Flushing Savings Bank, FSB, Appellant,v.Pierre Bitar,, Respondent, et al., Defendants.

Brief

N.Y.April 30, 2015

APL-2014-00074 To be argued by: MARK H. SHAWHAN 15 minutes requested Supreme Court, Kings County, Index No. 6674/2010 State of New York Court of Appeals FLUSHING SAVINGS BANK, FSB, Plaintiff-Appellant, -against- PIERRE BITAR a/k/a PIERRE M. BITAR, Defendant-Respondent, ANGELO GENOVA, ZOFIA GENOVA, HOME HEATING OIL CORP., NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, MAMA GIOVANNA’S PIZZERIA, NINE BARBER SHOP, CARLOS DEJESUS, JESUS M. SANCHEZ, RONALD OLIVER, MARIA RODRIGUEZ, Defendants. BRIEF FOR THE NEW YORK STATE OFFICE OF THE ATTORNEY GENERAL AS AMICUS CURIAE BARBARA D. UNDERWOOD Solicitor General STEVEN C. WU Deputy Solicitor General MARK H. SHAWHAN Assistant Solicitor General of Counsel ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney for Amicus Curiae 120 Broadway New York, New York 10271 (212) 416-6325 (212) 416-8962 (facsimile) Dated: September 18, 2014 i TABLE OF CONTENTS Page TABLE OF AUTHORITIES ............................................................ iii INTEREST OF THE ATTORNEY GENERAL ................................ 1 QUESTIONS PRESENTED ............................................................ 3 STATEMENT OF THE CASE ......................................................... 4 A. Statutory and Regulatory Background ......................... 4 1. New York’s deficiency-judgment statute ................ 4 2. New York’s regulation of appraisals ...................... 7 B. The Attorney General’s Mortgage-Related Enforcement Actions ...................................................... 9 1. Actions to ensure appraiser independence .......... 10 2. Actions to halt abuses in foreclosure proceedings ........................................................... 12 C. Judicial and Legislative Foreclosure-Related Reforms ........................................................................ 14 1. The affirmation requirement in foreclosure actions ................................................................... 15 2. The mandatory settlement conference in foreclosure actions ................................................ 19 D. This Proceeding ............................................................ 21 ARGUMENT ................................................................................. 24 ii TABLE OF CONTENTS (cont'd) Page POINT I - A CONCLUSORY APPRAISER’S AFFIDAVIT DOES NOT SATISFY THE FORECLOSING PLAINTIFF’S PRIMA FACIE BURDEN OF PROVING FAIR MARKET VALUE ....................... 24 POINT II - A FORECLOSINGPLAINTIFF IS NOT ENTITLED TO SUBMIT ADDITIONAL EVIDENCE OF FAIR MARKET VALUE IF ITS INITIAL PAPERS FAILED TO PROVIDE ANY SUPPORT FOR ITS VALUATION ................ 31 CONCLUSION ............................................................................... 37 iii TABLE OF AUTHORITIES Cases Page(s) 2132 Presidential Assets, LLC v. Carrasquillo, 39 Misc. 3d 756 (Civ. Ct. Bronx County 2013) .......................... 15 Adirondack Trust Co. v. Farone, 282 A.D.2d 910 (3d Dep’t 2001) ................................................... 7 Amatulli v. Delhi Constr. Corp., 77 N.Y.2d 525 (1991) ................................................................. 26 Aurora Loan Servs. v. Weisblum, 85 A.D.3d 95 (2d Dep’t 2011) ..................................................... 15 Bank of N.Y. v. Silverberg, 86 A.D.3d 274 (2d Dep’t 2011) ................................................... 15 BTC Mortg. Investors Trust 1997-SI v. Altamont Farms Inc., 284 A.D.2d 849 (3d Dep’t 2001) ................................................. 24 Citimortgage, Inc. v. Stosel, 89 A.D.3d 887 (2d Dep’t 2011) ................................................... 15 Crady v. Newcomb, 142 A.D.2d 940 (4th Dep’t 1988) .......................................... 33-34 Deutsche Bank Nat’l Trust Co. v. Barnett, 88 A.D.3d 636 (2d Dep’t 2011) ................................................... 15 Deutsche Bank Nat’l Trust Co. v. McRae, 27 Misc. 3d 247 (Sup. Ct. Allegany County 2010) .................... 16 Diaz v. N.Y. Downtown Hosp., 99 N.Y.2d 542 (2002) ................................................................. 26 E. Coast Props. v. Galang, 308 A.D.2d 431 (2d Dep’t 2003) ................................................... 7 iv TABLE OF AUTHORITIES (cont’d) Cases Page(s) Evergreen Bank N.A. v. Giroux, 273 A.D.2d 586 (3d Dep’t 2000) ................................................... 7 Farmers’ Loan & Trust Co. v. Siefke, 144 N.Y. 354 (1895) ................................................................... 32 Fed. Home Loan Mortg. Corp. v. Raia, 2010 N.Y. Slip Op. 52003(U) (Dist. Ct. Nassau County Nov. 23, 2010) .................................. 16 Fredenburgh v. State, 26 A.D.2d 966 (3d Dep’t 1966) ................................................... 34 HSBC Bank, N.A. v. McKenna, 37 Misc. 3d 885 (Sup. Ct. Kings County 2012) ......................... 21 HSBC Bank USA, N.A. v. Sene, 2012 N.Y. Slip Op. 50352(U) (Sup. Ct. Kings County Feb. 28, 2012) ...................................... 16 IndyMac Fed. Bank, F.S.B. v. Garcia, 2011 N.Y. Slip Op. 31748(U) (Sup. Ct. Queens County June 23, 2011) .................................. 15 Lasalle Bank, N.A. v. Ahearn, 59 A.D.3d 911 (3d Dep’t 2009) ................................................... 15 Long Island Sav. Bank, FSB v. Yaloz, 289 A.D.2d 380 (2d Dep’t 2001) ................................................... 7 Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009) .................................................. 34 Marine Midland Bank v. Harrigan Enters., 118 A.D.2d 1035 (3d Dep’t 1986) ............................................... 24 v TABLE OF AUTHORITIES (cont’d) Cases Page(s) Matter of County Dollar Corp. v. City of Yonkers, 97 A.D.2d 469 (2d Dep’t 1983) ................................................... 25 Matter of Estate of Schaich, 55 A.D.2d 914 (2d Dep’t 1977) ................................................... 34 Matter of N.Y. City Transit Auth., 160 A.D.2d 705 (2d Dep’t 1990) ................................................. 26 Nat’l Bank of N. Am. v. Sys. Home Improvement, Inc., 69 A.D.2d 557 (2d Dep’t 1979), aff’d on opn. below, 50 N.Y.2d 814 (1980) ................................. 24 OneWest Bank, F.S.B. v. Drayton, 29 Misc. 3d 1021 (Sup. Ct. Kings County 2010) ................. 13, 15 Sanders v. Palmer, 68 N.Y.2d 180 (1986) ................................................................... 5 Shore Haven Apts. No. 6, Inc. v. Comm’r of Fin. of City of N.Y., 93 A.D.2d 233 (2d Dep’t 1983) ............................................. 26, 34 Silberstein v. Presbyterian Hosp. in the City of N.Y., 96 A.D.2d 1096 (2d Dep’t 1983) ................................................. 32 State of N.Y. Mortg. Agency v. Vaccerino, 2012 N.Y. Slip Op. 31299(U) (Sup. Ct. Suffolk County May 7, 2012) ..................................... 15 Trustco Bank, Nat’l Ass’n v. Eakin, 256 A.D.2d 778 (3d Dep’t 1998) ................................................... 7 U.S. Bank, N.A. v. Collymore, 68 A.D.3d 752 (2d Dep’t 2009) ................................................... 16 vi TABLE OF AUTHORITIES (cont’d) Cases Page(s) U.S. Bank, N.A. v. Dellarmo, 94 A.D.3d 746 (2d Dep’t 2012) ................................................... 15 U.S. Bank, N.A. v. Madero, 80 A.D.3d 751 (2d Dep’t 2011) ............................................. 12, 15 U.S. Bank N.A. v. Sarmiento, 2014 N.Y. Slip Op. 05533 (2d Dep’t July 30, 2014) ................... 21 Vircillo v. State, 24 A.D.2d 534 (4th Dep’t 1965) ................................................. 26 Wells Fargo Bank, N.A. v. Marchione, 69 A.D.3d 204 (2d Dep’t 2009) .............................................. 15-16 State Laws C.P.L.R. 3012-b ............................................................................. 18, 19, 28 3212 ............................................................................................ 32 3408 ............................................................................................ 20 Ch. 306, 2013 McKinney’s N.Y. Laws 1034 ................................... 