Appellate Court Addresses Bad Faith by Financial Institution in Foreclosure Proceeding

foreclosure defense lawyerThe Appellate Division of the Second Department is an Appeals Court in New York. This court recently rendered a decision with regard to the issue of a bank negotiating in good faith at foreclosure court conferences. In the matter of U.S. Bank, N.A. v. Sarmiento the court upheld a decision by a Supreme Court judge which prevented the collection of interest or fees which had been accumulating on a loan since December 2009. The court in its decision stated “the issue of whether a party failed to negotiate in good faith within the meaning of CPLR 3408(f) should be determined by considering what the totality of the circumstances demonstrates that the party’s conduct did not constitute a meaningful effort at reaching a resolution.”

Mortgage on Home in Brooklyn

U.S. Bank held a mortgage of approximately $600,000 on a home in Brooklyn owned by Jose Sarmiento. In May 2008, Mr. Sarmiento lost his job. He was in touch with the mortgage servicing company, America’s Servicing Company, a subsidiary of Wells Fargo. He was told he did not meet their qualifications with regard to a mortgage modification. They claimed he didn’t make enough money. He thereafter defaulted on making the payments under his loan. However he found a tenant who was willing to pay rent and asked for another opportunity to submit a mortgage modification application. The servicing company refused his request. The court found Civil Practice Law and Rules section 3408 (f) states “both the plaintiff and defendant shall negotiate in good faith to reach a mutually agreeable resolution including the loan modification, if possible.” The court’s decision indicated between September 2009 and January 2011 there were 18 separate court conferences. The referee in charge of these conferences found the servicing organization mishandled various aspects of the negotiations. Documents were misplaced and denials were made on erroneous grounds. That mortgage modification actually wasn’t appropriate for Mr. Sarmiento.

Bank Prevented Settlement of the Case

The court found the bank prevented the reasonable settlement of this case. The attorney for Sarmiento indicated this court’s decision gives homeowners “a sword against lenders and they can use it immediately.” He further stated the bank was prevented from collecting over $300,000 in interest in this case. A spokesman for Wells Fargo stated their company “works hard to help our customers avoid foreclosure and communications during the modification process.”

Foreclosure Court Conference

Our office handles numerous foreclosure court conferences each and every week. We often find the banks hire per diem lawyers who know nothing about the case and have no authority to negotiate with the homeowner’s attorney at these conferences. The failure of banks to send attorneys who have authority to deal with important issues at these foreclosure court conferences is a violation of the good faith requirements of the statute which created these foreclosure court conferences. In essence it makes the foreclosure court conferences a waste of time!helping homeowners stay in their homes

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