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The Rolling Stones sang “you can’t always get what you want, but sometimes, you get what you need.” That tune has practical application to Connecticut foreclosures, particularly after the Supreme Court issued its opinion in KeyBank v. Yazar, 2023 Conn. Lexis 169. That case addressed whether the statutory pre-suit Emergency Mortgage Assistance Program (EMAP) notice requirement under EAMP implicates subject matter jurisdiction. It also addressed whether a second EMAP notice is required after a case has been dismissed on procedural grounds. It is the Connecticut Supreme Court’s first opinion on EMAP, which is a state loss mitigation program.
Many foreclosures in Connecticut were subject to dismissal for defective EMAP notices prior to Yazar. In 2020, the concept was then endorsed by the Appellate Court in MTGLQ Investors, L.P. v. Hammons, in which the Court held that a foreclosing plaintiff’s failure to provide the defendant mortgagor with an EMAP notice as required by § 8-265ee (a)constituted a jurisdictional defect requiring dismissal of the action.
Given the lengthy history of foreclosure as a common law action in Connecticut, the stage was set for the Supreme Court to decide whether the statute implicated subject matter jurisdiction-which is the power to hear the case in the first instance. In 2021, the Connecticut Supreme Court granted Certification on that issue.
On July 25, 2023, the Connecticut Supreme Court issued its long-awaited opinion on these two issues. On the issue of subject matter jurisdiction, the Court held that a mortgage foreclosure is indeed a common law cause of action in Connecticut and accordingly, held that EMAP does not implicate subject matter jurisdiction. This holding reversed two Appellate Court opinions (Hammons and Yazar), which had held that the notice requirement was a jurisdictional requirement. This holding is significant, given the increasing number of consumer statutes which impact a mortgage foreclosure in Connecticut.
On the second question—whether a second EMAP notice is required after a prior case is dismissed and the same default remains—the Court squarely held that each consumer mortgage foreclosure has to stand on its own EMAP notice, even if a prior suit was dismissed on procedural grounds. The Court looked to the legislative history of the statute, because its text was ambiguous. As the statute is remedial in nature, the Court held that a consumer foreclosure is not ripe without the notice having been sent prior to the service of each Complaint.
Further, the Connecticut Supreme Court in Yazar, reversed the Hammons case on an additional ground, which has practical implications on the business side for servicers. The Court reversed Hammons on which entity is required to issue the EMAP notice. Hammons had held that only the last assignee of record or its servicer could issue the EMAP notice. The Supreme Court stated emphatically that it is no longer good law, stating: “Our analysis does not turn on the particular entity that sent the EMAP notice; rather, what is of consequence is ensuring that an EMAP notice is sent prior to the initiation of any subsequent foreclosure action, as each foreclosure action must stand on its own EMAP notice.” Therefore, provided the EMAP notice was sent, it does not matter which entity issued the notice. This may save some foreclosures from dismissal.
Prior to Yazar, mortgage foreclosure actions where subject to dismissal for defective EAMP notices, because the statute was interpreted as implicating subject matter jurisdiction. Yazar holds that the notice is a condition precedent-and a mandatory one. But the key question left unaddressed is, what test is applied to challenge the contents of the notice after Yazar? Because the Court found that the mortgagor did not receive the notice in Yazar, the issue of whether substantial compliance applies to the notice was never addressed. Our Supreme and Appellate Courts have consistently held that substantial compliance with statutory notice provisions is sufficient. Notice provisions are generally construed liberally in favor of a claimant who is attempting to establish compliance with their terms, and substantial compliance with a statute requiring notice is all that is required."
Connecticut already applies substantial compliance to demand letters, which are a contractual conditions precedent in a foreclosure. Indeed, it is a time-honored maxim in this area that "literal enforcement of the relevant notice provision would serve no purpose.” It is likely that the next appeal on EMAP may very well address whether substantial compliance applies. Of course, the door has been opened on that issue after the Connecticut Supreme Court’s decision in Yazar, that EMAP does not involve subject matter jurisdiction.
Counsel for the lender in Yazar was Geoffrey K. Milne, Senior Partner, Northeast Litigation, McCalla Raymer Leibert Pierce, LLC.