16 Ch. 472, 2008 N.Y. Laws 3604 ....................................................... 20 Ch. 502, 1938 N.Y. Laws 1280 ......................................................... 7 Ch. 794, 1933 N.Y. Laws 1618 ......................................................... 6 Executive Law § 160-a ................................................................................. 7-8, 35 § 160-d .......................................................................................... 8 § 160-h .......................................................................................... 7 Real Property Actions and Proceedings Law § 1371 ............. passim vii TABLE OF AUTHORITIES (cont’d) State Laws Page(s) 19 N.Y.C.R.R. chapter 31 .................................................................................... 7 § 1106.1 ........................................................................................ 8 22 N.Y.C.R.R. § 202.12 ................................................................... 20 N.J. Stat. Ann. 2A:50-3 .................................................................. 27 42 P.A. Cons. Stat. § 8103 .............................................................. 27 Texas Prop. Code § 51.003 ............................................................. 27 Federal Laws Dodd-Frank Wall Street Reform & Consumer Protection Act, Pub. L. No. 110-203, 124 Stat. 1376 (2010) (codified at 15 U.S.C. § 1639e) (2014) ....................................... 11 75 Fed. Reg. 66,554 (Oct. 28, 2010) (codified at 12 C.F.R. § 226.42) (2014) ...................................... 11 Interagency Appraisal and Evaluation Guidelines, 75 Fed. Reg. 77,450 (Dec. 10, 2010)........................................... 12 Miscellaneous Authorities Andrew Kershner, New Court Rule Says Attorneys Must Verify Foreclosure Papers, N.Y.L.J. (Oct. 21, 2010) .................. 16 Chief Administrative Judge, Administrative Order 548/10 (Oct. 20, 2010) ............................................................................ 16 Chief Administrative Judge, Administrative Order 431/11 (March 2, 2011) .......................................................................... 16 viii TABLE OF AUTHORITIES (cont’d) Miscellaneous Authorities Page(s) Freddie Mac, Home Valuation Code of Conduct (Dec. 2008), http://www.freddiemac.com/singlefamily/pdf/122308_valu ationcodeofconduct.pdf .............................................................. 11 Mem. in Support of Legislation (July 27, 2013) reprinted in Bill Jacket for Ch. 306 (2013) .................................................... 18 N.Y. State Unified Court Sys., Residential Mortgage Foreclosures: Promoting Early Court Intervention (June 2008), available at http://www.nycourts.gov/whatsnew/pdf/ ResidentialForeclosure6-08.pdf ................................................. 20 National Mortgage Settlement, Executive Summary Of Multistate/Federal Settlement Of Foreclosure Misconduct Claims, available at http://www.nationalmortgagesettlement.com/about ................ 14 Office of Court Administration and Office of the Attorney General Mem. in Support (July 16, 2013) reprinted in Bill Jacket for Ch. 306 (2013) .................................................... 18 Press Release, New York State Unified Court System, New York Courts First in Country to Institute Filing Requirement to Preserve Integrity of Foreclosure Process (Oct. 20, 2010), available at http://nycourts.gov/press/ pr2010_12.shtml .................................................................. 16, 17 Press Release, New York State Unified Court System, NY Court System Adopts New Rules to Ensure A Fair Legal Process in Consumer Debt Cases (Sept. 16, 2014), available at http://www.nycourts.gov/press/PDFs/ PR14_06.pdf ............................................................................... 19 ix TABLE OF AUTHORITIES (cont’d) Miscellaneous Authorities Page(s) Press Release, N.Y. State Office of the Attorney General, A.G. Schneiderman Announces $4 Million Settlement With New York Foreclosure Law Firm Steven J. Baum P.C. And Pillar Processing LLC (March 22, 2012) ................................... 14 Press Release, N.Y. State Office of the Attorney General, Attorney General Cuomo Expands Probe Of New York Foreclosure Actions (Oct. 12, 2010) ........................................... 17 Press Release, N.Y. State Office of the Attorney General, Cuomo Announces Agreement With Fannie Mae, Freddie Mac, And Ofheo (March 3, 2008) ............................................... 11 Press Release, N.Y. State Office of the Attorney General, Cuomo Backs Federal Legislation Prohibiting Intimidation and Coercion of Appraisers (Nov. 5, 2007) .......... 10 Press Release, N.Y. State Office of the Attorney General, Schneiderman Secures Major Settlement That Allows Sweeping Mortgage Investigations To Proceed (Feb. 9, 2012) ............................................................................. 14 Public Papers of Herbert H. Lehman (1933) ................................... 6 Appraisal Foundation, 2010-2011 USPAP (2010) ................. 8, 9, 10 INTEREST OF THE ATTORNEY GENERAL New York’s Real Property Actions and Proceedings Law (RPAPL) § 1371 provides that when a lender forecloses on a mortgage and sells the property in a foreclosure sale, the lender may move for a personal money judgment against the borrower (known as a deficiency judgment) for the difference, if any, between the fair market value of the property and the amount of the debt. This case presents the question of whether a lender may satisfy its initial, prima facie burden to establish fair market value based solely on a conclusory appraiser’s affidavit that does not provide the data or reasoning underlying the appraisal. It also presents the question whether a court, on finding such an affidavit insufficient, must give the lender an opportunity to cure the deficiency with additional evidence. The borrower has not appeared at any stage of the litigation, and this Court has invited amicus participation on both issues. (A. 69-70.) The Attorney General submits this brief amicus curiae to explain that (1) a conclusory appraisal affidavit, lacking any underlying data or reasoning, is insufficient to satisfy the lender’s 2 initial obligation to make a prima facie showing of fair market value; and (2) a trial court has the discretion to deny the movant the opportunity to cure that flagrant defect in order to induce compliance with the statute. The Attorney General has a strong interest in ensuring that courts require lenders to provide adequate evidentiary support before either foreclosing on mortgages or obtaining post- foreclosure deficiency judgments. Pursuant to his authority under New York’s antifraud and consumer protection laws, the Attorney General has recently investigated and brought enforcement actions against financial institutions for misrepresentations and inadequate documentation relating to foreclosures and appraisals. Among other abuses, the Attorney General’s investigations have revealed that lenders have pressured appraisers into inflating real-estate valuations; that banks and mortgage servicers have failed to keep proper records of crucial mortgage documents; and that, in bringing foreclosure actions, banks and servicers have relied on “robosigned” affidavits executed in bulk by affiants lacking personal knowledge of the matters asserted in the affidavits. 3 In light of this history and the Attorney General’s continuing efforts to stamp out fraud and deceptive practices, the Attorney General has a strong interest in ensuring that mortgagees and other lenders provide evidence before foreclosing on mortgages or collecting on foreclosure-related judgments. Here, both well- established law and public policy support the requirement that banks—experienced repeat players in foreclosure litigation—provide the evidentiary basis for an expert’s valuation. The bank’s failure to do so here warranted dismissal of this deficiency proceeding. QUESTIONS PRESENTED 1. Whether the courts below properly concluded that the affidavit of plaintiff’s appraiser was too conclusory to make a prima facie showing of the fair market value of the property as of the foreclosure sale date. 2. Assuming that the affidavit was insufficient, whether the trial court had the discretion to deny plaintiff’s unopposed application for a deficiency judgment outright, without affording plaintiff an opportunity to cure the insufficiency in its proof. 