In a case recently decided in Kings County, New York, Justice Donald Kurtz, sitting in the Supreme Court Foreclosure Courtroom, ordered that all interest accrued on the note be forfeited because of the bank’s failure to negotiate a mortgage modification in good faith.
History of the Case
Wells Fargo Bank had started a foreclosure lawsuit. The case appeared on the Court’s calendar in Brooklyn before a referee. The referee determined the homeowner had submitted adequate documentation of his income to qualify for a mortgage modification under the Home Affordable Mortgage Program, also known as “HAMP” mortgage modification program guidelines. The bank had all of the necessary documents to review the loan modification application, however, the bank refused to grant a mortgage modification. The referee involved asked the bank to again consider reviewing the homeowner’s HAMP mortgage modification application. The bank again denied the HAMP mortgage modification. They also denied a traditional loan modification claiming the property was not being utilized as the principle place of residence as the owner.
Bank Representative Ordered To Appear In Court
The referee ordered the bank to produce a representative from its servicing organization in court to explain to the judge why they would not grant a mortgage modification. The referee took this action because he felt the homeowners were denied a mortgage modification even though they qualified for one.
The referee wrote a report stating the bank violated his directions which recommended they grant the homeowner a mortgage modification. The bank took the position they were not required to negotiate in good faith. Judge Donald Kurtz disagreed with the bank. He ruled the bank had a duty to negotiate in good faith under New York Civil Practice Law and Rules Section 3408(f). The judge confirmed the referee’s report and stopped all interest which accrued on the mortgage and note from the start of the mandatory foreclosure court conferences going forward.
Conclusion
If you take aggressive action with regard to mortgage modifications in front of judges or referees, you can put pressure on the banks to be cooperative and grant mortgage modifications.
In a case before Justice Yvonne Lewis sitting in the Supreme Court Foreclosure Part in Kings County, defendant Ellery Beaver LLC brought an application for summary judgment seeking the discharge of HSBC’s mortgage on their property. HSBC brought a cross application for dismissal of the action by the plaintiff.
The Consumer Financial Protection Bureau is reviewing new regulations which will put the brakes on a contentious practice called mandatory arbitration. Under mandatory arbitration rules, consumers must take disputes they have with financial institutions to third party mediators. This prevents them from going into courts and presenting their issues to judges. Consumer advocates feel this practice benefits large financial institutions, credit card issuers and financial service providers to the detriment of consumers.
Justice Phyllis Orlikoff Flug sitting in a Foreclosure Part in Queens County Supreme Court recently had a case where the defendants moved to dismiss the bank’s lawsuit in a foreclosure legal action. The lawsuit had been initiated against the defendants Michael Pertab and Cholying Pertab in 2010. Michael had been served by personal service in July 2010 and Cholying had been served by substituted legal service in August 2010.
New York Real Property Actions and Proceedings Law (RPAPL) Section 1304 requires financial institutions and loan servicing companies to provide homeowners, on residential property, at least 90 days notice before initiating a 
