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U.S. Bank v. Aboelenen

Supreme Court, Dutchess County
Mar 6, 2019
63 Misc. 3d 1210 (N.Y. Sup. Ct. 2019)

Opinion

2015-51949

03-06-2019

U.S. BANK NATIONAL ASSOCIATION, Not in Its Individual Capacity but Solely as Trustee for NRZ Pass-through Trust VIII, Plaintiff, v. Mahmoud H. ABOELENEN, Elshaimaa Aboelenen, Defendants.

Brandon M. Wrazen, Esq., Gross Polowy, LLC, 1775 Wehrle Drive, Suite 100, Williamsville, New York 14221 Devon Salts, Esq., Salts Law Office, 1542 Route 52, Fishkill, New York 12524


Brandon M. Wrazen, Esq., Gross Polowy, LLC, 1775 Wehrle Drive, Suite 100, Williamsville, New York 14221

Devon Salts, Esq., Salts Law Office, 1542 Route 52, Fishkill, New York 12524

Peter M. Forman, J.

The Court read and considered the following documents upon this application:

Papers Numbered

Order to Show Cause 1

Affirmation in Support 2

Affidavit in Support 3

Exhibits A-D

Affirmation in Opposition 4

Exhibits A-F

Reply Affirmation 5

Reply Affidavit 6

Exhibits A-D

Plaintiff commenced this mortgage foreclosure action against the Defendants by filing a Notice of Pendency, Summons, and Complaint on November 5, 2015. The Defendants, through counsel, interposed an answer on May 3, 2016. In early March of 2017, the Defendants submitted a loss mitigation application to the loan servicer, Nationstar Mortgage d/b/a Mr. Cooper ("Nationstar"). By Notice of Motion dated September 11, 2017, the Plaintiff moved for summary judgment and an order of reference. The Defendants did not submit opposition to the motion and, on October 5, 2017 the Court (Sproat, J.) granted the relief requested. By Notice of Motion dated June 18, 2018, the Plaintiff moved for an order confirming the Referee's report and for a judgment of foreclosure and sale. The Defendants did not submit opposition to this motion and, on July 19, 2018, this Court issued an Order confirming the Referee's report and granting the judgment of foreclosure and sale. A foreclosure sale was conducted on September 27, 2018, wherein ownership of the property reverted to Plaintiff.

The Defendants now move, by Order to Show Cause dated October 25, 2018, to vacate the Order granting summary judgment and the Order confirming the referee's report and judgment of foreclosure and sale pursuant to CPLR § 5015(a)(3). For the reasons set forth herein, the Defendants' motion is denied.

DISCUSSION

The determination of whether to vacate a default is generally left to the sound discretion of the motion court. Nowell v. NYU Medical Center , 55 AD3d 573 (2d Dept. 2008). "To prevail on a motion pursuant to CPLR § 5015(a)(3) to vacate an order granting summary judgment in a foreclosure action and a judgment of foreclosure and sale, the proponent must establish that the opponent procured the order and the judgment of foreclosure and sale by fraud, misrepresentation, or other misconduct." Rossrock Fund II, L.P. v. Norlin Corp. , 128 AD3d 1046, 1047 (2d Dept. 2015) (citing Wells Fargo Bank, N.A. v. Hornes , 94 AD3d 755 (2d Dept. 2012) ). The movant "must show fraud in the very means by which the judgment was procured." Id. (quoting Cofresi v. Cofresi , 198 AD2d 321, 321 (2d Dept. 1993) ). The Defendants' motion fails to make such a showing.

The crux of the Defendants' argument is that the Plaintiff violated the prohibition on "dual tracking" set forth in 12 C.F.R. § 1024.41, in that it proceeded with a foreclosure sale while the Defendants' loss mitigation application was pending. The Defendants argue that this non-compliance by the Plaintiff warrants vacatur under CPLR § 5015(a)(3). The Plaintiff asserts that because the Defendants never submitted a complete loss mitigation application, it was not required to stay the foreclosure sale.

12 C.F.R. 1024 is a codification of the Federal Consumer Financial Protection Bureau's "Regulation X" relating to mortgage servicing rules, as promulgated pursuant to section 1022(b) of the Dodd-Frank Act, 12 U.S.C. § 5512(b), and the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et. seq. 12 C.F.R. 1024.41, the section of Regulation X relied upon by the Defendants, governs a servicer's response to a loss mitigation application.