4 STATEMENT OF THE CASE A. Statutory and Regulatory Background 1. New York’s deficiency-judgment statute Under New York law, the holder of a mortgage loan is not only entitled to foreclose on the mortgage upon the default of the borrower, but in certain circumstances may also obtain a personal money judgment (or “deficiency judgment”) against the borrower. The motion for a deficiency judgment must be made in the underlying foreclosure action within ninety days of the delivery of the deed of conveyance to the party who purchased the property at the foreclosure sale. RPAPL § 1371(2). A deficiency judgment, if awarded, is available for, at most, any difference that may exist between the amount owed by the borrower and the fair market value of the property. Id.1 The court is required to independently 1 In the unusual case where the foreclosure-sale price is higher than the fair market value, the amount of the deficiency judgment is instead capped at the difference between the amount owed and the foreclosure-sale price. See RPAPL § 1371(2). But in the majority of cases, including this one, fair market value exceeds the foreclosure-sale price, and fair market value is what determines the availability and amount of a deficiency judgment. 5 determine the fair market value of the foreclosed property, based on evidence submitted by the parties, whether or not the motion is opposed. Id. The court has discretion to limit the size of the judgment to so much of the difference between the amount owed and fair market value “as the court . . . determine[s] to be just and equitable.” Id. § 1371(1). This statutory scheme is the product of reforms made by the Legislature during the Great Depression. As originally enacted in the nineteenth century, New York’s deficiency-judgment statute permitted the lender to recover the amount by which outstanding debt exceeded the foreclosure-sale price. The court had no equitable authority to reduce the judgment to account for the possibility that the foreclosure-sale price was lower than the true market value, or for any other reason. See Sanders v. Palmer, 68 N.Y.2d 180, 183 (1986). During the Depression, however, “the absence of any real estate market, and the consequent reluctance to bid on the foreclosure block,” led to artificially low foreclosure-sale prices— and thus the entry of inflated deficiency judgments against 6 foreclosed homeowners that were “entirely out of line with the fair value of the property.” Public Papers of Herbert H. Lehman (1933) at 140. In an extraordinary session of the Legislature called in 1933, Governor Lehman proposed the passage of reform legislation to protect homeowners against such “exaggerated deficiency judgments.” Id. at 141. The governor urged that “[a]uthority should be granted to the Supreme Court to determine the fair value of the real estate foreclosed,” and that a deficiency judgment should be available only for the excess of the debt over the property’s fair value, and not the excess of the debt over the foreclosure sale price. Id. at 142. The “burden of proving such value,” the governor said, “should be placed upon the mortgagee foreclosing the property,” and absent such proof, “the presumption should be that the value of the property is at least the amount of the first mortgage.” Id. Such a presumption would mean that no deficiency judgment is available, because there would be no excess of the mortgage debt over the property’s presumed fair value. In response to this proposal, the Legislature enacted the present deficiency-judgment statute. Ch. 794, 1933 N.Y. Laws 1618 7 (emergency legislation); Ch. 502, 1938 N.Y. Laws 1280 (permanent enactment). 2. New York’s regulation of appraisals To establish fair market value in deficiency proceedings, mortgagees frequently rely on real-estate appraisals,2 which have been regulated by New York since 1990. See Executive Law § 160-h; 19 N.Y.C.R.R. chapter 31. Appraisals conducted by state-licensed appraisers, and “any written communication” of such appraisals, must meet the requirements of the Uniform Standards of Professional Appraisal Practice (Uniform Standards or USPAP), which are incorporated into New York law.3 See Executive 2 See, e.g., E. Coast Props. v. Galang, 308 A.D.2d 431 (2d Dep’t 2003); Long Island Sav. Bank, FSB v. Yaloz, 289 A.D.2d 380 (2d Dep’t 2001); Adirondack Trust Co. v. Farone, 282 A.D.2d 910 (3d Dep’t 2001); Evergreen Bank N.A. v. Giroux, 273 A.D.2d 586 (3d Dep’t 2000); Trustco Bank, Nat’l Ass’n v. Eakin, 256 A.D.2d 778 (3d Dep’t 1998). 3 The Uniform Standards themselves are promulgated by the private, nonprofit Appraisal Foundation pursuant to Title XI of the federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989, Pub. L. No. 101-73. The Uniform Standards (and New York’s incorporating regulations) are updated annually. Citations here are to the 2010-2011 edition of (continued on next page) 8 Law § 160-a(2)-(3) (defining “appraisal” and “appraisal report”); id. § 160-d(2) (setting minimum standards for appraisal regulations); 19 N.Y.C.R.R. § 1106.1 (incorporating Uniform Standards). The Uniform Standards are intended to ensure that appraisals properly use valuation criteria that are appropriate for the particular case, that application of those criteria is based on probative information related to valuation, and that the appraiser sufficiently explains his or her use of the chosen criteria and the information that he or she relied upon. Thus, in developing an appraisal of a property’s fair market value, appraisers must identify the appropriate valuation approach and gather and analyze the information necessary to apply that approach (such as comparable sales or rental data). See Appraisal Foundation, 2010- 2011 USPAP, Standards 1-2(c), (e)(i); 1-3(a); 1-4(a), (c) (2010). The appraiser is also required to maintain a file for each appraisal, which must include the information and documentation necessary the Uniform Standards, which governed the appraisal in this case; as relevant here, that edition is not materially different from the 2014-2015 edition now in place. 9 to support the appraisal’s conclusions. USPAP Ethics Rule at u-9 (Record-Keeping). The Uniform Standards further govern how appraisers may communicate their valuations. Any written communication of a valuation must explain the appraiser’s methodology and must include enough information to permit the appraisal’s intended users to understand the appraisal properly. USPAP Standard 2-1. That explanation must therefore describe the appraised property; summarize the valuation approach used, the information analyzed, and the reasoning supporting the appraiser’s analyses and conclusions; and explain the appraiser’s rationale for the choice of approaches and use of data. USPAP Standard 2-2(a)(iii), (viii). B. The Attorney General’s Mortgage- Related Enforcement Actions This case involves the intersection of two areas—appraisals and foreclosures—that have been the subject of multiple Attorney General investigations and enforcement actions since 2007. Because those enforcement efforts provide important background for the policy concerns in this case, we briefly describe them here. 10 1. Actions to ensure appraiser independence The Attorney General has engaged in multiple efforts to ensure that real-estate appraisers reach impartial and independent valuations, rather than being improperly influenced by mortgage lenders. In 2007, for example, the Attorney General began an investigation into whether mortgage lenders had compromised the independence of real-estate appraisers in the loan-origination process. The Uniform Standards require appraisers to conduct valuations impartially and independently. USPAP Ethics Rule. Yet the Attorney General’s investigation revealed that mortgage lenders had frequently leaned on appraisers to inflate home valuations, thereby allowing lenders to make larger loans—and leaving the homeowner with a debt greater than the fair market value of the house.4 Based on this investigation, the Attorney General brought an antifraud enforcement action against a large appraisal 4 See, e.g., Press Release, N.Y. State Office of the Attorney General (NYAG), Cuomo Backs Federal Legislation Prohibiting Intimidation and Coercion of Appraisers (Nov. 5, 2007). 