CIT Bank, N.A. v. Neris

Background

CIT Bank brought a residential mortgage-foreclosure action against Ramon Neris under New York’s Real Property Actions and Proceedings Law. The court held a bench trial on February 28, 2022, and then issued findings of fact and conclusions of law under Rule 52(a) of the Federal Rules of Civil Procedure.

In December 2016, CIT Bank and Neris entered into a loan-modification agreement. Neris stopped making payments by June 1, 2017. CIT Bank’s witnesses testified that Neris owed $613,452.36 in principal, $62,042.85 in interest through February 28, 2022, $38,452.64 in escrow advances, and $35.24 in interest per day.

Foreclosure Claim

Under New York law, a mortgage lender seeking foreclosure must show the mortgage, the unpaid note, and the borrower’s default. A lender may establish its right to bring the case by showing a written assignment or physical possession of the note.

The court found that CIT Bank had established these requirements. CIT Bank submitted the original note and mortgage, evidence of the mortgage’s assignment, testimony that it physically possessed the note after the merger with OneWest, and records showing Neris’s default and the resulting amounts owed. The court therefore found that CIT Bank had established its initial case for foreclosure.

Statutory Notice Requirement

New York law requires a mortgage lender, assignee, or loan servicer to notify the borrower at least 90 days before starting a foreclosure action. The notice must contain specified information and generally must be sent in a separate envelope from other mailings. Compliance with this requirement is a condition that must be satisfied before a foreclosure action may begin.

CIT Bank presented the 90-day notice, records identifying it as mailed to Neris by certified and first-class mail on September 26, 2017, and testimony describing the regular mailing procedures used by CIT Bank and its vendor, Covius. The court found that this evidence established a presumption that the notice had been properly mailed.

Neris argued that the notice violated the separate-envelope rule because it also stated that the communication was from a debt collector attempting to collect a debt and included a statement concerning bankruptcy. He relied on a New York appellate decision adopting a strict interpretation under which the envelope could contain only the information specifically required by the state notice statute.

The court declined to follow that interpretation. It reasoned that the federal Fair Debt Collection Practices Act requires a debt collector’s initial and later communications to state that the collector is attempting to collect a debt and that information obtained will be used for that purpose. The court concluded that the New York Court of Appeals would not adopt a state-law interpretation that conflicted with this federal requirement. Because the 90-day notice contained the required state-law language and CIT Bank established the presumption of proper mailing, the court found that CIT Bank satisfied the statutory condition before filing the foreclosure action.

Disposition

The court ordered that CIT Bank was entitled to judgment of foreclosure for the amounts due under the note, mortgage, and loan-modification agreement. It directed that the property be sold to satisfy Neris’s outstanding debt. The clerk was directed to enter judgment for CIT Bank for $613,452.36 in unpaid principal, $62,042.85 in interest from May 1, 2017, through February 28, 2022, $38,452.64 in unpaid escrow advances, and $35.24 per day in additional interest from February 29, 2022, through the date judgment was entered. The court also ordered CIT Bank to file its trial exhibits on the public docket within ten days and directed the clerk to terminate pending motions and close the case.