Law Office of Ronald D. Weiss, P.C.

Dec 07
 

As of December 15, 2009, New York promulgated a civil practice rule1 that requires the parties to a foreclosure action to participate in a mandatory settlement conference with the court within the first 60 days after service of process. The purpose of this conference is to determine whether the parties can reach an agreement to help the defendant avoid losing his or her home. The statute recommends the parties consider a loan modification in reaching a resolution. However, prior to initiating a foreclosure action, the lender is required to send a 90-day notice letter that essentially offers the same option to the defaulting borrower. This includes information pertaining to loan modification and non-profit financial counseling. So if the parties were unable to reach an agreement prior to litigation, is there a benefit to judicial oversight of a mandatory compromise negotiation to ensure the parties negotiated in good faith?

Mandatory Judicial Compromise

The statute directs the court to hold a compromise conference as a means of explaining the rights and obligations of the parties under the mortgage and “reach a mutually agreeable resolution to help the defendant avoid losing his or her home.” The legislature recommends the parties consider the following:

  • Loan modification, including modification to payment terms and amount due;
  • Short sale;
  • Deed in lieu of foreclosure; or
  • Other loss mitigation as the court deems appropriate.
 
In order to ensure the negotiations are conducted in good faith, the legislature further requires the lender to provide the court with the following documents:
The lender’s payment history;

  • Itemized amounts needed to cure and pay off the loan;
  • Copies of the mortgage and the note;
  • Application forms and loss mitigation options available to the defendant;
  • A summery of the status of the lender’s modification evaluation; and
  • Any other documents the judge may require.
 
After the financial crash in 2008, New York has taken a strong stance on ensuring that the parties to a residential foreclosure proceeding have negotiated in “good faith.” As such, the lender is also required to bring to the compromise any information available regarding what the borrower has left outstanding after applying and being rejected for a loan modification. This includes the reasons for the denial and the data and value used in the evaluation. The borrower is also required to submit documentation to the court, including his income tax returns, expenses, benefits, and information regarding any additional sources of income. Lastly, the statute actually mandates that the parties negotiate in “good faith” to reach an agreement, but what is “good faith” at this stage?
 
“Good Faith” Negotiations in New York

The State of New York has one of the longest foreclosure processes2 in the United States, often taking several years. Accordingly, the parties would have had ample time prior to litigation to discuss the potential for loan modification. While some lenders may legitimately attempt to assist defaulting borrowers in keeping their homes, others may make a minimum effort as a means of eventually forcing a short sale or foreclosure. For this reason, the courts require documentation of the process itself to determine whether negotiations have been undertaken in “good faith.” This term is defined subjectively as the states of mind of the parties during negotiation. “Good faith” includes honesty in purpose, faithfulness to the obligation, observance of reasonable commercial standards of fair dealing in the business, and lack of an intent to defraud or seek an unconscionable advantage. 

A recent case3 out of King’s County—Deutsche Bank Natl. Trust Co. v. Husband (2015)— sheds light on what New York courts consider to be a “good faith” negotiation. In that case, the plaintiff lender was required to produce an itemized breakdown of all amounts claimed to be due and owed on the defaulting mortgage note for the compromise conference, including all relevant files concerning the loan and any modification requests. Not only did the plaintiff lender fail to comply with the full terms of the court’s request, a review of the evidence led the court to discover that the defendant’s rejection of a previous loan modification offer was proper because the plaintiff lender did not act in good faith when it presented the defendant with the loan modification terms. For example, the court found that the loan modification offer was not based on the defendant’s well-documented income, as the monthly payment requested constituted nearly 60% of it; the interest rate offered was too high; and the defendant was only given nine days to accept or reject the modification.
Standards for New York Foreclosure Litigation 

As is often the case, because “good faith” in New York is a relatively subjective standard, it is often defined as what not to do. There is an abundance of case law on the matter of “bad faith” negotiations in the context of foreclosure litigation, which includes providing conflicting information, refusing to honor agreements, unexcused delay, unexplained charges, and misrepresentations to the other party. Good faith typically entails approaching negotiations with an honest purpose, an intention to deal with the opposing party fairly, and an absence of intent to defraud or mislead.

An amendment to CPLR 34085 that became effective December 20, 2016 states that good faith will be measured by the totality of the circumstances when considering a variety of factors, including compliance with Rule 3408’s requirements; compliance with applicable court rules and orders; compliance with applicable mortgage servicing laws, rules, and loss mitigation standards; and whether the parties have conducted themselves in a way that demonstrates efforts to reach a mutually agreeable outcome, such as not causing unreasonable delay and providing accurate information.

As the primary goal of the compromise hearing required under CPLR 3408 is to keep the borrower in his or her home and ensure that all previous modification offers were made in good faith, failure of the lender to negotiate in good faith can result in sanctions. Such sanctions can generally include a reduction of the interest rate on any balance that has accrued since the date of the bad faith, payment of a civil penalty to the state, actual damages payable to the defendant, or a denial of all attorneys’ fees and costs.