11 company that allowed itself to be pressured by Washington Mutual (“WaMu”) into inflating its valuations. Indeed, the appraisal company even permitted the bank to pick and choose appraisers based on whether their previous valuations were acceptable to WaMu. See Compl. at 11-16, People v. First American Corp., Index No. 406796/2007 (Sup. Ct. N.Y. County Nov. 1, 2007). The Attorney General also negotiated an agreement with Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency that required all loans purchased by those entities to comply with a Home Valuation Code of Conduct that would insulate appraisers from monetary leverage (and pressure) exerted by lenders.5 5 See Press Release, NYAG, Cuomo Announces Agreement With Fannie Mae, Freddie Mac, And Ofheo (March 3, 2008); see also Freddie Mac, Home Valuation Code of Conduct (Dec. 2008), http://www.freddiemac.com/singlefamily/pdf/122308_valuationcod eofconduct.pdf. The specific terms of this Code of Conduct have since been superseded by similar appraiser-independence regulations promulgated by the Federal Reserve Board pursuant to the Dodd-Frank Act. See Dodd-Frank Wall Street Reform & Consumer Protection Act, Pub. L. No. 110-203, § 1472(a), 124 Stat. 1376, 2187-90 (2010) (codified at 15 U.S.C. § 1639e) (2014); 75 Fed. Reg. 66,554, 66580 (Oct. 28, 2010) (codified at (continued on next page) 12 2. Actions to halt abuses in foreclosure proceedings The Attorney General’s investigations have also revealed that banks and servicers repeatedly made false representations to courts in foreclosure proceedings at the expense of struggling homeowners. To obtain a foreclosure judgment in New York, the foreclosing party must establish that it is the holder or assignee of both the note and the mortgage at the time the foreclosure action commences.6 U.S. Bank, N.A. v. Madero, 80 A.D.3d 751, 752-53 (2d Dep’t 2011). During the recent recession, banks and servicers purported to make this showing through affidavits attesting to 12 C.F.R. § 226.42) (2014). C.f. Interagency Appraisal and Evaluation Guidelines, 75 Fed. Reg. 77,450 (Dec. 10, 2010) (regulatory guidance regarding proper appraisal practice issued jointly by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, and National Credit Union Administration). 6 The promissory note and the mortgage are the two crucial documents that underlie mortgage loans. In the promissory note, the borrower agrees to pay back the loan to the owner of the note. The mortgage permits the enforcement of the promissory note by establishing a security interest against the home that can be enforced through a foreclosure proceeding if the borrower defaults. 13 ownership of the note and the mortgage, without providing the underlying documents themselves. As the Attorney General’s investigation uncovered, however, a large number of these affidavits were “robosigned”—i.e., signed in vast quantities by individuals who had no personal knowledge of the information asserted, frequently had not read the affidavits they were signing, and were sometimes not even signing their own name.7 These robosigned affidavits helped to disguise the fact that major banks and servicers had failed to maintain accurate records (or any records at all) regarding the chain of ownership of the promissory note and mortgage of securitized mortgage loans. See, e.g., Compl. at 37-41, People v. JPMorgan Chase, supra. The Attorney General’s enforcement efforts against such frauds have 7 See, e.g., Compl. at 28-30, People v. JPMorgan Chase Bank, N.A., Index No. 2768/2012 (Sup. Ct. Kings County Feb. 3, 2012); Compl. at 27-28, United States v. Bank of America Corp., No. 12- 361 (D.D.C. March 14, 2012); Consent Judgment § 2.3(d), People v. Lender Processing Servs., Index No. 400204/13 (Sup. Ct. N.Y. County Feb. 21, 2013); see, also, e.g., OneWest Bank, F.S.B. v. Drayton, 29 Misc. 3d 1021, 1027-31 (Sup. Ct. Kings County 2010) (quoting admission by bank employee that she had executed 750 affidavits relating to assignment of mortgage loans per week, 30 seconds per affidavit). 14 brought about a series of favorable settlements and consent decrees requiring reform of the practices that led to the frauds.8 C. Judicial and Legislative Foreclosure- Related Reforms Both the Judiciary and the Legislature have also actively engaged in efforts to prevent fraud in foreclosure proceedings and to ensure the integrity of the foreclosure process, primarily by requiring banks and servicers to back up their assertions in court with documentary evidence. 8 See, e.g., Press Release, NYAG, Schneiderman Secures Major Settlement That Allows Sweeping Mortgage Investigations To Proceed (Feb. 9, 2012); National Mortgage Settlement, Executive Summary Of Multistate/Federal Settlement Of Foreclosure Misconduct Claims, available at http://www.nationalmortgagesettlement.com/about (link to summary in right-hand sidebar); Settlement Agreement, People v. JPMorgan Chase (June 18, 2013); Consent Judgment, People v. Lender Processing Servs. Feb. 21, 2013). See also Press Release, NYAG, A.G. Schneiderman Announces $4 Million Settlement With New York Foreclosure Law Firm Steven J. Baum P.C. And Pillar Processing LLC (March 22, 2012). 15 1. The affirmation requirement in foreclosure actions New York courts have repeatedly criticized banks and servicers for making false or unsupported representations in foreclosure actions. The courts have seen many examples of foreclosing plaintiffs commencing actions despite lacking a basis to assert standing;9 foreclosing plaintiffs regularly relying on robosigned affidavits;10 and plaintiffs too often introducing inaccurate, inconsistent, or conflicting evidence in foreclosure proceedings.11 To address these serious problems, the New York 9 See, e.g., U.S. Bank, N.A. v. Dellarmo, 94 A.D.3d 746 (2d Dep’t 2012); Citimortgage, Inc. v. Stosel, 89 A.D.3d 887 (2d Dep’t 2011); Bank of N.Y. v. Silverberg, 86 A.D.3d 274 (2d Dep’t 2011); Aurora Loan Servs. v. Weisblum, 85 A.D.3d 95, 108-09 (2d Dep’t 2011); Madero, 80 A.D.3d 751; Lasalle Bank, N.A. v. Ahearn, 59 A.D.3d 911 (3d Dep’t 2009). 10 See, e.g., State of N.Y. Mortg. Agency v. Vaccerino, 2012 N.Y. Slip Op. 31299(U) (Sup. Ct. Suffolk County May 7, 2012); IndyMac Fed. Bank, F.S.B. v. Garcia, 2011 N.Y. Slip Op. 31748(U) (Sup. Ct. Queens County June 23, 2011); Drayton, 29 Misc. 3d 1021. Cf., e.g., 2132 Presidential Assets, LLC v. Carrasquillo, 39 Misc. 3d 756 (Civ. Ct. Bronx County 2013) (use of robosigned affidavits to support eviction proceedings). 11 See, e.g., Deutsche Bank Nat’l Trust Co. v. Barnett, 88 A.D.3d 636, 637-38 (2d Dep’t 2011); Wells Fargo Bank, N.A. v. (continued on next page) 16 courts and the Legislature have substantially strengthened the documentary requirements for commencing foreclosure actions, initially by administrative orders of the State’s Chief Administrative Judge, Administrative Order (AO) 548/10 (Oct. 20, 2010); AO 431/11 (March 2, 2011) (see attached Addendum), and subsequently by legislation, Ch. 306, 2013 McKinney’s N.Y. Laws 1034 (codified at C.P.L.R. 3012-b). AO 548/10 was issued by the Chief Administrative Judge (at the direction of the Chief Judge of the State) in October 2010, following admissions by four of the country’s largest mortgage servicers that they had relied on improperly notarized documents and robosigned affidavits in their foreclosure filings.12 The order, Marchione, 69 A.D.3d 204, 209-11 (2d Dep’t 2009); U.S. Bank, N.A. v. Collymore, 68 A.D.3d 752, 754 (2d Dep’t 2009); HSBC Bank USA, N.A. v. Sene, 2012 N.Y. Slip Op. 50352(U) (Sup. Ct. Kings County Feb. 28, 2012); Fed. Home Loan Mortg. Corp. v. Raia, 2010 N.Y. Slip Op. 52003(U) (Dist. Ct. Nassau County Nov. 23, 2010); Deutsche Bank Nat’l Trust Co. v. McRae, 27 Misc. 3d 247 (Sup. Ct. Allegany County 2010). 