Wells Fargo Bank, N.A. v. Doran
Attorneys and Parties
Brief Summary
Reverse mortgage foreclosure—whether approval by the U.S. Department of Housing and Urban Development (HUD) Commissioner under 24 CFR 206.27(c)(2) [HUD reverse mortgage rule requiring the mortgage to state the loan becomes due and payable upon the Commissioner's approval if specified conditions occur] is a condition precedent; whether CPLR 3408 [mandates settlement conferences in residential foreclosure actions involving a home loan] and RPAPL 1304 [defines “home loan” and sets pre-foreclosure notice requirements] apply to pre-2016 reverse mortgage actions; and evidentiary sufficiency to confirm a referee’s computation plus interest tolling for delays.
Granted the bank’s motion to confirm the referee’s report and for a judgment of foreclosure and sale; denied the homeowner’s cross-motion to dismiss for lack of HUD approval, to compel a CPLR 3408/RPAPL 1304 settlement conference, to reject the referee’s report, or to toll interest.
The order and judgment of foreclosure and sale were reversed; confirmation of the referee’s report and entry of judgment of foreclosure and sale were denied; the referee’s report was rejected; interest was tolled for one year (Sept. 2022–Sept. 2023).
The servicer’s affidavit and attached business records did not substantiate the amounts due, so the referee’s findings were not supported by the record; and the bank failed to justify an extended delay in prosecution, warranting tolling of interest. The court correctly rejected arguments that HUD approval was a condition precedent and that post-2016 settlement-conference provisions retroactively applied.
Background
Wells Fargo commenced a reverse mortgage foreclosure in May 2016 against, among others, homeowner Peter Slavska. In Sept. 2023, the bank moved to confirm a referee’s report and for a judgment of foreclosure and sale. Slavska opposed and cross-moved to dismiss for failure to obtain approval from the HUD Commissioner under 24 CFR 206.27(c)(2) [HUD reverse mortgage rule requiring the mortgage to state the loan becomes due and payable upon the Commissioner's approval if specified conditions occur], to refer the case for a mandatory settlement conference under CPLR 3408 [mandates settlement conferences in residential foreclosure actions involving a home loan] and RPAPL 1304 [defines “home loan” and sets pre-foreclosure notice requirements], and to reject the referee’s report or toll interest based on delay. The Supreme Court (Nassau County) granted the bank’s motion and denied the homeowner’s cross-motion. Slavska appealed.
Lower Court Decision
The Supreme Court confirmed the referee’s report, entered a judgment of foreclosure and sale, and denied dismissal, a mandatory settlement conference, rejection of the referee’s report, and interest tolling.
Appellate Division Reversal
The Appellate Division dismissed the separate appeal from the order as subsumed, then reversed the order and judgment of foreclosure and sale. It denied the bank’s motion to confirm and for judgment, granted the homeowner’s request to reject the referee’s report, and tolled interest from Sept. 2022 to Sept. 2023, awarding costs to the homeowner. It affirmed the denial of dismissal under 24 CFR 206.27(c)(2), holding HUD approval is not a condition precedent where the mortgage contains the required language, and affirmed the denial of a CPLR 3408/RPAPL 1304 settlement conference because the action predates the Dec. 2016 amendments that extended those provisions to reverse mortgages and the amendments were not shown to be retroactive.
Legal Significance
Clarifies that 24 CFR 206.27(c)(2) does not impose a pre-suit HUD approval requirement when the mortgage includes the mandated due-and-payable clause; confirms that the 2016 expansion of CPLR 3408 and RPAPL 1304 to reverse mortgages does not retroactively apply to actions commenced before the amendment; and reiterates that a referee’s computation must be supported by admissible business records and that courts may toll interest for unexplained prosecution delays.
In reverse mortgage foreclosures filed before Dec. 2016, no mandatory settlement conference applies, and HUD approval is not a condition precedent under 24 CFR 206.27(c)(2); however, lenders must substantiate amounts due with proper business records, and interest may be tolled for unreasonable, unexplained delay.