A Yorktown man has filed a $5 million class action lawsuit against KeyBank, claiming that the lender fails to file proofs when residential mortgages are paid off.
Robert K. Sullivan sued the Cleveland bank April 2 in U.S. District Court in White Plains citing a New York law that requires lenders to file a satisfaction of mortgage with the local county clerk when a loan’s entire principal and interest have been paid.
“This is no mere procedural transgression,” the complaint states. “The widespread failure of banks to timely present mortgage satisfactions may disrupt the entire system for transferring residential property in New York State.”
Spokeswoman Karen Crane said KeyBank does not comment on pending litigation.
Robert and Denise Sullivan bought a house on Sherry Drive for $448,000 in 2003. In 2017, they took out a $335,000, 30-year loan from KeyBank.
Last September, as the Sullivans were going through divorce proceedings, they asked for a payoff statement. KeyBank said they owed $324,942, according to the lawsuit, and they paid the debt.
Robert then deeded his interest in the property to Denise, according to Westchester property records, and she refinanced with another lender.
But as of April 2, the complaint states, KeyBank had not presented a mortgage satisfaction to the Westchester County Clerk.
New York imposes progressively higher penalties for failure to file satisfaction papers within a month. The borrower is entitled to $500 after 30 days, $1,000 after 60 days and $1,500 after 90 days.
The law is meant to ensure that property can be efficiently and reliably bought and transferred, the complaint states. Landowners need clear titles to sell real estate, for instance, and the lack of a mortgage satisfaction can impair a borrower’s credit and ability to secure a new loan.
KeyBank has failed to file mortgage satisfactions thousands of times in New York, Sullivan claims, though his complaint does not explain how the number was derived.
He is asking the court to certify as a class all New York borrowers who paid off KeyBank loans after March 30, 2014, for whom no discharge or satisfaction of mortgage was filed with a county clerk within 30 days.
He is demanding that the borrowers be paid from $500 to $1,500, depending on when mortgage satisfaction papers were filed.
Sullivan is represented by Philip L. Fraietta and Frederick J. Klorczyk III of Bursor & Fisher PA, a national firm that specializes in class action lawsuits, and by Yorktown Heights attorney Mitchell P. Lieberman.
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