12 See Press Release, New York State Unified Court System, New York Courts First in Country to Institute Filing Requirement to Preserve Integrity of Foreclosure Process (Oct. 20, 2010) (“Filing Requirement”), available at http://nycourts.gov/press/ (continued on next page) 17 which noted the presence of “numerous and widespread insufficiencies in foreclosure filings in various courts around the nation” (Addendum (Add.) 8), was aimed at “ensuring that the documents judges rely on” in foreclosure proceedings “will be thoroughly examined, accurate, and error-free,” Office of Court Administration, Filing Requirement, supra. It required foreclosure counsel to communicate with a specific, named representative of the plaintiff who could personally confirm the accuracy of the papers filed in the foreclosure action (and the underlying mortgage documentation), and required counsel to certify that to the best of their knowledge, information, and belief, the papers filed in the action were accurate and complete. (Add. 8.)13 In 2013, this affirmation requirement was extended by statute (now codified at C.P.L.R. 3012-b). The statutory version of pr2010_12.shtml; Andrew Kershner, New Court Rule Says Attorneys Must Verify Foreclosure Papers, N.Y.L.J. (Oct. 21, 2010); Press Release, NYAG, Attorney General Cuomo Expands Probe Of New York Foreclosure Actions (Oct. 12, 2010). 13 The language of the required affirmation was modified slightly by Administrative Order 431/11, issued on March 2, 2011. (See Add. 1-3.) 18 the requirement was first introduced in the Legislature at the joint request of the Chief Judge and the Attorney General. Mem. in Support of Legislation (July 27, 2013) at 1, reprinted in Bill Jacket for Ch. 306 (2013). Like its regulatory predecessors, this statutory version is intended to “ensure the integrity of the mortgage foreclosure process and eliminate the cases brought without standing or merit,” Office of Court Administration and Office of the Attorney General Mem. in Support (July 16, 2013) at 1, reprinted in Bill Jacket for Ch. 306 (2013). C.P.L.R. 3012-b requires counsel to file a certification with the foreclosure complaint attesting that counsel has reviewed the relevant mortgage documentation—including the promissory note, mortgage, and any instrument of assignment—and has consulted with specific, named representatives of the plaintiff to ensure the accuracy of those documents. Counsel must also attest, based on that consultation and counsel’s review of the documentation, that to the best of their knowledge, information, and belief, plaintiff is the entity with standing to foreclose, and that a reasonable basis exists to bring the foreclosure action. But foreclosure counsel may not rest 19 on this representation alone: the statute further requires that the C.P.L.R. 3012-b certification must itself attach all of the mortgage documents required to establish standing. Willful failure to provide these documents may be punished by denial of all accrued mortgage interest, or by outright dismissal of the action. C.P.L.R. 3012-b(e).14 2. The mandatory settlement conference in foreclosure actions The Legislature and the Judiciary have also acted to increase judicial supervision of foreclosure proceedings after the 14 The courts have also strengthened evidentiary rules outside the foreclosure context. Just this week, for example, the State’s Uniform Rules for the New York State Trial Courts were amended to add a series of new documentary requirements in consumer debt-collection cases. The amendments respond to the problem of creditors too-frequently obtaining “default judgments . . . on the basis of insufficient or incorrect factual proof or hearsay testimony” that are “for the wrong amount of money or even against the wrong party, or for debt that has already been paid or for which the statute of limitations has already expired.” Thus, the amendments require creditors to submit affidavits establishing the validity of the debt, the debt’s chain of ownership, and the non-expiration of the statute of limitations, supported by detailed, specified documentation. Press Release, New York State Unified Court System, NY Court System Adopts New Rules to Ensure A Fair Legal Process in Consumer Debt Cases (Sept. 16, 2014), available at http://www.nycourts.gov/press/PDFs/ PR14_06.pdf. 20 complaint is filed. In 2008, the Legislature enacted a requirement that a foreclosing plaintiff must engage in settlement negotiations with the homeowner after filing the complaint. Ch. 472, § 3, 2008 N.Y. Laws 3604, 3607-08, codified at C.P.L.R. 3408. This settlement conference process was built on a similar judicial pilot program established in 2008 by the Chief Judge and Chief Administrative Judge15 and is intended to avoid the drastic remedy of foreclosure when it is possible to reach a less disruptive resolution to the action, such as a payment-schedule modification. To substantiate representations made at the conference, the foreclosing plaintiff (or its counsel) must bring detailed documentation of relevant financial information, including the homeowner’s mortgage and note, payment history, default (and any efforts to cure default), and the lender’s requirements for a loan modification. 22 N.Y.C.R.R. § 202.12a-(c)(5)(i). The parties must negotiate in good faith, C.P.L.R. 3408(f), which, among other things, 15 See N.Y. State Unified Court Sys., Residential Mortgage Foreclosures: Promoting Early Court Intervention (June 2008), available at http://www.nycourts.gov/whatsnew/pdf/ ResidentialForeclosure6-08.pdf. 21 requires the foreclosing plaintiff to give genuine consideration to whether the homeowner qualifies for a loan modification or other reasonable alternatives to foreclosure, see, e.g., HSBC Bank, N.A. v. McKenna, 37 Misc. 3d 885, 901-09 (Sup. Ct. Kings County 2012). If the plaintiff fails to do so, the court may impose substantial monetary sanctions. U.S. Bank N.A. v. Sarmiento, 2014 N.Y. Slip Op. 05533, at *9-*10 (2d Dep’t July 30, 2014). D. This Proceeding In this case, appellant Flushing Savings Bank (FSB) obtained a foreclosure judgment against respondent Pierre Bitar for a property in Brooklyn.16 FSB purchased the property at the foreclosure sale for $125,000. (A. 18-19.) A month later, the referee who conducted the sale delivered the deed to FSB and issued a report of sale stating that the amount then owed by Bitar was $793,000. (A. 19.) FSB then moved for a deficiency judgment under RPAPL § 1371. FSB’s standard-form motion papers stated 16 Flushing Savings Bank has since changed its name to Flushing Bank. For convenience, we continue to refer to appellant here as Flushing Savings Bank or FSB. 22 that the fair market value of the property was $475,000, and sought a deficiency judgment of $318,000—the difference between the putative fair market value and the amount owed. (See A. 12-22.) FSB’s deficiency-judgment motion was supported only by a four-paragraph affidavit of a licensed appraiser, Wayne Covington. (A. 23-24.) In its entirety, Covington’s affidavit stated that he was an experienced, licensed appraiser familiar with Brooklyn real estate values; that he had conducted an exterior and interior inspection of the property; that he had considered a number of criteria related to market value (including comparable sales, real estate trends, and the condition of the neighborhood); and that the fair market value of the property was $475,000. (A. 23-24.) Aside from the final valuation figure and the address of the property, every other part of the affidavit was essentially boilerplate. Notwithstanding the requirements of New York’s appraisal regulations, see supra at 7-9, the affidavit did not explain how Covington applied the criteria he listed, nor set out specific information about the property (and other comparable properties) on which he said he had relied. 