Source: http://www.wallstreetmainstreet.com/2016/
Timestamp: 2019-04-22 12:20:43+00:00

Document:
Finally, courts across New York will now have uniform guidelines to help homeowners in foreclosure!
Since 2009 many homes were lost to foreclosure due to variations in how courts dealt with borrowers during FCP conferences (Foreclosure Conference Part). Obviously, unproductive settlement conferences were surely to blame as well.
One of the more important revisions revolves around "bad faith". Now that the courts have somewhat addressed this issue and provided some much needed direction we can hopefully see both parties (especially the banks) come to the table ready to settle. And, surprisingly it is sometimes the borrower who behaves as if they do not want to save their homes. I believe though, this is more due to frustration than anything else. Most of these "bad faith" issues revolve around lenders sending in per diem attorneys to conferences with little to no information regarding the case. Along with the banks invoking the famous "phantom investor restrictions" excuse. Clearly, this makes it impossible to settle. A tactic long used by the banking industry. Which when you think about it makes no sense. Aren't banks in the business of collecting money, not properties??
And, finally the most problematic issue we see is the failure to answer the summons and complaint. Unfortunately, many borrowers mistakenly believed that showing up in court and providing the bank with loan modification documents is the same as filing a written answer. The problem here is the borrower usually discovers after their case is removed from FCP that they failed to file an answer. Thankfully, the court will now address this problem by advising the homeowner at the first conference of the need to file an answer. Time to answer is limited though to 30 days from the initial FCP appearance. Clearly, the borrower must have a valid reason for not answering the summons and complaint.
Since their inception in 2009, settlement conferences under New York's judicial residential foreclosure conference process, the mandatory mediation program New York enacted in response to the foreclosure crisis, have allowed thousands of New York homeowners to achieve settlements and loan modifications, thereby averting foreclosures and sparing New York's communities their adverse effects. But many homes have been needlessly lost to foreclosure because of unproductive settlement conferences, with erratic implementation of the law leading to dramatic variations in the efficacy of the conferences (see Divergent Paths: The Need For More Uniform Standards and Practices in New York State's Residential Foreclosure Conference Process (New Yorkers for Responsible Lending), available at http://www.legalservicesnyc.org/storage/PDFs/divergent paths.pdf).
Legislation enacted in the waning hours of the 2016 session included significant changes to the foreclosure conference process. These amendments fill many of the gaps that the original legislation left open, so there is now hope that the settlement conference law will be more rigorously implemented in all jurisdictions, with uniform consequences to deter its violation, and the legislature's intent to prevent avoidable foreclosures and encourage home-saving loan modification solutions more effectively implemented across New York State. The amendments clarify the courts' obligation to ensure a meaningful negotiation process that prevents avoidable foreclosures by clarifying the obligations to appear with required information and authority, defining the good faith negotiation standard, detailing the remedies when the negotiation process is subverted, and preserving homeowners' ability to defend foreclosure actions on the merits, among other changes.
CPLR 3408 was enacted in 2008 and amended in 2009. It provides for mandatory residential foreclosure settlement conferences at which the parties are encouraged to negotiate, at face-to face court-supervised settlement conferences, foreclosure-avoiding solutions such as loan modification agreements (CPLR 3408(a), (f)). It requires parties appearing at conferences to appear with authority to dispose of the case (CPLR 3408(c)), and requires the courts to provide notice to the parties of the scheduling of the conference and the documents to be brought to the conference (CPLR 3408(e)).
Although CPLR 3408(f) presently expresses a preference for home-saving loan modifications, specifying that "the plaintiff and defendant shall negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible," for some homeowners other options such as "deeds in lieu of foreclosure" or "short sales" are more viable.
Some courts denied defendants settlement conferences based on a determination that the homeowners could not qualify for a loan modification, depriving homeowners of the opportunity to avoid foreclosure with a negotiated settlement as the Legislature intended. The amendments clarify that other loss mitigation options, not just loan modifications, are proper subjects of settlement conferences (CPLR 3408(a)).