As a preliminary matter, the Court notes that the Defendants have provided the Court with no authority for their proposition that a lender's non-compliance with Regulation X is sufficient grounds to vacate a judgment of foreclosure and sale . The Court need not resolve this issue, however, because even assuming a violation of Regulation X provided a basis for the relief requested, the Defendants' moving papers fail to establish that Plaintiff violated the dual tracking prohibition contained in Regulation X.

Neither Plaintiff nor Defendants addressed this issue in their papers. It is not clear to this Court from its review of 12 C.F.R. 1024.41 and the relevant provisions of RESPA that a violation of Regulation X provides any relief to a borrower other than a private cause of action against the bank. Section 6(f) of RESPA [12 U.S.C. § 2605(6)(f) ] provides: "[w]hoever fails to comply with any provision of this section shall be liable to the borrower for each such failure an amount equal to the sum of any actual damages to the borrower as a result of the failure; and any additional damages in an amount not to exceed $ 2000.00." See

The restrictions on foreclosure sales contained in Regulation X are predicated upon the lender's receipt of a complete loss mitigation application. 12 C.F.R. § 1024.41(g) states, in pertinent part: "If a borrower submits a complete loss mitigation application after a servicer has made the first notice or filing required by applicable law for any judicial or non-judicial foreclosure process but more than 37 days before a foreclosure sale, a servicer shall not move for foreclosure judgment or order of sale, or conduct a foreclosure sale "A complete loss mitigation application is defined as "an application in connection with which a servicer has received all the information that the servicer requires from a borrower in evaluating applications for the loss mitigation options available to the borrower." 12 C.F.R. § 1024.41(g). The documentary evidence submitted by the Defendants fails to establish that they submitted a complete loss mitigation application more than 37 days before the foreclosure sale.

Defendants first submitted their loss mitigation application in early March of 2017, subsequent to the commencement of the foreclosure action. On March 10, 2017, Nationstar sent a written notice to the Defendants acknowledging receipt of the application and advising of additional documentation that must be provided. See Exhibit A to October 16, 2018 Affirmation of Defendants' attorney, Devon Salts ("Salts Affirmation"). The March 10th notice advised that documents should be returned no later than April 9, 2017 and contained the following warning:

A complete package must be received by Nationstar in order for us to begin the evaluation process. Prior to our receipt of the missing/completed documents, a foreclosure process may be intitiated or if the foreclosure has already been initiated, the foreclosure process will continue until all documents are received .

(emphasis added). Between March 10, 2017, and May 2, 2018, Nationstar sent seven (7) additional notices to the Defendants, each advising that further or updated documentation was required before Nationstar could complete its evaluation of the loss mitigation request. See Salts Affirmation, Exhibit B . Each of these notices contained warning language similar to the March 10, 2017 notice. Each of these notices also advised the Defendants that additional documentation was needed in order to fully evaluate the application.

The Defendants contend that Plaintiff considered the loss mitigation application complete as of September 28, 2017. However, the documents submitted in support of the motion do not support this contention. In a November 16, 2017 notice to the Defendants, Nationstar stated that "the Borrower Response Package appeared to be complete as of 9/28/2017, with regard to the information previously requested . While you have provided all documentation previously requested, we have determined that additional information is needed before we can evaluate your loss mitigation request ." (Id. , emphasis added). Subsequent notices sent by Nationstar to the Defendants on April 3, April 4, and May 2, 2018, contained identical language. Id. Moreover, contrary to the Defendants' assertions, the documentary evidence submitted in support of the motion shows that Plaintiff did not unequivocally represent that the foreclosure process would not move forward but, rather, consistently advised that the foreclosure would proceed if requested documents were not provided.The April 3, 2018 notice from Nationstar clearly advised the Defendants:

As long as you submit the additional documentation/information to us by 5/4/2018, all foreclosure protections to which you are entitled will be preserved. If you fail to return the additional documentation by the deadline, however, the foreclosure protections may end, and we may initiate or resume foreclosure processes after that time.