23 Supreme Court, Kings County (Hinds-Radix, J.) declined to grant a deficiency judgment. Supreme Court found the Covington affidavit to be “conclusory,” noting that it did not “contain any specific information regarding how [Covington] reached his fair market value determination.” (A. 9.) In fact, the court said, “the only specific details set in the appraiser’s affidavit regarding the premises are its address and the fair market value figure.” (A. 10.) The court therefore held that FSB had “failed to satisfy its prima facie burden of establishing the fair market value of the premises.” (A. 10.) On appeal, the Appellate Division, Second Department affirmed. The Second Department also found Covington’s affidavit to be conclusory. (A. 3.) The court held that, in the absence of any details about the appraisal or the comparable-sales data that Covington had used, Supreme Court “was entitled to reject the opinion of the plaintiff’s appraiser as without probative value in light of the lack of evidentiary foundation set forth in his affidavit.” (A. 3.) “In light of the plaintiff’s failure to make a prima facie showing as to the value of the subject premises,” the Second 24 Department affirmed Supreme Court’s denial of a deficiency judgment. (A.3.) This Court granted FSB’s application for leave to appeal. (A. 1.) ARGUMENT POINT I A CONCLUSORY APPRAISER’S AFFIDAVIT DOES NOT SATISFY THE FORECLOSING PLAINTIFF’S PRIMA FACIE BURDEN OF PROVING FAIR MARKET VALUE A foreclosing plaintiff in New York may obtain a deficiency judgment only if it can prove that the fair market value of the mortgaged property is less than the amount owed by the party liable for the mortgage debt. RPAPL § 1371(2). It is well-settled that the foreclosing plaintiff must make an initial prima facie showing of the property’s fair market value. Nat’l Bank of N. Am. v. Sys. Home Improvement, Inc., 69 A.D.2d 557, 562 (2d Dep’t 1979), aff’d on opn. below, 50 N.Y.2d 814 (1980); see also, e.g., BTC Mortg. Investors Trust 1997-SI v. Altamont Farms Inc., 284 A.D.2d 849, 850 (3d Dep’t 2001); Marine Midland Bank v. Harrigan Enters., 118 A.D.2d 1035, 1037 (3d Dep’t 1986). 25 In this case, FSB’s papers failed to meet that prima facie burden. FSB asserted that an appraisal showed the property’s fair market value to be $475,000. (A. 19-20.) But FSB did not support that assertion with a report from the appraiser that both set forth the data and explained the reasoning behind his appraisal. Rather, FSB relied entirely on the appraiser’s page-and-a-half affidavit, which contained no analysis at all—merely a generic list of several valuation criteria and a bottom-line valuation. (A. 23-24.) The absence of any “specific details” in the appraiser’s affidavit beyond the property’s “address and the fair market value figure” (A. 10) left Supreme Court no way properly to understand, much less assess, the appraiser’s opinion. The court was instead faced merely with “an appraiser’s bald opinion[,] represent[ing] nothing but conclusory estimates . . . entitled to no probative weight,” Matter of County Dollar Corp. v. City of Yonkers, 97 A.D.2d 469, 476 (2d Dep’t 1983) (tax certiorari proceeding). Courts should not be required essentially to take the word of the foreclosing plaintiff’s expert. To the contrary, this Court has made clear that where an “expert’s ultimate assertions” are 26 “unsupported by any evidentiary foundation . . . the opinion should be given no probative force.” Diaz v. N.Y. Downtown Hosp., 99 N.Y.2d 542, 544 (2002).17 See also, e.g., Amatulli v. Delhi Constr. Corp., 77 N.Y.2d 525, 533 n.2 (1991) (same); Matter of N.Y. City Transit Auth., 160 A.D.2d 705, 705 (2d Dep’t 1990) (same, in eminent-domain compensation proceeding); Vircillo v. State, 24 A.D.2d 534, 535 (4th Dep’t 1965) (same). Thus, “[i]f an appraiser's opinion has any substantial basis in fact, it is fair to assume that the facts will be spread on the record.” Shore Haven Apts. No. 6, Inc. v. Comm’r of Fin. of City of N.Y., 93 A.D.2d 233, 236 (2d Dep’t 1983). To accept FSB’s position that courts should instead credit “unsupported” expert opinions on market value would also be contrary to the purpose and design of New York’s modern deficiency-judgment statute. The statute was reformed during the Great Depression for the express purpose of protecting 17 FSB attempts to distinguish Diaz as decided on a motion for summary judgment (Br. for Appellant (Br.) at 13), but the Diaz Court’s holding that the expert opinion at issue lacked any probative force at all, see 99 N.Y.2d at 544, did not depend on the procedural posture of the case. 27 homeowners in foreclosure from excessive deficiency judgments by ensuring that such judgments would only be based on a home’s actual fair market value. See supra at 6-7. The Legislature placed the burden on the party seeking a deficiency judgment to establish actual fair market value. And unlike the practice of a number of other states,18 a party seeking a deficiency judgment in New York is not relieved of that burden even if the homeowner fails to appear or oppose the deficiency motion. These statutory protections would be easily evaded if foreclosing plaintiffs could make out a prima facie case in deficiency proceedings— particularly those that are unopposed—simply by proffering an unsupported assertion of fair market value. Trusting foreclosing plaintiffs’ conclusory assertions of fair market value is especially inappropriate given the recent history of fraud and other abuses in foreclosure-related proceedings. See supra at 10-15. In just the last few years, the New York courts and the 18 See, e.g., New Jersey, N.J. Stat. Ann. 2A:50-3; Pennsylvania, 42 P.A. Cons. Stat. § 8103; and Texas, Prop. Code § 51.003. 28 Attorney General have uncovered repeated instances in which even sworn affidavits provided by foreclosing plaintiffs have been proven false—for example, because they were executed without personal knowledge, omitted necessary facts, or included inaccurate or contradictory information. In addition, the Attorney General’s investigations have shown that such fraudulent behavior extended to real-estate appraisals, with mortgage lenders pressuring appraisers to adjust their valuation figures in ways that benefited the lenders but hurt borrowers. The Attorney General’s investigations have led to reforms of the appraisal process; and the abuses committed during foreclosure proceedings were found to be so widespread that both the Judiciary and the Legislature felt obliged to respond by requiring plaintiffs to make heightened evidentiary showings to obtain foreclosure judgments. C.P.L.R. 3012-b. As this recent history demonstrates, documentary proof is now widely seen as an essential safeguard against fraud and other abuses in foreclosure-related proceedings, due to banks’ and servicers’ failure to ensure the accuracy of even sworn statements in court filings. That same public policy supports the lower courts’ 29 holding here that a conclusory appraiser’s affidavit, unsupported by any explanation or evidence, fails to satisfy a foreclosing plaintiff’s prima facie burden to establish fair market value in a deficiency proceeding. FSB’s objections to such a standard are unpersuasive. FSB asserts that it would be “inordinately burdensome” and entail a “full-blown appraisal” to require a foreclosing plaintiff to provide more than a conclusory appraiser’s affidavit before it is permitted to proceed on a claim for a deficiency judgment. Br. at 23. But these assertions ignore the fact that FSB’s appraiser was already legally required to gather the information that Supreme Court held should have been provided here, and to provide it in any written communication of his appraisal valuation. See supra at 7-9. Explaining the data and analysis underlying an appraisal is only “inordinately burdensome” if that information does not already exist—but in that case, the appraisal itself would be fatally deficient and thus not a proper basis for a deficiency judgment. FSB also asserts (Br. at 23-24) that it did not have time to submit documentation supporting the appraisal within the three- 30 