NY Foreclosure Notice Ruling Is a Win for Lenders


On Feb. 14, New York's highest court, the Court of Appeals, issued a ruling in Bank of America NA v. Kessler,[1] reversing the Appellate Division, Second Department's 2021 decision.[2]

Specifically, the Court of Appeals held that including additional information, such as bankruptcy disclosures, debt collection disclosures and service members' disclosures, in a 90-day pre-foreclosure notice is permissible and does not void such notice pursuant to Section 1304 of the New York Real Property Actions and Proceedings Law.

As such, a 90-day notice including such disclosures does not invalidate the subsequently filed foreclosure action. Notably, the Court of Appeals held that Section 1304 does not preclude such additional language, and such language does not violate or frustrate the legislative purpose of Section 1304.

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.

Summary of Facts and Background

In September 2013, the borrower, Andrew Kessler, defaulted on his loan. Thereafter, Bank of America sent a 90-day pre-foreclosure notice to Kessler pursuant to Section 1304. The last page of the 90-day notice included additional language, which is not required by Section 1304. Specifically, the 90-day notice contained the following important disclosures:

  • A statement advising that the notice was being mailed by a debt collector pursuant to the Fair Debt Collection Practices Act;
  • A statement advising that if the recipient of the notice is a debtor in bankruptcy or a debtor previously discharged in bankruptcy, the notice is for informational purposes only; and
  • A statement regarding the rights of borrowers and their spouses in the military who are given significant protections from foreclosure under the Servicemembers Civil Relief Act.

Bank of America commenced a foreclosure action against Kessler and then moved for summary judgment in 2017. Kessler cross-moved to dismiss the action, alleging that the bankruptcy disclosure and the SCRA disclosure violated the separate envelope provision in Section 1304(2), which states that the 90-day notice must be "sent by the lender, assignee or mortgage loan servicer in a separate envelope from any other mailing or notice."

The statute also requires that specific language be included in the 90-day notice, which is a condition precedent to commencing a foreclosure action. The Westchester County Supreme Court granted Kessler's cross-motion and dismissed the foreclosure complaint. Bank of America appealed.

Second Department's Decision

On appeal, the Second Department affirmed the lower court's decision. The Second Department held that the

inclusion of any material in the separate envelope sent to the borrower under RPAPL § 1304 that is not expressly delineated in [the statute] constitutes a violation of the separate envelope requirement of RPAPL 1304(2).

Further, the Second Department held that it was irrelevant whether the additional material was on the same page as the notice or separately paginated.

The dissent noted that the additional disclosures did not violate the content provisions of Section 1304 or frustrate the statute's purpose or intent and found that the statute does not expressly prohibit the additional disclosures. Rather, the statute only provides the language that must be included. Bank of America sought leave to appeal to the Court of Appeals, which the Second Department granted and certified the question of whether its order was proper.

The Court of Appeals Decision

The Court of Appeals heard oral argument on Jan. 4, and issued its decision on Feb. 14.

In an opinion penned by Judge Rowan D. Wilson, the Court of Appeals reversed the Second Department's decision and held that the "inclusion of concise and relevant additional information" did not void an otherwise proper notice to Kessler sent pursuant to Section 1304.

First, the Court of Appeals discussed the legislative history of Section 1304 which was to

address the pre-foreclosure "lack of communication" between borrower and lender, which "often leads to needless foreclosure proceedings in cases where a foreclosure alternative might otherwise have been possible."[3]

The court added that Section 1304 was not intended to extinguish a lender's right to foreclose.

Second, the court addressed the additional disclosures included in the 90-cay notice admittedly mailed to Kessler and pointed out that the inclusion of the initial debt collector disclosure statement under the FDCPA was not challenged by Kessler.

Thus, although the FDCPA disclosure is not part of the required statutory language, the fact that Kessler did not challenge it underlines the fact that some variation in language can be made by a lender and not all deviations in statutory language automatically void or invalidate the notice.[4]

Third, the Court of Appeals explained that the operative statutory language contains two requirements:

(1) The notice "shall include" the specified language and information; and (2) the notice must be sent "In a separate envelope from any other mailing or notice."[5]

Specifically, the first requirement "does not say that the notice must state only the cautionary language set forth in the statute, but rather that the notice 'shall include' that language."[6]

Further, the Court of Appeals reasoned that the "word 'include' suggests that more can be added to the notice."[7]

With respect to the mandatory language, the Court of Appeals indicated that

the notice indisputably contains all of the mandatory language set forth in the version of section 1304(1) in effect at the time Bank of America commenced this action. The statute says that the notice 'shall include' certain information; the notice here does so.[8]

Next, the Court of Appeals focused on the constraint imposed by the requirement that the envelope not contain any other mailing or notice. Notably, the Court of Appeals recognized that applying a bright-line rule here would require the use of a very narrow definition of the word "other" and would lead to nonsensical results.[9]

Moreover, "[p]rohibiting lenders from concisely informing borrowers of additional rights they may have to avoid foreclosure is manifestly at odds with" the legislative purpose of Section 1304, which is to help borrowers avoid foreclosure.[10]

Thus, the Court of Appeals held that "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.' ... That language serves the express statutory purpose of providing borrowers with information that may help them avoid foreclosure during a 90-day window established by that statute."[11]

Finally, the Court of Appeals held that prohibiting the inclusion of debt collection disclosures or bankruptcy disclosures could conflict with disclosure requirements under federal law.[12]

The Court of Appeals ultimately held that the inclusion of additional information in the 90-day notice "may help borrowers avoid foreclosure and is not false or misleading."[13]

As a result, the Court of Appeals reversed the Second Department's decision with costs, denying Kessler's motion for summary judgment dismissing the complaint, and granting Bank of America's motion for summary judgment.[14]


This decision is a significant win for the financial services industry.

As a result of the Second Department's prior decision, trial courts and appellate courts began dismissing foreclosure actions for failure to strictly comply with the separate envelope rule and foreclosing plaintiffs were forced to discontinue pending actions and delay initiating new actions while they reissued 90-day notices.

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.

Finally, 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.

"NY Foreclosure Notice Ruling Is a Win for Lenders," by Diana M. Eng and Alina Levi was published in Law360 on February 16, 2023.

[1] Bank of America NA v. Kessler, No. 4, 2023 WL 1972994, at *1, (N.Y. Feb. 14, 2023).

[2] Bank of America NA v. Kessler, 202 A.D.3d 10, 160 N.Y.S.3d 277 (2d Dept. 2021).

[3] Id. at p. 3.

[4] Id. at p. 4, fn.3.

[5] Id. at p. 6.

[6] Id.

[7] Id.

[8] Id.

[9] Id. at pp. 7-8.

[10] Id. at p. 8.

[11] Id. at p. 8.

[12] See id. at pp. 9-10.

[13] Id. at p. 11.

[14] Id. at p. 11-12.