The Consequences of Imperfect Foreclosure Affirmations

An administrative order issued by the state's chief judge requires counsel for a foreclosing mortgagee to prepare an affirmation establishing the factual accuracy of the documents on which the foreclosure action is based. When the mortgagor has conceded default on the mortgage, what perceived deficiencies in the affirmation preclude issuance of an order of reference and a judgment of foreclosure and sale? The First Department recently faced that issue in Bank of America v. Brannon, NYLJ 11/1/17, p. 22., col. 1, and the issue has also provoked litigation in the Second Department. The import of those cases appears to be that when the mortgagee substantially complies with the administrative order, the mortgagee will be entitled to proceed with the foreclosure.

History and Content of the Administrative Order

In response to allegations of widespread “robosigning” of mortgage documents, former Chief Judge Jonathan Lippman issued Administrative Order 548/10 in 2010. The original order was superseded by Administrative Order 431/11, which essentially requires preparation of two affirmations in any residential foreclosure action. Counsel for the foreclosing mortgagee must prepare an affirmation establishing that he or she communicated with a representative of the mortgagee, and that the representative reviewed the documents related to the mortgage for factual accuracy and confirmed the factual accuracy of the allegations in the complaint.

The Administrative Order also provides that the mortgagee's representative “may” prepare a form affirmation. That affirmation represents that the signatory has reviewed the summons and complaint for accuracy of the plaintiff's identity, and accuracy of the defaults and the amounts claimed to be due the plaintiff.

The Brannon Case

In January 2007, General Electric lent money to Brannon, secured by a mortgage. In September of that year, the mortgage servicer served a notice of default on Brannon. In November, GE assigned the mortgage to Bank of America. Earlier that same month, Bank of America brought a foreclosure action. In 2008, Bank of America moved for summary judgment, supported by affirmations from the bank's servicer. Brannon responded by noting that she had been in touch with the servicer about a loan modification, but did not dispute the allegations of default. The court granted Bank of America's summary judgment motion. Then, in 2011, after a settlement conference, the court released the matter to the foreclosure part. Meanwhile, in 2009, Bank of America assigned the mortgage to IFS.

In April 2014, Bank of America moved to vacate the 2008 grant of summary judgment because of defects in the 2008 affirmations. On three separate occasions from April 2014 through February 2015, Bank of America moved for summary judgment, supported by three separate affirmations prepared by Michael Mattera, a managing member of IFS. Brannon opposed the first summary judgment motion on the ground that Mattera was an employee of IFS, not Bank of America, and therefore could not affirm the relevant facts. Brannon opposed the two subsequent summary judgment motions on grounds unrelated to the affirmation, contending with respect to one motion or the other that the assignment to IFS was invalid, that IFS had failed to provide an opportunity for loan modification, and that she had been improperly served. Supreme Court denied all three summary judgment motions.

With respect to the final motion, Supreme Court held that the initial false affirmation prepared by affirmations from the loan servicer could not be cured by a subsequent affirmation. The court also held that even if cure were possible, the Mattera affirmation was defective because it failed to indicate the state and county in which notarization had taken place. The bank appealed from the final denial of summary judgment.

A divided First Department reversed, awarded summary judgment to the bank, and remanded for appointment of a referee to determine the amount due on the mortgage. In an opinion by Justice Richard Andrias, the court's 4-1 majority relied on the two affirmations submitted on the bank's behalf. Counsel's affirmation asserted that counsel had relied on communications with Mattera, who had confirmed the factual accuracy of the allegations set forth in the complaint, as well as counsel's own inspection and reasonable inquiry.

Mattera's affirmation certified that he had reviewed Bank of America's records and concluded that all required notices of default had been sent, and that any allegation of timely payment after default was not substantiated by those records. Because Brannon's default was not in dispute, the court's majority held that the bank was entitled to summary judgment, and to an order of reference.

Justice Ellen Gesmer dissented in part. She agreed that the bank was entitled to summary judgment, but concluded that the bank was not entitled to an order of reference because of what she regarded as “substantial” deficiencies in Mattera's affirmation. She conceded that the bank could rely on Brannon's own answer, in which she admitted the amount she owed, to establish its right to summary judgment. Nevertheless, she argued that the court should refuse to issue an order of reference and a judgment of foreclosure and sale when the bank's affirmation does not comply with Administrative Order 431/11. She then focused on two perceived defects in Mattera's affirmation. First, she noted that the affidavit was prepared as if Mattera was a representative of Bank of America, when in fact he was a managing member of Bank of America's assignee. Second, Mattera never claimed to have reviewed the records of GE, the original mortgage lender.

Justice Gesmer suggested that denying the bank an order of reference would be consistent with existing Second Department practice. In fact, however, the Second Department cases she cited presented facts significantly different from those in the Brannon case. In one of the cases, Wells Fargo Bank, N.A. v. Hudson, 98 A.D.3d 576, the mortgagee had filed no affirmation at all. In the second case, Downey Savings and Loan Association v. Trujillo, 142 A.D.3d 1040, the affirmation included a demonstrably false statement of fact — a representation by counsel that he had communicated with the lender when, on the date of the supposed communication, the lender had become defunct and had assigned the mortgage. Moreover, even in the Downey case, the court denied the order of reference without prejudice to renew.

Conclusion

In cases like Bank of America v. Brannon, where the mortgagee has substantially complied with the Administrative Order, and where the borrower's default is not in dispute, the First Department appears to have recognized that there is little reason to delay the inevitable foreclosure.

*****
Stewart E. Sterk, Mack Professor of Law at Benjamin Cardozo School of Law, is the Editor-in-Chief of New York Real Estate Law Reporter.