month statute of limitations for a deficiency action. That contention is not supported by the record. In this case, FSB’s own motion papers represented that its appraiser was able to apply the valuation criteria listed in his affidavit to this property, and arrive at a bottom-line figure, well within the ninety-day time limit that FSB now contends is unworkable. Given this representation, FSB should have been able to provide the appraiser’s explanation of how he applied those criteria in reaching his conclusion about fair market value. Ultimately, FSB’s position is that it should not have had to provide Supreme Court with an explanation and documentation of the appraisal that its appraiser ostensibly conducted. But foreclosing plaintiffs such as FSB are sophisticated litigants seeking large personal money judgments against financially strained individuals. It is reasonable for a court to decline to grant them such judgments on faith. At a minimum, when a foreclosing plaintiff relies on an expert’s valuation without providing the data and reasoning needed to understand and assess that valuation, 31 the court may hold that the plaintiff has not satisfied its prima facie evidentiary burden. POINT II A FORECLOSINGPLAINTIFF IS NOT ENTITLED TO SUBMIT ADDITIONAL EVIDENCE OF FAIR MARKET VALUE IF ITS INITIAL PAPERS FAILED TO PROVIDE ANY SUPPORT FOR ITS VALUATION In this case, FSB made no effort to support the appraiser’s conclusory valuation—failing to provide any particularized analysis or supporting data to explain how the appraiser reached his final dollar figure. Absent any explanation of how and why the appraiser reached the results that he did, Supreme Court properly exercised its discretion to dismiss the deficiency proceeding rather than give FSB another opportunity to make its prima facie case. A fact-finder’s role is to weigh, not obtain, the evidence in a case. It is thus the responsibility of the foreclosing plaintiff, as the party seeking a deficiency judgment, to establish to the court’s satisfaction that the plaintiff is entitled to relief because the fair market value of the property is less than the amount owed. See, 32 e.g., Farmers’ Loan & Trust Co. v. Siefke, 144 N.Y. 354, 358-59 (1895) (discussing burdens of proof). And in the proper circumstances the court may find a movant’s evidence of market value so deficient as to warrant dismissal. Dismissal is an accepted remedy when a moving party’s initial submission is wholly insufficient. For example, a court may dismiss a motion for a default judgment, notwithstanding the absence of any opposition, if the movant fails to “present prima facie proof of a cause of action.” Silberstein v. Presbyterian Hosp. in the City of N.Y., 96 A.D.2d 1096, 1096 (2d Dep’t 1983). And a court hearing a motion for summary judgment may grant judgment to the nonmoving party “without the necessity of a cross-motion,” and without affording the moving party an opportunity to cure the shortcomings in its papers, if the law or facts so warrant. C.P.L.R. 3212(b). There is no indication that the Legislature intended to prevent courts from disposing of facially inadequate, unsupported deficiency motions in a similar fashion. To the contrary, the Legislature confirmed the courts’ discretion in this area by authorizing judges to award any judgment “as the 33 court may determine to be just and equitable,” RPAPL § 1371(1)— which, in the appropriate case, may be no judgment at all. Here, FSB’s initial submission was so deficient that Supreme Court was not required to give FSB another opportunity to meet its prima facie burden before dismissing the motion for a deficiency judgment. FSB relied solely on a conclusory appraiser’s affidavit that did not discuss how the appraiser applied the listed criteria to reach his final valuation figure here, and did not provide any of the data he relied upon in doing so. When a foreclosing plaintiff seeks a deficiency judgment solely on the basis of a bottom-line valuation, without including these two pieces of explanatory information, Supreme Court may properly exercise its discretion to dismiss the deficiency proceeding outright. This clear, bright-line rule is fair because there is no reasonable basis for a mortgagee to believe that a naked valuation without the information needed for the factfinder to evaluate the expert’s conclusions would have any evidentiary force. To the contrary, courts have repeatedly rejected appraisals “not supported by any market data information or explanation of 34 adjustments and comparisons” as “lacking in probative value.” See, e.g., Crady v. Newcomb, 142 A.D.2d 940, 941 (4th Dep’t 1988); Shore Haven Apts., 93 A.D.2d at 236; Fredenburgh v. State, 26 A.D.2d 966, 966-67 (3d Dep’t 1966). And in a variety of contexts— from attorneys’-fee applications to damages estimates—courts have refused to accept conclusory figures offered without any explanation or support. See, e.g., Matter of Estate of Schaich, 55 A.D.2d 914, 914 (2d Dep’t 1977) (holding that court was not obligated to accept attorney’s billing claim “in view of the fact that there existed no written day-by-day record of the time spent”); Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1329 (Fed. Cir. 2009) (“A lump-sum damages award cannot stand solely on evidence which amounts to little more than a recitation of royalty numbers.”). Property-valuation experts, like any other expert, must explain the bases of their opinion, not simply ask a court to take their word for it. Moreover, both New York law and professional standards unambiguously require appraisers to provide such an explanation in reporting appraisal values. Thus, FSB’s initial submission here 35 fell short of objective, preexisting requirements for appraisals. New York’s appraisal-regulation statute deems “any written communication of an appraisal” to be an “[a]ppraisal report.” Executive Law § 160-a(3). Under the Uniform Standards of Professional Appraisal Practice, any appraisal report must provide sufficient details to permit the recipient of the report to evaluate the appraisal—including both the way in which the appraiser chose and analyzed relevant valuation criteria and the data used in that analysis. And the appraiser is also required to maintain a file for each appraisal documenting the development of the appraisal, including the appraiser’s data and reasoning. See supra at 8-9. In other words, FSB and its appraiser had adequate notice of the information that should have been provided to Supreme Court in the first instance. A court may reasonably dismiss a deficiency-judgment motion that fails to include such basic explanatory information. Dismissal of facially inadequate deficiency-judgment motions not only constitutes an appropriate response to the defects of a particular movant’s papers—it also has beneficial 36 systemic effects on the behavior of foreclosing plaintiffs. If plaintiffs know they will always have multiple chances to meet their prima facie evidentiary burden, they will have little incentive to ensure that their initial submissions contain the information needed for a court to understand or evaluate their assertions of fair market value. By contrast, the risk of outright dismissal without an opportunity to provide additional evidence will encourage foreclosing plaintiffs to support their proffered valuations with concrete data and reasoning—thereby ensuring that courts can properly determine whether or not plaintiffs have established their entitlement to a deficiency judgment under the statute.19 19 This Court need not reach the distinct question of how Supreme Court should exercise its remedial discretion if the foreclosing plaintiff provides an explanation of the appraisal valuation and the underlying data, but the court nonetheless determines that the plaintiff has failed to satisfy its prima facie burden of proving fair market value. (For example, a court may find the appraiser’s price comparisons to be unpersuasive, or the underlying data outdated.) In such circumstances, not presented here, it would likely be reasonable to grant the foreclosing plaintiff one opportunity to supplement its proof. 