Contact a Long Island Foreclosure Attorney with Questions

Whether you are in the process of working with your bank on a loan modification, have recently received a 90-day foreclosure notice, or a foreclosure complaint has recently been filed against you, it is important to note that the goal of a foreclosure compromise hearing is to help you remain in your home. As such, your lender must adhere to strict standards of good faith negotiations intended to help you make fair, affordable payments on your mortgage. If your HAMP application has been rejected or you believe your lender is not negotiating with you in good faith, contact Ronald D. Weiss, P.C., Attorney at Law. He is your premier foreclosure attorney on Long Island, specializing in Nassau and Suffolk Counties, and he can analyze the specific facts of your case in order to determine whether your lender is abiding by federal and New York modification standards. Contact us today online or at 631.479.2455 for a no-risk consultation.

Aug 04

  

The Law Office of Ronald D. Weiss, P.C. is a bankruptcy, foreclosure, and modification law firm located in Long Island, New York and serving clients throughout Suffolk and Nassau Counties. Ronald D. Weiss, ESQ. is a Long Island bankruptcy, foreclosure, and modification lawyer, who since 1988 has represented individuals and businesses in the greater Long Island and New York areas undergoing financial hardship.
 
The Law Office of Ronald D. Weiss, P.C., for over twenty-five (25) years, has concentrated in legally representing residents of Suffolk County and Nassau County, Long Island under Chapters 7, 11 and 13 of the Bankruptcy Code, foreclosure defense litigation, mortgage loan modification, and general debt negotiation. Through advice and representation, our attorneys help determine and implement the best and most affordable ways to: eliminate overwhelming credit card obligations, reduce burdensome mortgage payments, stop creditor collection actions, and overcome foreclosure difficulties.
 
Let our law firm explain to you how we can help resolve your financial difficulties by representing you in the following:
 
Bankruptcy: Chapter 7, Chapter 11 & Chapter 13
Immediate protection by a Long Island bankruptcy attorney to stop collection actions, creditor harassment, foreclosure actions, wage garnishment, and bank restraint. Chapter 7 bankruptcy, as practiced by our Long Island law firm, eliminates most unsecured debts, such as credit card debts, personal loans, and medical bills, to allow individuals a fresh financial start. Chapter 13 bankruptcy, as implemented by our Long Island lawyers, helps individuals by curing mortgage arrears and reducing unsecured debt over a 5-year plan, while Chapter 11, as carried out by our LI law office, reorganizes businesses by protecting them from their creditors while a plan is worked on to save the business. Bankruptcy issues include: income means testing, exemption applicability to protect assets, potential avoidable transfers, the discharge of particular debts and the feasibility of potential reorganizations. Our law firm concentrates in bankruptcy solutions and is experienced in representing individuals and businesses in Suffolk County, Nassau County and the greater LI and NYC areas in all chapters of the bankruptcy code.
 
Defending Foreclosure
Vigorous defense of foreclosure actions by a Long Island foreclosure lawyer with customized, case-specific answers, discovery, conferences, and motions to protect our clients’ homes. Timely defense is important to avoid default and protect a homeowner’s rights. Emergency orders to show cause and motion practice can stop foreclosure sales, and potentially dismiss foreclosure actions, based on defects with documentation, standing, jurisdiction, and other defenses including predatory lending, fraud and misrepresentation. Foreclosure defense by our attorneys gains time and leverage for Suffolk and Nassau County homeowners seeking modifications and other mortgage solutions. Our law firm concentrates in foreclosure solutions and other debt oriented defense litigation and is experienced in defending individuals and businesses in the greater LI and NYC areas in all aspects of the foreclosure litigation process.
 
Mortgage Loan Modification & Debt Negotiation
Persistent negotiation by a Long Island modification lawyer to obtain more affordable mortgage terms, resolve mortgage arrears, and prevent foreclosure, through mortgage modification or other agreements, including settlements, forbearances and short sales. While modifications  and other negotiated resolutions are consensual, and while many lenders make these negotiations overly burdensome, our modification attorneys, based on our experience, approach and reputation, have obtained helpful modifications for a high percentage of our Long Island clients. Our law firm concentrates in negotiation solutions, including mortgage loan modification, credit card debt negotiations, and tax debt negotiations. We resolve and settle all manners of mortgage and other problematic debt affecting individuals and businesses in Suffolk County, Nassau County and the greater LI and NYC areas.
 
Our Approach to Debt Solutions
The Law Office of Ronald D. Weiss, P.C. analyzes each client’s case individually, based on the case’s specific facts and the needs of the client. Our goal is to give our clients highly effective representation that is at the same time compassionate and affordable. Often we look at using the above referenced debt solution tools as potential alternatives or as part of a larger approach where they are used to reinforce and build on each other. In each client’s situation we look at and consider all options, their implementation, probable results, timing, and methodology. We develop with our clients a plan in order to best maximize the chances of successfully resolving  burdensome debt and strategize to effectively overcome our clients’ economic challenges.
 

CONTACT:
Law Office of Ronald D. Weiss, P.C.
734 Walt Whitman Rd #203
Melville, NY 11747
Phone: (631) 479-2455
Email: [email protected]