Second Department Clarifies: Referee Reports Must Rest on Produced Business Records; RPAPL 1301(3) Defense Fails Absent Prejudice

Introduction

In Citimortgage, Inc. v. Hassanin (2025 NY Slip Op 05935, Second Department, Oct. 29, 2025), the Appellate Division reversed an order and judgment of foreclosure and sale issued by the Supreme Court, Queens County. The decision delivers two central clarifications for New York foreclosure practice:

A referee’s report cannot be confirmed where the plaintiff’s computations are grounded in unproduced business records, and an affidavit from a later loan servicer must lay a CPLR 4518-compliant foundation for any records created by prior entities, particularly where the alleged default predates the servicer’s tenure.
An RPAPL 1301(3) concurrent-action defense is patently meritless absent prejudice—i.e., where the prior foreclosure was effectively abandoned and the borrower was not burdened by defending two actions on the same debt at the same time.

The case stems from a long-running mortgage foreclosure involving Citimortgage, Inc. (plaintiff-respondent) and borrower Hoda Hassanin (defendant-appellant). The Second Department reversed the confirmation of the referee’s report and remitted for a new computation, while affirming the trial court’s rejection of a late RPAPL 1301(3) defense and finding no prejudice from the referee’s failure to hold a hearing.

Summary of the Opinion

The Appellate Division:

Reversed the order and judgment of foreclosure and sale, with costs.
Denied the plaintiff’s motion to confirm the referee’s report and for a judgment of foreclosure and sale.
Rejected the referee’s report.
Remitted to Supreme Court, Queens County, for a new report computing the amount due to plaintiff, followed by proceedings under CPLR 4403 and entry of an amended judgment.

It also held that the Supreme Court properly denied the borrower’s cross-motion for leave to amend her answer to add an RPAPL 1301(3) defense because the prior action had been effectively abandoned and the borrower suffered no prejudice from any technical violation. Further, any failure by the referee to hold a hearing was harmless, as the borrower had a full opportunity to submit objections and evidence to the court at the confirmation stage.

Procedural Background and Key Facts

2008: Plaintiff’s predecessor commenced a first foreclosure action; a judgment of foreclosure and sale was entered in October 2008.
June 4, 2014: The first foreclosure action was voluntarily discontinued and the 2008 judgment vacated.
July 2013: Citimortgage commenced the second foreclosure action underlying this appeal.
May 2, 2017: Supreme Court (Modica, J.) granted plaintiff’s motion for summary judgment and order of reference; denied defendant’s cross-motion to amend to assert RPAPL 1301(3).
August 2022: Plaintiff moved to confirm the referee’s report and for a judgment of foreclosure and sale.
May 16, 2023: Supreme Court (Ventura, J.) granted the motion, confirmed the report, and directed a sale.
Appeal: Defendant appealed, bringing up for review the 2017 order (CPLR 5501[a][1]).

Issues Presented

RPAPL 1301(3): Was the borrower entitled to amend her answer to assert a defense based on the pendency of a prior foreclosure action?
Referee Hearing: Did the referee’s failure to hold a hearing require denial of confirmation?
Referee’s Report: Was the referee’s computation of the amount due substantially supported by the record, or was it impermissibly based on unproduced business records and an inadequate CPLR 4518 foundation?

Holding and Disposition

Amendment to Assert RPAPL 1301(3): Properly denied as patently devoid of merit; the prior action was effectively abandoned, and defendant suffered no prejudice.
Referee Hearing: Any failure to hold a hearing was harmless given defendant’s opportunity to contest the report before the court.
Confirmation of Referee’s Report: Reversed. The report relied on unproduced business records and an affidavit from a servicer (Chase) whose limited power of attorney began in 2013, though the default allegedly occurred in 2008, with no proper foundation for adopting or relying on prior entities’ records.
Remand: For a new computation and further proceedings under CPLR 4403.

Court’s Legal Reasoning

1) RPAPL 1301(3): Strict Statute, But Prejudice Controls

RPAPL 1301(3) bars maintaining another action on the mortgage debt while a foreclosure action is pending, absent leave of the court. Although strictly construed because it limits a mortgagee’s common-law right to pursue concurrent remedies, New York courts disregard technical violations where the borrower suffers no prejudice—i.e., when the borrower is not forced to defend two suits on the same debt at once.

Here, the first foreclosure was “effectively abandoned” since 2008 and later discontinued in 2014. Because defendant was not prejudiced by defending two simultaneous suits, the proposed RPAPL 1301(3) defense was patently meritless, and leave to amend was correctly denied.

