LIEB BLOG

How current events impact business & real estate

Showing posts with label Foreclosure settlement conference. Show all posts
Showing posts with label Foreclosure settlement conference. Show all posts

Monday, March 16, 2020

Coronavirus & Foreclosure: It's about to get real



With quarantine, foreclosures are next.

We are heading for a recession and possibly a depression the likes of which we haven't seen before.

Jobs are going to be lost, tenants aren't going to pay rent, mortgage payments are going to be missed and banks will have no choice but to start to pursue foreclosure.

If you are currently in a foreclosure proceeding, you should know that the courts have just rescheduled (adjourned) all foreclosure settlement conferences (CPLR 3408) for at least 45 days while they work on new orders and directives for the process.

This is going to be a mess.

If you are concerned about your mortgage, you need to act immediately and negotiate a forbearance (i.e., banks often agree to refrain from pursuing a foreclosure for a period of time for no or reduced payments) with a lender before going into default.

Get ready - the next foreclosure crisis is here.


Tuesday, July 26, 2016

Changes to New York Foreclosure Law Impose Stringent Penalties for Failing to Negotiate in “Good Faith”

Recently Governor Andrew Cuomo signed into law a comprehensive piece of legislation, which makes sweeping changes to New York’s requirement that Lenders and Borrowers negotiate in “good faith” during Mandatory Foreclosure Settlement Conferences.

Under New York foreclosure law, in a residential foreclosure action, commenced on or after February 13, 2010, involving a 1-4 family owner occupied property, it is required that a Mandatory Foreclosure Settlement Conference be held within sixty (60) days of service of the foreclosure summons and complaint. The purpose of the Mandatory Foreclosure Settlement Conference is to provide a venue for Borrowers and Lenders to settle the foreclosure action without further court action, via a loan modification, deed-in-lieu, short sale or other loss mitigation option. At this settlement conference, it is required that both parties negotiate in “good faith.”

However, the implementation of New York’s Mandatory Foreclosure Settlement Conference and its “good faith” negotiations requirement, has had its fair share of complications. To mitigate these complications, this recently enacted legislation, which takes effect on December 20, 2016, places stringent guidelines on the documentation and information that both parties must come to the conference with and requires that both parties, or representatives thereof, appear at the conference with full authority to settle the case.

Additionally, the legislation imposes more stringent penalties upon both parties should they fail to negotiate in “good faith.” Where it is found that a Lender has failed to negotiate in “good faith,” one or more of the following penalties may be imposed:
  • A toll of the accumulation and collection of interest, costs and fees during any undue delay caused; 
  • A civil penalty of up to twenty-five thousand dollars ($25,000.00); 
  • Actual damages, fees (including attorney’s fees) and expenses incurred by the homeowner as a result of the Lender’s failure to negotiate in good faith; or 
  • Any other relief that the Court deems just and proper. 
On the other hand, where it is found that a Borrower has failed to negotiate in “good faith,” the Court is required to remove the case from the conference calendar, meaning that the Lender will then be permitted to move forward towards obtaining a Judgment of Foreclosure and Sale. 

Since the Federal Making Homes Affordable (“MHA”) program is due to expire on December 31, 2016, these additional consumer protections, provided by the State of New York, will ensure the availability of continued protections for the State’s distressed homeowners by requiring that Lenders come to the Mandatory Foreclosure Settlement Conferences ready, willing, and able to settle foreclosure actions, or face the consequences.

Monday, June 01, 2015

Making Home Affordable - New Handbook Available - Version 4.5

To access the new Handbook for MHA, inclusive of HAMP and HAFA, click here. While reviewing the Handbook you should be aware of the case of US Bank v. Sarmiento wherein the Court held that the statutory good faith standard for a CPLR 3408 Foreclosure Settlement Conference is whether the "totality of the circumstances demonstrates that the party's conduct did not constitute a meaningful effort at reaching a resolution", including compliance with the Handbook. To review the case, click here.

This Handbook is the rules for banks / servicers to modify mortgages, so pay careful attention to detail and make sure that they comply.

Tuesday, November 25, 2014

Good Faith Decisions on Short Sales - Updates Coming 12/1/2014

Effective December 1, 2014, the Courts of the State of New York will oversee negotiations between lenders and borrowers to achieve a short sale or deed-in-lieu within foreclosure settlement conferences. The Courts are empowered to sanction parties who negotiate in bad faith.

