Justice Debra Silber sitting in a Supreme Court foreclosure court in Kings County, New York recently had a case involving bad faith in negotiations by Deutsche Bank. In this case the defendant moved for, and was granted, an Order which confirmed a report of a special referee made at the foreclosure conference which found that Deutsche Bank had acted in bad faith in violation of New York Civil Practice Law and Rules section 3408(f).

Bad Faith by Bank

Justice Silber, in her decision, found the actions and inactions by Deutsche Bank clearly indicated an absence of good faith as was contemplated by the New York Statute. During a period of ten months the bank delayed the underwriting of husband’s mortgage modification application. The referee found Deutsche Bank’s failure to act during a 10 month period was a dilatory tactic. Justice Silber concluded the husband had sought to obtain a mortgage modification for a period of 6 months. He had made 18 appearances at foreclosure mediation conferences. In determining the appropriate sanction to punish Deutsche Bank for its failure to work with the defendant in this case regarding his mortgage modification application, the court decided to reduce the interest rate to 2% on the balance of the mortgage which accrued after August 1, 2010. This was the date Justice Silber deemed the bank should have approved the husband’s HAMP mortgage application. In addition, the bank and its loan servicer organization were barred from collecting attorney’s fees with regard to the foreclosure lawsuit which accrued after August 1, 2010.

Conclusion

If a bank fails to negotiate in good faith mortgage modifications at foreclosure court mediation conferences, there are remedies available to the homeowner.

Elliot S. Schlissel is a foreclosure attorney who litigates foreclosure cases. He seeks to keep homeowners in their homes.