2) Referee Hearing: Harmless Error Where Court Review Cures

The court reiterated that a referee’s failure to hold a hearing does not, by itself, invalidate confirmation if the defendant had the opportunity to raise objections and submit evidence directly to the court in opposition to confirmation. That opportunity existed here, rendering any lack of hearing non-prejudicial.

3) Confirmation Standard and Business Records Foundation

A referee’s report should be confirmed when its findings are substantially supported by the record and credibility issues are resolved. However, computations based on the review of unidentified and unproduced business records are inadmissible hearsay and lack probative value.

The plaintiff relied on an affidavit from a JPMorgan Chase Bank, N.A. employee. The limited power of attorney authorizing Chase to act for the plaintiff began on January 25, 2013. The alleged default occurred in 2008. The affiant did not establish:

That records from prior entities (a former servicer or the plaintiff) were provided to Chase and incorporated into Chase’s records;
That Chase routinely relied on those prior records in its business; or
Personal knowledge of the prior entities’ business practices and procedures.

Without producing the underlying records and without laying a proper CPLR 4518 business-records foundation for cross-servicer reliance, the report’s figures (principal, interest, taxes, insurance, advances) were not substantially supported. The court therefore rejected the report and denied confirmation.

Precedents Cited and Their Influence

Reichert v Stilwell, 172 NY 83 (1902): Articulates RPAPL 1301’s object to protect mortgagors from the burden of simultaneous actions on the same debt. The Second Department invokes this principle in assessing prejudice.
Wells Fargo Bank, N.A. v Mitselmakher, 197 AD3d 778, and Deutsche Bank Natl. Trust Co. v O'Brien, 175 AD3d 650: RPAPL 1301 must be strictly construed as in derogation of the mortgagee’s common-law rights; nonetheless, harmless irregularities are disregarded in the absence of prejudice—informing the denial of leave to amend.
Wilmington Sav. Fund Socy., FSB v Hack, 209 AD3d 798; HSBC Bank USA, N.A. v Kading, 204 AD3d 649: Recognize that when a prior action is effectively abandoned, technical RPAPL 1301(3) violations may be overlooked absent prejudice—applied here to find the proposed defense patently meritless.
Wells Fargo Bank, N.A. v Spatafore, 183 AD3d 853: Supports denial of leave to amend where the proposed amendment is patently devoid of merit—applied directly to the 1301(3) defense.
Bank of N.Y. Mellon v Viola, 181 AD3d 767; Excel Capital Group Corp. v 225 Ross St. Realty, Inc., 165 AD3d 1233: A referee’s failure to hold a hearing can be harmless where the court entertains objections and evidence on confirmation—adopted to reject the hearing-based challenge.
Nationstar Mtge., LLC v Douglas, 218 AD3d 599; Bank of N.Y. Mellon v Conforti, 209 AD3d 942: Confirmation standard (“substantially supported by the record”) and the inadmissibility of calculations based on unproduced business records—central to rejecting the referee’s report here.
U.S. Bank N.A. v Jong Shin, 224 AD3d 933: Reinforces the necessity of producing underlying business records to support computations—followed here.
Bank of N.Y. Mellon v Hoshmand, 158 AD3d 600: Addresses powers of attorney and servicer authority—used to frame the analysis of Chase’s 2013 POA vis-à-vis a 2008 default.
Citibank, N.A. v Milord-Jean-Gille, 233 AD3d 750; Bank of N.Y. Mellon v Demasco, 226 AD3d 855: Set out the CPLR 4518 foundation required when a later servicer relies on records created by a prior entity—applied to find the foundation lacking.
Bank of N.Y. Mellon v Glasgow, 232 AD3d 754; Wells Fargo Bank, N.A. v Laronga, 219 AD3d 1559: Referee findings not “substantially supported” where the plaintiff fails to produce business records or lay an adequate foundation—supporting reversal here.
Countrywide Home Loans Servicing, L.P. v Weberman, 230 AD3d 632: Confirms that an appeal from a final judgment brings up for review certain prior orders (CPLR 5501[a][1])—used to reach the 2017 order.

