NY Appeals Court Dismisses Lender's Lawsuit; Says Bank Failed To Strictly Comply With State Anti-F'closure Rescue Ripoff Law When Filing Legal Action

In Brooklyn, New York, The New York Law Journal reports:

• Failure to give proper notice to a homeowner under New York's foreclosure fraud law is a defense that can be raised at any time, a Brooklyn appeals court has ruled in a decision of first impression at the state appellate level.

• In dismissing a foreclosure suit against homeowner Alan Silver, a panel of the Appellate Division, 2nd Department, held that the lender seeking to foreclose had the burden of showing strict compliance with the state's Home Equity Theft Prevention Act.

• The act, codified in Real Property Law §265-a, requires that a homeowner be served with a foreclosure notice on a separate, colored page with a "bold, twenty-point type" title and "bold, fourteen-point type" in addition to a summons and complaint. Enacted in 2007, the law aims to curb foreclosure-related schemes that encourage homeowners in financial distress to sign over their houses to buyers who promise to pay off the debt but disappear once they have the title.

• In reversing Supreme Court Justice Karen V. Murphy in Nassau County, N.Y., a four-judge appeals panel in First National Bank of Chicago v. Silver, 18539/07, disagreed with the bank's argument that complying with the statutory notice requirement was a "red herring." "We hold that this is a condition precedent which is the plaintiff's burden to meet, and which does not have to be raised as an affirmative defense in the answer," Justice Anita R. Florio wrote for the panel. Justices Mark C. Dillon, Ruth C. Balkin and John M. Leventhal joined the opinion.

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• In reversing the lower court, Florio observed that lower courts had consistently interpreted the notice provision "as a mandatory condition" that required the foreclosing party to show "compliance therewith and, if it fails to demonstrate such compliance, the foreclosure action will be dismissed."(1)

For more, see N.Y. Court Places Burden on Bank of Showing Notice of Foreclosure.

For the court ruling, see First Natl. Bank of Chicago v Silver, 2010 NY Slip Op 02511 (NY App. Div. 2nd Dept., March 23, 2010).

Go here for the standard, statutorily-required foreclosure notice required by New York's Home Equity Theft Prevention Act that the lender failed to serve on the homeowner when initiating this foreclosure action and which proved to be its undoing.

(1) Reportedly, Jeffrey D. Buss of Smith, Buss & Jacobs in Yonkers, N.Y., represented Silver and his wife pro bono. In an interview, Buss said that "it was a real pleasure" to inform his clients, a couple in their 80s, that the case had been dismissed, the story states. Buss said the bank could re-file the case but would have difficulty proving standing, according to the story.