On February 14, 2023, the New York Court of Appeals issued a ruling in Bank of America, NA v. Kessler, holding that the inclusion of concise and relevant additional information does not void an otherwise proper 90-day preforeclosure notice issued pursuant to New York Real Property Actions and Proceedings Law § 1304. The 90-day preforeclosure notice is a prerequisite to filing a foreclosure action against a borrower’s primary residence.

This decision reverses the Appellate Division, Second Department's 2021 decision that held the inclusion of any additional information in a 90-day notice that is not expressly delineated in the statute constitutes a violation of the statute’s separate envelope requirement and made the 90-day notice and any subsequent foreclosure action void. In Kessler, the bank included in the 90-day notice, in addition to the statutorily required language, additional information about the communication being from a debt collector, borrower’s rights under bankruptcy law, and additional resources should the borrower be a member of the military. The trial court dismissed the foreclosure action on the basis that this additional language violated RPAPL § 1304. The Appellate Division, Second Department affirmed the lower court, adopting a so-called “bright line rule” which voids 90-day preforeclosure notices which contain any information not expressly provided for in the statute.

In reversing the Second Department, the Court of Appeals held that including additional language in the 90-day pre-foreclosure notice, such as bankruptcy, debt collection and service member disclosures, is permissible and does not void the notice. The only caveat is that the additional information must not be false or misleading. The Court of Appeals noted that it must “interpret a statute so as to avoid an unreasonable or absurd application of the law.”

Lenders Should Review Dismissed Foreclosure Actions

In light of the Court of Appeals' decision, financial institutions, lenders and servicers now have a basis to review actions that were dismissed based on the Second Department's decision and potentially seek leave to reargue or renew based on a misapprehension of the law or a change in the law.

The decision will not only allow many foreclosing plaintiffs to proceed with foreclosure without reissuing 90-day notices, but it will also directly affect many pending motions to dismiss and motions for summary judgment that were based upon challenges to the inclusion of additional disclosures in the 90-day notices that are no longer viable.

Thus, financial institutions, lenders and servicers should review actions that were dismissed based on the Second Department's prior decision in Kessler to determine whether they may be able to restore such actions.