An administrative order issued by the state's chief judge requires counsel for a foreclosing mortgagee to prepare an affirmation establishing the factual accuracy of the documents on which the foreclosure action is based. When the mortgagor has conceded default on the mortgage, what perceived deficiencies in the affirmation preclude issuance of an order of reference and a judgment of foreclosure and sale? The First Department recently faced that issue in Bank of America v. Brannon, NYLJ 11/1/17, p. 22., col. 1, and the issue has also provoked litigation in the Second Department. The import of those cases appears to be that when the mortgagee substantially complies with the administrative order, the mortgagee will be entitled to proceed with the foreclosure.

History and Content of the Administrative Order

In response to allegations of widespread “robosigning” of mortgage documents, former Chief Judge Jonathan Lippman issued Administrative Order 548/10 in 2010. The original order was superseded by Administrative Order 431/11, which essentially requires preparation of two affirmations in any residential foreclosure action. Counsel for the foreclosing mortgagee must prepare an affirmation establishing that he or she communicated with a representative of the mortgagee, and that the representative reviewed the documents related to the mortgage for factual accuracy and confirmed the factual accuracy of the allegations in the complaint.

The Administrative Order also provides that the mortgagee's representative “may” prepare a form affirmation. That affirmation represents that the signatory has reviewed the summons and complaint for accuracy of the plaintiff's identity, and accuracy of the defaults and the amounts claimed to be due the plaintiff.

The Brannon Case

In January 2007, General Electric lent money to Brannon, secured by a mortgage. In September of that year, the mortgage servicer served a notice of default on Brannon. In November, GE assigned the mortgage to Bank of America. Earlier that same month, Bank of America brought a foreclosure action. In 2008, Bank of America moved for summary judgment, supported by affirmations from the bank's servicer. Brannon responded by noting that she had been in touch with the servicer about a loan modification, but did not dispute the allegations of default. The court granted Bank of America's summary judgment motion. Then, in 2011, after a settlement conference, the court released the matter to the foreclosure part. Meanwhile, in 2009, Bank of America assigned the mortgage to IFS.

In April 2014, Bank of America moved to vacate the 2008 grant of summary judgment because of defects in the 2008 affirmations. On three separate occasions from April 2014 through February 2015, Bank of America moved for summary judgment, supported by three separate affirmations prepared by Michael Mattera, a managing member of IFS. Brannon opposed the first summary judgment motion on the ground that Mattera was an employee of IFS, not Bank of America, and therefore could not affirm the relevant facts. Brannon opposed the two subsequent summary judgment motions on grounds unrelated to the affirmation, contending with respect to one motion or the other that the assignment to IFS was invalid, that IFS had failed to provide an opportunity for loan modification, and that she had been improperly served. Supreme Court denied all three summary judgment motions.

With respect to the final motion, Supreme Court held that the initial false affirmation prepared by affirmations from the loan servicer could not be cured by a subsequent affirmation. The court also held that even if cure were possible, the Mattera affirmation was defective because it failed to indicate the state and county in which notarization had taken place. The bank appealed from the final denial of summary judgment.

A divided First Department reversed, awarded summary judgment to the bank, and remanded for appointment of a referee to determine the amount due on the mortgage. In an opinion by Justice Richard Andrias, the court's 4-1 majority relied on the two affirmations submitted on the bank's behalf. Counsel's affirmation asserted that counsel had relied on communications with Mattera, who had confirmed the factual accuracy of the allegations set forth in the complaint, as well as counsel's own inspection and reasonable inquiry.

Mattera's affirmation certified that he had reviewed Bank of America's records and concluded that all required notices of default had been sent, and that any allegation of timely payment after default was not substantiated by those records. Because Brannon's default was not in dispute, the court's majority held that the bank was entitled to summary judgment, and to an order of reference.

Justice Ellen Gesmer dissented in part. She agreed that the bank was entitled to summary judgment, but concluded that the bank was not entitled to an order of reference because of what she regarded as “substantial” deficiencies in Mattera's affirmation. She conceded that the bank could rely on Brannon's own answer, in which she admitted the amount she owed, to establish its right to summary judgment. Nevertheless, she argued that the court should refuse to issue an order of reference and a judgment of foreclosure and sale when the bank's affirmation does not comply with Administrative Order 431/11. She then focused on two perceived defects in Mattera's affirmation. First, she noted that the affidavit was prepared as if Mattera was a representative of Bank of America, when in fact he was a managing member of Bank of America's assignee. Second, Mattera never claimed to have reviewed the records of GE, the original mortgage lender.

Justice Gesmer suggested that denying the bank an order of reference would be consistent with existing Second Department practice. In fact, however, the Second Department cases she cited presented facts significantly different from those in the Brannon case. In one of the cases, Wells Fargo Bank, N.A. v. Hudson , 98 A.D.3d 576, the mortgagee had filed no affirmation at all. In the second case, Downey Savings and Loan Association v. Trujillo , 142 A.D.3d 1040, the affirmation included a demonstrably false statement of fact — a representation by counsel that he had communicated with the lender when, on the date of the supposed communication, the lender had become defunct and had assigned the mortgage. Moreover, even in the Downey case, the court denied the order of reference without prejudice to renew.

Conclusion

In cases like Bank of America v. Brannon, where the mortgagee has substantially complied with the Administrative Order, and where the borrower's default is not in dispute, the First Department appears to have recognized that there is little reason to delay the inevitable foreclosure.

*****
Stewart E. Sterk, Mack Professor of Law at Benjamin Cardozo School of Law, is the Editor-in-Chief of New York Real Estate Law Reporter.