37 CONCLUSION For the foregoing reasons, the judgment denying that portion of appellant’s motion that sought a deficiency judgment should be affirmed. Dated: New York, NY September 18, 2014 BARBARA D. UNDERWOOD Solicitor General STEVEN C. WU Deputy Solicitor General MARK H. SHAWHAN Assistant Solicitor General of Counsel Respectfully submitted, ERIC T. SCHNEIDERMAN Attorney General of the State of New York By: ____________________________ MARK H. SHAWHAN Assistant Solicitor General 120 Broadway New York, NY 10271 (212) 416-6325 Reproduced on Recycled Paper ADDENDUM A1 ADMINISTRATIVE ORDER OF THE CHIEF ADMINISTRATIVE JUDGE OF THE COURTS Pursuant to the authority vested in me, at the direction of the Chief Judge of the State of New York and with the consent of the Presiding Justices of the Appellate Divisions, I hereby order and direct that, effective November 18, 2010, nunc pro tune, plaintiff~ counsel in residential mortgage foreclosure actions shall file with the court in each such action an affmnation, in the revised Form A attached hereto, at the following times: • In cases commenced after the effective date of this Order, at the time of the filing of the Request for Judicial Intervention. • In cases pending on such effective date, where no judgment of foreclosure has been entered, at the time of filing either the proposed order of reference or the proposed judgment of foreclosure. • In cases where judgment of foreclosure has been entered but the property has not yet been sold as of such effective date, five business days before the scheduled auction, with a copy to be served on the referee. This revised form affirmation shall replace the affirmation previously required pursuant to A0/548/10. However, a filing by counsel of that earlier form affirmation shall satisfy the requirement of this order. In conjunction with the filing of Form A, a representative of plaintiff may file a supporting affidavit as set forth in Form B attached hereto, in addition to such other information as the court may require. udge of the Courts Dated: March 2, 2011 A0/,431/11 A D D E N D U M A2 FORM A SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF v. ------- Plaintiff, AFFIRMATION Index No.: ____ _ Defendant{s) Mortgaged Premises: N.B.: Dut'lng 1ind a/tel' August 2/JJIJ, numet'ous and wldespt'ead lnsufflciencles lnfot'eclosut'eflllngs In t1at'lous courll around the nation wet'e l'eponed by majo,. mot'tgage /endet's and othet' authol'ities, including failut'e to t'et1lew document3 and flies to establish standing and other /onclosure l'equisltes;fi/lng o/notat'l'l:ed aflldat1lts which falsely atte1t to such nt1iew and to othel' cl'itlcal facts in the fot'eclosure pt'ocess; and 111'oboslgnatu1'e" of documents. *** .___ __ _,, Esq., pursuant to CPLR §2106 and under the penalties of perjury, affirms as follows: 1. I am an attorney at law duly licensed to practice in the state of New York and am affiliated with the Law Firm of the attorneys of record for Plaintiff in the above-captioned mortgage foreclosure action. As such, I am fully aware of the underlying action, as well as the proceedings had herein. 2. On [date], I communicated with the following representative or representatives of of Plaintiff, who informed me that he/she/they {a) personally reviewed plaintiffs documents and records relating to this case for factual accuracy; and {b) confirmed the factual accuracy of the allegations set forth in the Complaint and any supporting affidavits or affirmations filed with the Court, as well as the accuracy of the notarizations contained in the supporting documents filed therewith. Name Title A3 3. Based upon my communication with [person/s specified in ii2], as well as upon my own inspection and other reasonable inquiry under the circumstances, I affirm that, to the best of my knowledge, information, and belief, the Summons, Complaint, and other papers filed or submitted to the Court in this matter contain no false statements of fact or law. I understand my continuing obligation to amend this Affirmation in light of newly discovered material facts following its filing. · 4. I am aware of my obligations under New York Rules of Professional Conduct (22 NYCRR Part 1200) and 22 NYCRR Part 130. DATED: N.B.: Counsel may augment this alflrmation to provide explanatory details, and may flle supplemental alflrmatlons or affidavits for the same purpose. [Revised 11118/10] A4 FORM B SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF ------ Plaintiff, v. Defendant(s) STATEOFNEWYORK) ) ss: COUNTY OF ) AFFIDAVIT Index No.: ----- Mortgaged Premises: -----------------~ being duly sworn, deposes and says: I. I am a a representative of plaintiff in the above-captioned mortgage foreclosure action. I am authorized to execute this affidavit and am fully aware of the underlying action, as well as the papers and proceedings heretofore had herein. 2. This Affidavit is made in further support of plaintiff's counsel's affirmation pursuant to the October 2010 Administrative Order of the Chief Administrative Judge of the Courts of New York, as supplemented. 3. I have performed the following actions in order to confirm the truth and veracity of the statements made herein. This review is based upon my access to the books and records relating to this loan which are kept in the ordinary course of business. Initial all that are applicable: A __ Confirmed the notice of default, if required, was properly mailed prior to commencement of foreclosure. B __ Reviewed the summons and complaint in this action to confirm the factual accuracy of the identity of the proper plaintiff, the defaults and the amounts claimed to be due to plaintiff as set forth therein. Confirmed the affidavit(s) executed and submitted by plaintiff together with this A5 application have been personally reviewed by the signatory; that the notary acknowledging the affiant's signature followed applicable law in notarizing the affiant's signature. D __ I am unable to confinn or deny that the underlying documents previously filed with the Court have been properly reviewed or notarized. E __ Inasmuch as the underlying mortgage loan has been transferred prior to commencement or during the pendency of this action, I am unable to confinn or deny that the underlying documents filed with the Court have been properly reviewed or notarized by the prior servicer. F __ (other) ______________________ _ N.B.: A/flan ts may augment this affidavit to provide explanatory details, and may flle supplemental a/jlrmatlons or affidavits/or the same purpose. 2 A6 WHEREFORE, it is respectfully requested that the Court grant the proposed relief requested herein together with such other relief as the Court deems just and proper (Affiant) STATE OF ) SS: COUNTY OF ____ ) On the __ day of in the year before me, the undersigned, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is( are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), that by his/her/their signature(s) on the instrument, the individual(s), or the personal upon behalf of which the individual(s) acted, executed the instrument, and that such individual made such appearance before the undersigned in the . Notary Public 3 A7 ADMINISTRt\TfVE ORDER or Tl lE CTTJFF J\DMINISTRATfVF JUDGE OF.Tiii~ COURTS Pursuant to the authority n:stt.:d in n'.c, ut the dircclion of the Chief Judge of the Stnte of '-!cw York ai1d with the con:;i.:nt of the Prcsidiny Justices nfthc :\ppcllutc Divisions, I hereby order and d:r~ct that. cffi:cti\'I.: im1m:· ~··~I J 0 A8 SUPREME COURT OF THE STA TE OF NEW YORK COUNTY OF v. ------- Plaintiff, AFFIRMATION Index No.: Defendant( s) Mortgaged Premises: N.B.: During and after August 2010, numerous and widespread insufficiencies in foreclosure filings in various coum around the nalion were reported by major mol'lgage lenders and ot/1er auJ/torltles. T/1ese insufficiencies Include: failure of plalntJJJs and their counsel lo review documents and files to establls/1 standing and oilier foreclosure requisites; filing of notarized affidavits whic/1 falsely attest to sucll review and to