Court Denies Interest from Default Data Due to Bank’s Failure to Negotiate in Good Faith

On March 27, 2007, HSBC Bank brought a foreclosure proceeding on a mortgage on property located in Brooklyn. The mortgage on the property was given to “MORTGAGEIT.” The mortgage was an adjustable rate mortgage in the amount of $624,000. A note was also given to “MORTGAGEIT,” as lender.

The borrower on the note and the defendant on the case was named McKenna.  The note showed an undated endorsement on behalf of ” MORTGAGEIT” to HSBC. There was also an assignment of the mortgage on March 2, 2009. The assignment was from the Mortgage Electronic Registration System Incorporated designated the mortgagee as “the nominee for the lender and mortgagee of record” to HSBC.

HSBC had refused to agree to a short sale on the property which had been requested by McKenna. HSBC claimed that McKenna had never been a resident of the property subject to the foreclosure. Therefore, HSBC had no obligation to negotiate with him in good faith.

The court found that HSBC failed to negotiate in good faith. The court ruled that they could not recover the interest on the note and the mortgage from the date of the McKenna’s alleged default.


This court penalized the lender for refusing to act in good faith.  The courts in New York are becoming more aggressive in taking action against lenders who fail to act in good faith.

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