Impact and Practical Guidance

A. For Lenders/Servicers

This decision reinforces a non-negotiable evidentiary baseline for foreclosure accounting:

Produce the business records underlying all computations (principal balance, interest accrual, escrow disbursements for taxes/insurance, corporate advances, fees). An affidavit that merely references internal systems without annexing records will not suffice.
Where the default predates your servicing, lay a robust CPLR 4518 foundation for cross-servicer records:
- Show the “boarding” process by which prior servicer records were received, verified, and integrated.
- Attest that your entity routinely relies on those integrated records in the ordinary course of business.
- Demonstrate your affiant’s personal knowledge of both your entity’s practices and adequate knowledge of the prior entity’s record-making practices or otherwise establish the trustworthiness of those prior records.
Document authority: Match powers of attorney, servicing agreements, and agency documents to the relevant time periods (especially the default date).
Anticipate referee scrutiny: Provide a clear, self-contained loan history and escrow ledger with page citations tying each number in the referee’s computation to an annexed record.

B. For Borrowers

On confirmation, specifically challenge hearsay-based computations and demand production of the loan history, escrow ledgers, and evidence of advances.
If a later servicer’s affiant relies on prior servicer records, probe for gaps in the CPLR 4518 foundation (lack of boarding details, no integration testimony, no knowledge of prior practices).
Argue that a limited power of attorney beginning after the alleged default undermines any claim of personal knowledge of default conditions unless a proper cross-servicer foundation is laid.
Note: A technical RPAPL 1301(3) violation will not automatically bar the case; you must show prejudice (actual burden of concurrent suits) to gain traction.

C. For Referees and Trial Courts

Require that every dollar in the computation be traceable to a produced record.
Scrutinize cross-servicer affidavits for CPLR 4518 compliance, especially where the default predates the affiant’s servicer.
While hearings are not invariably required, ensure the parties have a meaningful opportunity to submit objections and evidence; make a record of consideration at confirmation.

Complex Concepts Simplified

RPAPL 1301(3) (Concurrent-Action Rule): Generally, you cannot maintain a separate action to collect the same mortgage debt while a foreclosure is pending without the court’s permission. Courts will ignore technical violations if the borrower was not actually prejudiced by having to fight two suits at the same time.
CPLR 4518 (Business Records Exception): Business records can be admissible if made in the regular course of business, at or near the time of the events recorded, and it was the regular course of business to make them. If a servicer relies on a prior servicer’s records, it must show those records were integrated, relied upon, and trustworthy—often via detailed “boarding” testimony.
Referee’s Report: In a foreclosure, a referee computes what is owed. The court will confirm the report only if it is substantially supported by the record. Unsupported numbers or hearsay-based computations won’t pass.
CPLR 4403: After a referee issues a report, the court, on motion, can confirm, reject, or modify it. If the report is rejected (as here), the matter can be remitted for a new report.
“Order and Judgment of Foreclosure and Sale”: The final order directing the sale of the mortgaged property to satisfy the debt. If reversed on appeal, the sale cannot proceed unless and until a new judgment is entered.

Broader Significance

This opinion consolidates Second Department jurisprudence on two recurring foreclosure battlegrounds: evidentiary rigor at confirmation and the scope of RPAPL 1301(3). On evidentiary matters, it raises the bar for plaintiffs who seek confirmation based on internal summaries or affiant attestations untethered to annexed records—especially when the default lies outside the affiant-servicer’s tenure. On 1301(3), it underscores that strict construction does not equate to automatic dismissal; prejudice remains a decisive filter.

Expect more granular affidavits and fuller loan files at the confirmation stage, with increased attention to cross-servicer boarding and integration practices. Borrowers, in turn, have a clearer roadmap for challenging unsupported computations. Referees and trial courts gain an appellate template for insisting on production and proper foundations rather than accepting summaries.

Unresolved or Limited Aspects

The decision does not address standing, statute of limitations, or substantive defenses beyond those raised.
“Effective abandonment” is fact-sensitive; here, the long dormancy and ultimate discontinuance supported the finding. Different timelines may yield different outcomes under RPAPL 1301(3).
While the court found the lack of a referee hearing harmless, cases with more contested facts or credibility issues could warrant an evidentiary hearing.

Conclusion

Citimortgage, Inc. v. Hassanin stands as a forceful reminder that foreclosure accounting must be proven with produced business records and that cross-servicer reliance requires a meticulous CPLR 4518 foundation—particularly when the alleged default predates the affiant’s authority. At the same time, the court clarifies that RPAPL 1301(3) is not a trap for the unwary: absent prejudice from concurrent litigation, technical violations are a “mere irregularity.”

The decision’s practical effect will be tighter, better-documented confirmation papers and a more exacting review of referee reports. For litigants, the message is plain: bring the records, lay the foundation, and expect the court to insist on evidentiary precision before ordering a home sold.