Previously, borrowers were only allowed to attend the conferences to discuss workout options, such as loan modifications and payment plans, which would allow borrowers to keep their homes. If borrowers were denied loan modifications, their cases would be released from the settlement conference part, and they would be forced to do short sales or deeds-in-lieu on their own without court intervention or oversight. Oftentimes, these exit strategies took a very long time because many borrowers with second mortgages had difficulties settling their second mortgages or were unable to keep up with the lender’s numerous and complicated document requests. Many borrowers simply gave up and allowed their properties to go to foreclosure rather than spend thousands of dollars on legal fees for help with a short sale that was never going to be approved.

Now, with court oversight, it is anticipated that lenders will now be making quicker decisions on short sale and deed-in-lieu applications within the State of New York, and there should be fewer foreclosures overall. The court referees will set deadlines for the submission and review of short sale and deed-in-lieu applications and will ensure that the borrower is complying with the lender’s document requests and that the lender is properly reviewing the applications.

Despite this new rule, it is likely that short sales will continue to decline because the Mortgage Forgiveness Debt Relief Act of 2007 expired at the end of 2013. Under this Act, borrowers were not required to pay income tax on cancelled mortgage debt as a result of loan modifications, short sales, or deeds-in-lieu. Now that it has expired, borrowers who choose to do short sales may be hit with large tax bills after they sell their properties for less than what is owed on the mortgage. Therefore, even though the short sale and deed-in-lieu application process will be quicker with court oversight, borrowers may still choose to not move forward with these exit strategies because they cannot afford the taxes.

Thursday, November 13, 2014

New York Foreclosure Settlement Conferences are Tools to Help Homeowners Stay in Their Homes

New York is one of many states across the country that has implemented court-mandated settlement conferences for residential foreclosure actions.

It is important to understand how these conferences work so that homeowners can take full advantage of this opportunity to delay and avoid foreclosure. The initial conference must be scheduled within 60 days after the proof of service of the complaint has been filed with the county clerk and allows the borrower to meet with his or her Lender and a court referee or judge to discuss potential workout options, such as loan modifications or payment plans. If the borrower decides to apply for a loan modification, the Lender provides the borrower with a document request for the loan modification application, and the court referee sets deadlines for the submission and review of the application. Typically, there are numerous conferences throughout the application process in order to ensure that the borrower is complying with the Lender’s document requests and that the Lender is properly reviewing the application. If a borrower believes he was improperly denied a loan modification, his attorney may request a bad faith hearing with the judge to determine whether the Lender should be sanctioned for bad faith negotiations. These settlement conferences not only help homeowners delay the foreclosure process but also can stop the foreclosure process all together.

Not every person who has a property in foreclosure in New York State is entitled to these mandatory pre-trial foreclosure settlement conferences. The law in New York (CPLR 3408), extends the conferences only to owner-occupied residential properties, so if a homeowner has a vacant property or a rental property in foreclosure, he or she is not entitled to a CPLR 3408 conference as of right.

Further, CPLR 3408 does not apply in federal court, but settlement conferences are still available at the federal level. Rule 16 of the Federal Rules of Civil Procedure allows federal courts to hold pre-trial conferences for the purpose of settlement negotiations and encourages judges to take an active part in the settlement negotiations. The procedures differ at the federal level but the purpose is still the same. These conferences are often the difference between a homeowner staying in his or her home and losing it.

Friday, May 16, 2014

New Policy to Reduce Foreclosures on Long Island

Starting in June 2014, judges on Long Island will take on a substantial role in Foreclosure Settlement Conferences as issues arise in foreclosure litigation. The purpose of this new policy is to solve homeowners’ issues in an efficient way and help more homeowners obtain loan modifications in an area of the country where the percentage of foreclosures is still quite high.

New York requires judicial intervention in the foreclosure process. It is New York State Law that the courts must hold Foreclosure Settlement Conferences for all residential foreclosure actions involving home loans originating between January 1, 2003 and September 1, 2008, or nontraditional home loans. Previously overseen only by Court-appointed referees, these conferences allow borrowers to discuss workout options with their mortgage lenders in order to avoid foreclosure. However, the process has always been flawed, as lenders oftentimes would send representatives who not only did not have knowledge of the cases but also had no authority. This new policy is supposed to address these types of issues quickly, correct the flaws of the Foreclosure Settlement Conferences, and protect borrowers against the wrongful practices of these mortgage lenders. A judge is much more equipped to handle these issues than a referee, allowing for fewer foreclosures on Long Island.