Following amendment in 2009, the law imposed an affirmative obligation to negotiate "in good faith" to achieve such loan modifications, if possible (CPLR 3408(f)), but the law left "good faith negotiation" undefined, and prescribed no remedies when that standard is violated, leaving the courts to devise their own, sometimes idiosyncratic, definitions of good faith and to craft remedies when parties did not fulfill the mandate to negotiate in good faith. The recent amendments fill some of the gaps left by the original law.
The amendments adopt a good faith definition evolved from case law, stating that it "shall be measured by the totality of the circumstances." Courts determining good faith shall now consider: (1) compliance with the requirements of CPLR 3408 and applicable court rules, orders or directives of the court or its designees; (2) compliance with applicable mortgage servicing laws, rules or regulations and loss mitigation standards; and (3) conduct consistent with efforts to reach a mutually agreeable resolution, including avoiding unreasonable delay, appearing at conferences with authority to settle, avoiding prosecution of foreclosure proceedings while loss mitigation applications are proceeding (known as "dual tracking"), and providing accurate information to the court and parties (CPLR 3408 (f)).1 In light of some courts' reluctance to consider conduct preceding the formal start of settlement conferences when assessing good faith, the reference to dual tracking is significant, because it by definition authorizes consideration of conduct preceding the settlement conference process.
The amendments provide additional guidance about other settlement conference requirements. CPLR 3408(c) clarifies that any party's representative at the conference must appear with authority to dispose of the case. In the past, plaintiffs routinely appeared by per diem lawyers or representatives lacking required authority or information needed for meaningful negotiations. As a result, the settlement conference process is often needlessly protracted. See Stalled Settlement Conferences: Banks Frustrate New York's Foreclosure Settlement Conferences, April 29, 2014, available at http://nylawyer.nylj.com/adgifs/decisions14/050214report.pdf.
The amendment revises the language to make the appearance with authority requirement applicable to all representatives appearing at conferences. Also, while the original statute allowed only plaintiff's representative to appear telephonically or by video conference, as amended, either party's representative may be permitted to appear by video or telephone.
The amendments also add stronger language concerning the obligation to bring required information needed for meaningful settlement negotiations to conferences, for both defendants and plaintiffs (CPLR 3408(e). The amendments require plaintiffs' representatives to appear with a summary of the status of the plaintiffs' evaluation of any pending loan modification or loss mitigation applications, including a list of outstanding items required for completion of the application; an expected date for completion of the review of the application; and, if the application was denied, a denial letter or other document explaining the basis for denial and documentation supporting denials.
Plaintiffs' invocation of phantom investor restrictions, and refusals to seek waiver of such restrictions as is required by the federal Home Affordable Modification Program (HAMP) governing most loan servicers, has been an impediment to settlements and has led to much litigation concerning failure to negotiate in good faith,2 so the requirement that plaintiffs supply this back-up for modification denials provides greater transparency and should prevent litigation on these issues.
Addressing the statute's failure to specify a remedy for violation of the statute,3 the amendments provide a process for adjudicating disputes under the statute and enumerate prescribed remedies for its violation. A new section, CPLR 3408(i), empowers the court to determine good faith and order remedies either on motion or sua sponte, on notice, and also provides that referees, judicial hearing officers or other court staff may hear and report findings of fact and conclusions of law, and may make reports and recommendations for relief to the court. New subsections (j) and (k) enumerate remedies when both plaintiffs and defendants fail to negotiate in good faith.
CPLR 3408(j) mandates that when plaintiffs fail to negotiate in good faith, the court shall, at a minimum, toll interest and fees during any undue delay caused by the plaintiff, codifying the most commonly granted remedy under the case law construing CPLR 3408(f).4 The court may also compel production of documents requested during conferences, impose a civil penalty not to exceed $25,000, and award any other relief deemed just and proper (CPLR 3408(j)).
For defendants who fail to negotiate in good faith, CPLR 3408(k) specifies that the court shall remove the case from the conference calendar, but cautions that the court shall take into account "equitable factors," including whether the defendant was represented by counsel. This is important recognition of the disparity in bargaining power at settlement conferences, where foreclosing lenders are among the world's largest financial institutions and are always represented by counsel, while defendants are among the most vulnerable, and often are left to fend for themselves without access to counsel or understanding of the court proceedings in which they find themselves.
