On Oct. 6, 2021, the Appellate Division, Second Department broke with prior precedent in redefining the “willful neglect” standard in reforeclosure cases. Prior to the Second Department’s decision, a lender could demonstrate, prima facie, the absence of “willful neglect” in failing to name a necessary party to a foreclosure action by showing that it was negligent and/or relied on a faulty title search. However, such a showing is no longer sufficient.
In an unprecedented decision with significant repercussions for mortgage servicers and title insurers alike, the Second Department effectively eroded the “willful neglect” standard to encompass simple negligence. In moving the negligence needle, the Appellate Division has introduced confusion and uncertainty to an area of the law that most observers believed was settled. Lenders must take heed of this development or potentially find their mortgages deemed unenforceable.
