.

Berkman, Henoch, Peterson, Peddy & Fenchel, PC

USFN Member (NY)

On February 14, 2023, the New York Court of Appeals issued its much-anticipated ruling on Bank of America v. Kessler (N.Y. Feb. 14, 2023), wherein the Court reversed the Second Department and held that the inclusion of additional information with the RPAPL 1304 notice did not invalidate the notice. This ruling constitutes a significant departure from the prior ruling of the Second Department and will have a dramatic effect on New York foreclosure matters.

In New York, the 90-day pre-foreclosure notice is governed by RPAPL 1304 and is a condition precedent to the commencement of a foreclosure action. Further, the failure to demonstrate strict compliance with RPAPL 1304 is a basis for dismissal of a foreclosure action. As you may recall, on December 15, 2021, the Second Department issued its decision in Bank of America, N.A. v. Kessler, 202 A.D.3d 10, 160 N.Y.S.3d 277 (2d Dept. 2021), holding that at the “inclusion of any material in the separate envelope sent to the borrower under RPAPL 1304 that is not expressly delineated in these provisions constitutes a violation of the separate envelope requirement of RPAPL 1304(2).” As such, any additional materials included in the envelope with the notice as well as any extraneous information on the notice itself was deemed to not be in compliance with RPAPL 1304.

The Second Department’s holding in Kessler had an immediate and detrimental impact on lenders as it spurred a host of additional decisions issued by the Second Department as well as the lower courts. Specifically, Kessler was responsible for the dismissal of countless cases, many of which were already stalled for almost two years as a result of the COVID-19 pandemic.

The Court of Appeals specifically looked to the intent of RPAPL 1304, which was in part to enable communication between the borrower and lender, prevent unnecessary foreclosures, and inform borrowers of their rights. The Court of Appeals held that the “accurate statements that further the underlying statutory purpose of providing information to borrowers that is or may become relevant to avoiding foreclosure do not constitute an ‘other notice.’” Additionally, the Court noted that a bright-line rule could conflict with federal law, such as the FDCPA mini-Miranda language and bankruptcy protection disclaimer.

Specifically, in rejecting the Second Department’s “bright-line rule,” the Court of Appeals held that “to the extent that there is any ambiguity about how to interpret the statute, application of a bright-line rule would contravene the legislative purpose. RPAPL 1304 is a remedial statute that should be read broadly to help borrowers avoid foreclosure.” In evaluating its decision, the Court held that unlike its ruling in Freedom Mortgage Corp. v. Engel, 37 N.Y.3d 1, 169 N.E.3d 912 (2021), a bright-line rule would not be appropriate as “[d]etermining whether additional language in a section 1304 notice is permissible requires no examination of intent or extrinsic evidence, but rather an objective facial determination of the language’s relevance, truth, falsity, or potential to mislead or confuse.” The Court rather relied on the “workable rule” standard as set forth in CIT Bank v. Schiffman, 36 N.Y.3d 550, 168 N.E.3d 1138 (2021). The Court noted in its decision that a bright-line rule would defeat the intent of the statute and would punish lenders who are attempting to comply with federal disclosure requirements or are providing additional information intended to further assist borrowers to avoid foreclosure.

On December 30, 2022, the New York Foreclosure Abuse Prevention Act (“FAPA”) was enacted as a direct result of the Court of Appeals decision in Engel. The intent of FAPA was to render the holding with respect to acceleration in Engel ineffective and ultimately moot. FAPA has the potential to be extremely detrimental to both pending and future foreclosure actions and is likely to face numerous challenges to its enforceability from lenders seeking to foreclose. As a result of the legislature’s immediate response to the Engel decision, it is possible there will be a similar action taken in response to the Court of Appeals holding in Kessler. The Court of Appeals even noted in its opinion in Kessler that “Engel was recently legislatively overruled.”

It is expected that the Court of Appeals decision in Kessler will have a dramatic impact on pending foreclosure actions. Specifically, in cases that have motions and appeals pending premised on the Second Department’s holding, lenders can reasonably expect a favorable ruling as long as the additional language or information included within the notice was not false, misleading, or unrelated. Additionally, to prevent any potential ramifications of FAPA, lenders are likely to appeal or move to vacate dismissals that were premised on the Second Department’s holding. This decision is certainly a welcome relief for many lenders who were faced with the difficult decision as to whether to recommence due to issues with the pre-foreclosure notice, or worse, had cases dismissed.

USFN is extremely proud to have participated in the Kessler case as an amicus and is gratified to see arguments it advanced be accepted by the Court. We look forward to keeping you apprised with the impact of the Kessler decision in New York.

Read the full Court of Appeals decision in Kessler here.

Copyright @2023

USFNews - Feb. 22

By Sonia J. Buck, Esq.

Brock & Scott,PLLC *

USFN Member (AL, CT, FL, GA, KY, ME, MD, MA, MI, NH, NJ, NC, OH, PA, RI, SC, TN, VA)

The Maine Law Court has requested amici briefs in an appeal filed by J.P. Morgan Mortgage Acquisition Corp., regarding key issues in Maine foreclosure law: strict statutory compliance with Maine’s demand letter statute and the res judicata effect of a judgment for a defendant based on a finding that a mortgagee’s demand letter failed to strictly comply.

The Oxford County (Maine) Superior Court ruled that J.P. Morgan failed to comply with 14 M.R.S.A. § 6111 (Maine’s comprehensive and unforgiving foreclosure demand letter statute), based on a discrepancy with respect to the total amount due. J.P. Morgan Mortgage Acquisition Corp., v. Camille J. Moulton, SOPDC-RE-19-02 (November 24, 2021, J. Tammy Hamm-Thompson, at page 7). Not only did the Superior Court find for the defendant homeowner, but the Court’s opinion further ruled that res judicata forever precluded a second foreclosure. Id. at pg. 9.  Going further, the Superior Court specifically ordered that judgment “shall enter for the Defendant, declaring that she holds title to the real property at issue, unencumbered by the mortgage and promissory note.” Id.

The Court relied on prior Maine case law that has resulted in “free homes” to defendants for even technical or minor noncompliance by the plaintiff with respect to the demand letter. That prior case law, most notably, FNMA v. Deschaine, 2017 ME 90, and Pushard v. Bank of America, 2017 ME 230, now has the potential to be overturned.

Although the request for the amici briefs centers around the preclusive effect of a judgment for the defendant based on the demand letter statute, it remains to be seen whether the Law Court will also provide guidance in Moulton as to the level of scrutiny the itemization and other components of a Maine demand letter will be subject to going forward.

Will minor defects in a demand letter render a note and a mortgage forever unenforceable? Stay tuned.

Copyright @2022

USFN e-Update