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Second Circuit Expands Federal Class Actions for Mortgagors
In Maddox v. Bank of N.Y. Mellon Trust Co., N.A., 997 F.3d 436, the Second Circuit recently held that individuals have Article III standing to seek statutory damages for a bank's violation of Real Property Law (RPL) §275 and New Real Property Actions and Proceedings Law (RPAPL) §1921 (together, New York's Mortgage-Satisfaction-Recording Statutes). The Second Circuit held that, despite no "actual injury," violations of New York statutory law constitute a concrete and particularized harm giving rise to Article III standing. This is important because under New York rules, a plaintiff could not bring a class action in state court under New York's Mortgage-Satisfaction-Recording Statutes. Because the Second Circuit held that a bare violation of New York's Mortgage-Satisfaction-Recording Statutes without a demonstration of actual injury conferred federal jurisdiction, a mortgagor now has the ability to bring a class action in federal court. Thus, statutes designed to be merely remedial in nature can now be used punitively against lenders and servicers.
The Plaintiffs, Sandra Maddox and Tometta Maddox Holley, obtained a loan with Aegis Mortgage Corporation, which was memorialized by a mortgage secured against a property located in Buffalo, New York. The mortgage was, thereafter, assigned to Bank of New York Mellon (BNY). On or about Oct. 5, 2014, the loan was paid off and the debt discharged. BNY filed a satisfaction of mortgage on Sept. 22, 2015.
New York's mortgage-satisfaction-recording statutes require a mortgage lender to file a certificate of discharge/satisfaction of mortgage within thirty (30) days of full repayment of the debt. Failure to present a certificate of discharge within certain time frames results in the mortgagee being liable to the mortgagor in monetary form. Specifically, RPL §275 and RPAPL §1921 both mandate that a mortgagee present a satisfaction of mortgage/certificate of discharge to the Clerk's Office within 30 days of the payment of the debt and: 1) if not filed within 30 days, the mortgagee shall be liable to the mortgagor in the amount of $500.00; 2) if not filed within 60 days, the mortgagee shall be liable to the mortgagor in the amount of $1,000.00; 3) if not filed within 90 days, the mortgagee shall be liable to the mortgagor in the amount of $1,500.00.
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