The Appellate Division of the Second Department, an appeals court, has recently rendered a decision establishing remedies for homeowners when their lenders fail to act in good faith during the course of mandatory foreclosure settlement conferences. The appellate court in the case of US Bank National Association v. Williams upheld the lower court decision which cancelled interest from accruing and also prevented the bank from charging the debtor with their legal fees during the foreclosure conference period.
Homeowners’ Remedies
This case gave homeowners remedies to use against banks when they act in bad faith during foreclosure conference negotiations.
In this case, the bank continually asked the borrower for further documentation during the course of the foreclosure settlement conferences. However, it turned out even though the bank was asking for more and more documentation during the 13 month period, they had a ban which would have prevented them from granting a mortgage loan modification.
The Appellate Court’s Decision
The appellate court stated in its decision, “under these circumstances, the Supreme Court providently exercised its discretion in finding that US Bank was not entitled to collect interest accrued as a result of its wrongful conduct.” Under Civil Practice Law and Rules section 3408(a)(f), “both the plaintiff and defendant shall negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible.”
The court stated in its decision, attorneys representing mortgage holders have been complaining that in many cases financial institutions refuse to offer mortgage loan modifications but still come to the mandatory foreclosure court conferences and demand the homeowners provide them with detailed documentation to underwrite mortgage modifications. During these periods of time, the interest and the attorneys fees is accruing on the homeowner’s mortgage. Foreclosure defense lawyers have been continually asking courts for sanctions against financial institutions when they act in bad faith concerning these mandatory mortgage modification court conferences.
Conclusion
There exists remedies for homeowners when they are dealing with banks who refuse to negotiate mortgage modifications in good faith.
