The courts in New York are being flooded with new foreclosure lawsuits. Before the litigation stage in a foreclosure lawsuit, the parties must attend mandatory foreclosure mediation conferences. The Office of Court Administration is assigning new judges to deal with the increased volume of foreclosure court conferences in the Counties of Nassau, Suffolk, Kings and Queens. This action is being taken related to numerous complaints which have been filed by the attorneys for homeowners. These complaints generally state the financial institutions attorneys’ who are showing up at the foreclosure court conferences have no authority to make the decisions necessary to amicably resolve these cases.

Bank Attorneys Have No Authority To Settle Cases
or Approve Mortgage Modifications

In a study provided by legal service providers, it was found in eighty percent of 252 settlement conferences which took place over a 90 day period last year, the lawyers representing the financial institutions either lacked the appropriate information concerning the cases or did not have settlement authority. Justice Barry Kamins, the Chief of Policy and Planning for the courts in New York has taken action to provide more judges at the foreclosure settlement conferences in the four counties that have the heaviest backlog of foreclosure cases for the purpose of having judges immediately available for resolving disputes that occur at the foreclosure court conferences.

New York Courts Bursting At The Seams With Foreclosures

In 2013, there were 87,000 foreclosure cases pending in the courts in New York. As of April 1, 2014, there are more than 90,000 cases now pending in the courts.

The purpose of foreclosure court conferences is to allow the homeowners and attorneys for the banks to get together for the purpose of negotiating a mortgage modification to prevent the house from being sold at foreclosure sales.

New York Law

New York Civil Practice Law and Rules section 3408(c) which governs foreclosure court conferences states “the plaintiff shall appear in person or by counsel, and if appearing by counsel, such counsel shall be fully authorized to dispose of the case.” In another section of CPLR 3408(f) it states, both sides to the legal proceeding “shall negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible.” Foreclosure defense lawyers are aware most financial institutions are ignoring this statute.

The large majority of attorneys who appear for banks do not have any settlement authority. It is estimated at less than ten percent of the attorneys who appear at foreclosure court conferences for financial institutions have any settlement authority. A recent report with regard to the conduct at foreclosure court conferences states the courts should “not tolerate rampant violation of the settlement conference law and should enforce the law as it is written vigorously.” The report goes on to state when the attorneys for the banks appear without the appropriate authority or do not negotiate in good faith, judges should create consequences for the lenders such as tolling or barring interest on the outstanding balance or staying actions until the financial institutions fulfill their obligations under the settlement conference law.

Conclusion

The purpose of the foreclosure court conferences were to provide an intermediate step prior to full fledged litigation to allow beleaguered homeowners to work out mortgage modifications to keep them in their homes. The statute was a step in the right direction. However, the banks are not complying with this statute. If they continue to fail to comply, judges should punish them for violation of this statute!