Enhanced Evidentiary Scrutiny of Referee Reports in Mortgage Foreclosure Actions

Commentary on HSBC Bank USA, N.A. v. Coxall
(2025 NY Slip Op 03557, Appellate Division, Second Department)

Introduction

HSBC Bank USA, N.A. v. Coxall marks the latest chapter in New York’s evolving mortgage-foreclosure jurisprudence. Although the case began as a routine uncontested foreclosure in Kings County, the Appellate Division’s decision reverberates far beyond the immediate litigants. At its core, the Court imposed a heightened evidentiary burden on mortgagees when they seek confirmation of a referee’s computation of the amount due. The ruling invalidated the foreclosure sale order because the plaintiff’s proof—a servicer’s affidavit—failed to show that business records inherited from a prior servicer were admissible under CPLR 4518(a). Additionally, the Court clarified when a borrower who defaulted in opposing a summary-judgment motion may (or may not) raise RPAPL 1304 notice defenses later in the action.

Summary of the Judgment

• The appeal from the interlocutory order (10/12/22) was dismissed as academic because a final order and judgment of foreclosure and sale had been entered.
• On the merits, the Second Department:
  • Reversed the judgment of foreclosure and sale.
  • Denied HSBC’s motion to confirm the referee’s report and for entry of judgment.
  • Rejected the referee’s report in its entirety.
  • Remitted the matter for a de novo computation of the amount due, pursuant to CPLR 4403.
• The Court affirmed the Supreme Court’s refusal to:
  • Vacate the 2017 default summary-judgment order under CPLR 5015(a)(3);
  • Permit the borrower to amend his answer nine years after service; or
  • Re-litigate RPAPL 1304 compliance, which had already been resolved.

Analysis

A. Precedents Cited and Their Influence

1. Matter of Aho, 39 NY2d 241 (1976) – confirmed that interlocutory appeals are usually subsumed once a final judgment is entered.
2. U.S. Bank N.A. v. Morino, 207 AD3d 776 (2d Dept 2022) and U.S. Bank N.A. v. Carucci, 217 AD3d 894 (2d Dept 2023) – distinguished between intrinsic and extrinsic fraud for CPLR 5015(a)(3) purposes; adopted here to reject defendant’s “false-representation” argument because it was intrinsic fraud and no reasonable excuse for default was offered.
3. Wells Fargo Bank N.A. v. Morales, 178 AD3d 881 (2d Dept 2019) – recognized that RPAPL 1304 compliance is a condition precedent and a defense that may be raised “at any time” but also held that once decided, the law-of-the-case doctrine applies. This provided the backbone for precluding re-litigation of notice issues.
4. Bank of N.Y. Mellon v. Gordon, 171 AD3d 197 (2d Dept 2019) – articulated the foundational requirements for admitting business records from prior mortgage servicers; relied on heavily to declare the affidavit inadmissible here.
5. Christiana Trust v. Campbell, 202 AD3d 750 (2d Dept 2022); Bank of N.Y. Mellon v. Basta, 205 AD3d 664 (2d Dept 2022) – further refined what a servicer must show when relying on predecessor records. The Coxall Court cites these cases verbatim.

B. Court’s Legal Reasoning

1. Appellate Jurisdiction: Once a final judgment is entered, any appeal from an interlocutory order merges into that judgment (Matter of Aho). Therefore, the Court addressed only the final judgment.
2. CPLR 5015(a)(3) – Intrinsic Fraud Standard: Defendant alleged the bank committed fraud by misrepresenting RPAPL 1304 compliance. That is intrinsic, not extrinsic, fraud. Without a reasonable excuse for default, vacatur is unavailable.
3. RPAPL 1304 & Law of the Case: Although notice compliance can be raised “at any time,” once the 2017 summary-judgment order resolved it, the defendant’s later attempt was barred by procedural doctrine.
4. Amendment of Pleadings: Because defendant’s answer had been stricken, there was nothing to amend. Even if there were, nine-year delay would unfairly prejudice the bank.
5. Confirmation of Referee’s Report – The Critical Holding:
   • The referee relied exclusively on an affidavit from Nationstar’s vice-president, Frank Rosas.
   • Rosas stated that Nationstar’s records “included” PHH Mortgage’s prior records but did not:
     • Identify when Nationstar became servicer;
     • Attest to personal knowledge of PHH’s record-keeping practices; or
     • Establish that PHH’s data was incorporated and relied upon in the ordinary course of business.
   • Under Gordon and CPLR 4518(a), those omissions render the affidavit—and consequently the referee’s computation—inadmissible hearsay.
   • Because the calculation of amounts due is essential to the judgment, the entire report had to be rejected and remanded.

C. Potential Impact

The decision fortifies a trend toward rigorous enforcement of CPLR 4518(a) in foreclosure actions:

• Servicer Affidavits: Banks and loan servicers must provide granular details about data integration from predecessor entities—mere boilerplate will not suffice.
• Referee Proceedings: Referees and Supreme Court judges must independently ensure that the documentary foundation meets admissibility standards before rubber-stamping a report.
• Litigation Strategy: Plaintiffs should now consider live testimony or supplemental affidavits from predecessor-servicer personnel or produce the servicing transfer agreements.
• Borrower Remedies: Even after losing earlier stages, borrowers can attack the judgment at the damages phase if the lender’s proof is deficient.
• Case Management: Trial courts may see more evidentiary hearings under CPLR 4403 to cure defective records, increasing foreclosure timelines.

Complex Concepts Simplified

CPLR 4518(a) – Business Records Exception

A hearsay rule allowing written records into evidence if (1) made in the regular course of business, (2) by a person with knowledge of the act, and (3) it was the regular practice to make such a record. When a successor relies on records created by a prior entity, the successor must show personal familiarity with the predecessor’s practices or that the predecessor’s records were integrated and relied upon.

Referee in Foreclosure

An individual (often a lawyer) appointed by the court to compute the exact amount owed—including principal, interest, taxes, and fees—before a judgment of foreclosure and sale can be entered.

Intrinsic vs. Extrinsic Fraud (CPLR 5015)

Intrinsic fraud concerns misrepresentations or perjury within the lawsuit itself; extrinsic fraud prevents a party from having a full and fair day in court. Only extrinsic fraud automatically warrants vacatur of a default.

Law of the Case Doctrine

Once an issue is decided in a particular case, that decision is generally binding on courts of coordinate jurisdiction in later stages of the same litigation, absent compelling circumstances.

Conclusion

HSBC Bank USA, N.A. v. Coxall reinforces that “paper perfect” foreclosure practice in New York requires more than secured lending boilerplate. The Appellate Division signaled that: (1) affidavits relying on inherited servicing records must satisfy every element of CPLR 4518(a); (2) trial courts must refuse to confirm referee reports lacking an adequate evidentiary foundation; and (3) procedural doctrines such as default, law of the case, and timeliness continue to delimit when borrowers may invoke statutory notice defenses. Going forward, lenders should anticipate stricter evidentiary demands at the referee-confirmation stage, while borrowers and their counsel have a reinforced tool for challenging deficient calculations. The ruling thus strikes a balance between expedited foreclosure processes and the integrity of the evidentiary record that supports the drastic remedy of property sale.