Judge Patrick Sweeny sitting in Suffolk County Supreme Court, compelled a bank who acted in bad faith during the mandatory foreclosure settlement conferences to grant a mortgage modification to a homeowner. The bank appealed.
The Appellate Division in the Second Department, an Appeals court, held even though the bank failed to negotiate in good faith during the mandatory settlement conferences, Judge Sweeny’s remedy of compelling a loan modification was “unauthorized and inappropriate.” Justice Dickerson wrote in a decision for the Appellate Division, “Courts may not rewrite the contract that the parties freely entered into – the loan and mortgage agreements – upon a finding that one of the parties failed to satisfy its obligation to negotiate in good faith.” Justice Dickerson held in his decision Justice Sweeny’s court order ordering Wells Fargo to comply with the terms of the original loan modification agreement was a violation of the United States Constitution’s contract clause. It was also a violation of the banks due process rights. Justice Sweeny had also ordered that the foreclosure was dismissed.
Remedies For Bad Faith By Banks Regarding Foreclosures
Concerning the lower court’s decision, Justice Dickerson acknowledged the provisions mandating good faith negotiations in settlement conferences were “silent” with regard to the issues of sanctions and remedies. His decision stated “in the absence of a specifically authorized sanction or remedy in the statutory scheme, the courts must employ appropriate, permissible, and authorized remedies tailored to the circumstances of each given case. What may prove appropriate recourse in one case may be inappropriate or unauthorized under the circumstances presented in another. Accordingly, in the absence of further guidance in the legislature or the Chief Administrator of the Courts, the courts must prudently and carefully select from among available and authorized remedies tailoring their applications to the circumstances of the case.”
Judge Dickerson said the Appellate Court saw no reason to disturb Justice Sweeny’s finding that Wells Fargo did not satisfy its obligations. The Appellate Court did not rule out other possible sanctions and remedies against Wells Fargo. However in this case, they found that Judge Sweeny had gone too far.
The Appellate Court took the position the original modification was “merely a trial arrangement, not an agreement for binding obligations of the parties going forward.”
About The Author
Elliot S. Schlissel, Esq. is a foreclosure attorney representing homeowners concerning foreclosure legal defense, mortgage modifications and other remedies against banks who have been involved in improper mortgage and foreclosure practices.
Mortgage rates have reached all time lows. Unfortunately, the mortgage crisis in American has made it extremely difficult for the average American to qualify for these low interest mortgages.