Defendants have not submitted evidence to establish that they complied with the additional document requirements imposed by Nationstar in the April 3, April 4, and May 2, 2018 notices.

Based upon the foregoing, the evidence provided by the Defendants fails to establish that they submitted a complete loss mitigation application more than 37 days prior to the foreclosure sale. Therefore, Defendants have failed to show that Plaintiff violated Regulation X by proceeding with the foreclosure sale on September 27, 2018. 12 C.F.R. § 1024.41(g).

In addition to non-compliance with Regulation X, the Defendants assert that Plaintiff intentionally deceived them into filing a new loss mitigation application on August 8, 2018. Plaintiff did this, Defendants argue, so that Plaintiff could move forward with the foreclosure sale without acting on the Defendants' loss mitigation application. The Defendants offer no evidence to support this claim other than the vague and conclusory allegations of Defendant Mahmoud Aboelenen and Ms. Salts. Such proof is insufficient to vacate the default. See Summitbridge Credit Invs., LLC v. Wallace , 128 AD3d 676 (2d Dept. 2015) (conclusory allegations of fraud and misconduct were insufficient to warrant vacatur of judgment); Wells Fargo Bank v. Linzenberg , 50 AD3d 674 (2d Dept. 2008) (defendant's allegations that plaintiff committed fraud were broad and unsubstantiated); Aames Capital Corp. v. Davidsohn , 24 AD3d 474 (2d Dept. 2005) (defendant in foreclosure action was not entitled to relief from default judgment, where he offered nothing more than broad, unsubstantiated allegations of fraud on part of plaintiff).

Finally, the Court notes that the Defendants were represented by counsel during the pendency of the foreclosure action. Counsel received notice (via ECF) of Plaintiff's application for an order of reference and of Plaintiff's motion for a judgment of foreclosure and sale, yet the Defendants raised no objection. At no time after the Court issued an Order confirming the Referee's report and granting the judgment of foreclosure and sale on July 19, 2018 but prior to the sale did the Defendants move to vacate or seek a stay of the foreclosure sale.

On this record, the Court cannot conclude that Plaintiff committed fraud, misrepresentation, or other misconduct in its procurement of the order of reference or the judgment of foreclosure and sale. Rossrock Fund II, L.P., supra; U.S. Bank N.A. v. Allen, 102 AD3d 955 (2d Dept. 2013) (defendant failed to make a showing that the plaintiff engaged in the type of fraud or misconduct that would warrant vacatur of the order of reference pursuant to CPLR 5015(a)(3) ); Bay Crest Ass'n, Inc. v. Paar, 99 AD3d 744, 746 (2d Dept. 2012) ("defendants failed to satisfy their burden of establishing that the judgment was procured through fraud or other misconduct."). It is hereby

ORDERED that the Defendants' motion to vacate the Order granting summary judgment and the Order confirming the referee's report and judgment of foreclosure and sale is denied in its entirety.

The foregoing constitutes the Decision and Order of this Court.

HSBC Bank USA, N.A. v. Ahmad, 59 Misc 3d 1216(A) (Supreme Court, Suffolk County, 2018) (A violation of dual tracking prohibition "merely affords a borrower a separate action in federal court against the servicer/lender for the assessment of a monetary penalty, it is not a defense to a state foreclosure action."); see also Federal Nat. Morg. Ass'n v. Karastamatis , 52 Misc 3d 1007, 1009 (Supreme Court, Suffolk County, 2016) ("[R]egulatory provisions, particularly those referred to as Regulation X do not provide defendant mortgagors with any viable defense to a New York mortgage foreclosure action or any right to obtain a stay of proceedings in such actions or to obtain a vacatur of orders or judgments issued in such actions.").


Summaries of

U.S. Bank v. Aboelenen

Supreme Court, Dutchess County
Mar 6, 2019
63 Misc. 3d 1210 (N.Y. Sup. Ct. 2019)
Case details for

U.S. Bank v. Aboelenen

Case Details

Full title:U.S. Bank National Association, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY…

Court:Supreme Court, Dutchess County

Date published: Mar 6, 2019

Citations

63 Misc. 3d 1210 (N.Y. Sup. Ct. 2019)
2019 N.Y. Slip Op. 50454
114 N.Y.S.3d 576