Northeast Home Loan LLC v. Nelson, No. 630-10-12 Wrcv (Teachout, J., July 9, 2014)

[The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the 

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STATE OF VERMONT

SUPERIOR COURT CIVIL DIVISION

Windsor Unit Docket 630-10-12 Wrcv

NORTHEAST HOME LOAN LLC

v.

JEFFREY J. & NANCY S. NELSON

DECISION

Sanctions for Lack of Good Faith in Foreclosure Mediation

Defendants in this foreclosure action sought foreclosure mediation in an attempt 

to obtain a modification of the loan involved in this case, which is a first mortgage. They 

also have a second mortgage, and were seeking to work with both mortgage holders and 

were apparently interested in either a short sale or a modification and/or refinance of one 

or both mortgages in an attempt to keep their home of many years and preserve their 

credit.

Foreclosure mediation was held. As required by statute, this Court then was 

obliged to make a determination of whether the Plaintiff had complied with its statutory 

obligations in connection with foreclosure mediation. In an entry order of September 12, 

2013, the Court determined that a hearing was necessary on the issue. A hearing was 

held on October 8, 2013. Based on the information presented at that hearing, the Court 

issued a Determination on November 18, 2013 with the conclusion that Plaintiff did not 

participate in foreclosure mediation in good faith for three specified reasons. See Entry 

Order of November 18, 2013. The Court determined that a further hearing would be held 

to determine sanctions.

The sanctions hearing was held on January 3, 2014. At that hearing, Plaintiff 

asked the Court to reconsider the Determination and made offers of proof of facts that 

Plaintiff’s counsel represented it had discovered in researching the matter after the 

October 8, 2013 hearing and November 18, 2013 Determination. Defendant Nancy 

Nelson participated in the hearing and disputed many of the facts represented by Plaintiff. 

The Court questioned the grounds on which a hearing previously held and completed 

should be reopened for new evidence that was previously available but not introduced at 

the original hearing. At the close of the hearing, the Court set a deadline of January 31, 

2014 for Plaintiff to submit a justification for reopening the evidence on the issue of a 

determination of good faith compliance, or lack of it.

Plaintiff filed a Sanctions Memorandum on January 30, 2014, and Defendant 

Nancy Nelson filed a response on February 13, 2014. Plaintiff and Defendants continue 
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to dispute many details with respect to what took place at the mediation and following it. 

In its memo, however, Plaintiff did not request that the Court reopen the evidentiary

hearing and reconsider the determination of lack of compliance. Rather, Plaintiff instead 

made many representations of fact about what happened during and after mediation and, 

in addition, described post-hearing offers made by Plaintiff. Attached to the memo were 

copies of several pieces of correspondence, and Plaintiff asked the Court to take its

representations of factual matters and attached communications into account in 

determining the level of sanctions. Defendant Nelson responded in detail to the 

representations of fact and disputed many of them and attached copies of other 

correspondence.

The parties continue to dispute the accuracy of factual statements made by the 

Court in the November 18, 2013 Determination. Specifically, Plaintiff emphasizes that at 

the July 1, 2013 mediation session, there was no full “agreement,” but only a tentative 

preliminary approval, and that the 2 1⁄2 month delay that followed before Plaintiff denied

approval of the proposal did not cause Defendants to lose a refinance opportunity for both 

loans but only the second mortgage loan. Plaintiff also claims that there was only a 

phone call from its servicer to Defendants after the mediation session and that it was not a 

debt collection phone call, whereas Defendants claim that there were two phone calls and 

they were debt collection phone calls made by an agent of Plaintiff with a complete lack 

of understanding of the fact that mediation had been held there was a pending possible 

settlement agreement. 

The Court does not change its Determination of November 18, 2013 for two 

reasons. First, Plaintiff no longer seeks reconsideration of that Determination. Second, 

even if there are some inaccuracies with respect to details of fact, none of the described 

disputes of fact undercut the essential findings, which were that Plaintiff’s agent at the 

mediation did not have authority to agree to a settlement or modification, Plaintiff 

(because of its own relationships with Freddie Mae for its own benefit) did not 

communicate its denial of the proposal to Defendants for 2 1⁄2 months after the mediation 

session, the delay caused Defendants to be in a position of not being able to take 

advantage of an approved opportunity to refinance with the second mortgage lender

because they did not know what would happen with the first mortgage, and Plaintiff’s 

servicer BSI made at least one direct debt collection telephone call to Defendants,

without up-to-date knowledge of the status of the loan, while foreclosure mediation was 

not yet complete. All of these actions are attributable to Plaintiff and are inconsistent 

with its obligation to engage in foreclosure mediation with Defendants in good faith. The 

Determination of November 18, 2013 that Plaintiff failed to comply with its statutory 

obligations stands.

With respect to sanctions, the Court has considered the memos of both parties. 

Defendants should not be relieved of the obligations they would have had if the outcome 

of the mediation had taken place in a timely way. The effect of delays and increased 

costs, however, were largely caused by Plaintiff and not attributable to Defendants, and 

they have been exacerbated by Plaintiff’s attempt to change the outcome of the October 
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8, 2013 hearing after the fact by seeking to have the Court consider information not 

provided until after that hearing that could have been provided at the hearing. 

A reasonable time period after the July 1, 2013 mediation session for Plaintiff to 

have notified Defendants of a definitive response was July 15, 2013, but no later than

August 1, 2013. The effect of Plaintiff’s actions was to delay Defendants’ ability to have 

sufficient knowledge about what their choices were with respect to both the first and 

second mortgages so that they could determine how to proceed in order to save their 

equity if possible, minimize their losses, and minimize any effect on their credit rating. 

That delay has continued to the present. Therefore, the Court suspends the running of 

interest on the loan for the period of August 1, 2013 to the present. 

Furthermore, while Defendants are responsible for reasonable attorneys’ fees in 

connection with this foreclosure action, the Court determines that any attorneys’ fees 

attributable to work performed during this same period is not reasonably attributable to 

the Defendants’ default, and will not be allowed in the accounting. 

Therefore, as sanctions the Court suspends interest from August 1, 2013 to July 

31, 2014, and disallows any attorneys’ fees incurred by Plaintiff during that period.

Dated at Woodstock, Vermont, this 8th day of July, 2014. 

Honorable Mary Miles Teachout

Superior Court Judge