Foreclosure actions historically proceeded on default in most cases, with no homeowner defendant participation. With the advent of settlement conferences, defendants have become participants in the process, as homeowners lacking access to counsel or the wherewithal to answer a complaint are nonetheless able to—and do—appear in court for settlement conferences when they receive notice from the court of a scheduled conference date.5 But homeowners who have participated in conferences and believed they had "answered" by attempting to negotiate a settlement in court and complying with onerous application processes and documentation requests from their mortgage servicers have, upon exhaustion of settlement conferences, been prevented by the courts from submitting answers and litigating their cases on the merits.6 The amendments address that unintended problem.
CPLR 3408(l) now obligates the court, at the first settlement conference, to advise the defendant of the requirement to answer the complaint, to explain what "answering" a complaint entails, that the ability to contest the foreclosure and assert defenses may be lost if an answer is not interposed, and to provide information about available resources for assistance. Also, a new Section 3-a of RPAPL 1303 directs the Department of Financial Services to publish a Consumer Bill of Rights detailing the rights and responsibilities of parties to foreclosure proceedings, which the court must provide to foreclosure defendants at the first settlement conference, pursuant to CPLR 3408(l).
A new subsection (m) of CPLR 3408 overrules much of the appellate case law effectively barring non-answering defendants who participated in settlement conferences from vacating defaults and interposing late answers, providing that a defendant who has defaulted in answering but appears at settlement conferences is presumed to have a reasonable excuse for the default and shall be permitted to serve and file an answer, without any substantive defenses deemed waived, within 30 days of the initial appearance at a settlement conference, and with the defendant's default being deemed vacated upon service of such late answer (CPLR 3408(m)). This will spare the courts adjudication of motions for leave to vacate defaults and serve late answers, which currently flood the dockets of both the trial and intermediate appellate courts and will better implement the preference of disposition of cases on the merits.
Subsection (m) of CPLR 3408 also codifies existing practice under the Uniform Court Rules (Uniform Rules for the Supreme Court and the County Court §202.12-a (c) (7)) specifying that motions shall be held in abeyance while the settlement conference process is ongoing, except for motions concerning compliance with CPLR 3408 or its implementing rules. This makes clear that parties participating in the settlement conference process have redress for violations of the settlement conference law even if other motion practice pertaining to the case is held in abeyance (and even if they have not answered the complaint).
US Bank moved for summary judgment and an order of reference in this mortgage foreclosure action. The now-deceased borrower, Eisenman, failed to make payments, but defendant opposed the motion arguing dismissal was warranted due to bank's failure to serve the estate of Eisenman with notice of default under RPAPL §1304. The court found bank established prima facie entitlement to summary judgment and an order of reference noting defendant failed to raise an issue of fact precluding summary judgment in bank's favor. It found defendant's laches argument meritless, as was the claim bank failed to comply with the notice provisions of §1304. Also, contrary to defendant's claim, the Jan. 30, 2012 dismissal of a prior action against Eisenman was not dismissed on the merits, and was not res judicata barring this action. The court stated prior courts found §1304 was inapplicable where the borrower was deceased. Therefore, as Eisenman, the borrower, was deceased, there could no longer be notice given to the borrower, and accordingly, the notice provisions of RPAPL §1304 did not apply. Hence, bank's motion for summary judgment, and an order of reference was granted.
A group of Queens pols is touting a new program to help people living in foreclosed homes turn their fortunes around.
Council members representing southeast Queens gathered Tuesday morning to unveil the new Foreclosure Buyback Program, also known as the City Restoration Program.
They said the initiative is the first in the country of its kind, and would allow nonprofits to purchase distressed mortgages throughout New York City from the Federal Housing Association.
More than 40 so-called “zombie homes” across New York City have been selected for the pilot program, which has partnered with a number of nonprofits to purchase distressed mortgages.
Once these are bought back from the FHA, the nonprofits will work with families to restructure their mortgages and give them the opportunity to remain in their homes.
Councilman I. Daneek Miller, who spearheaded the program, called it a response to the foreclosure crisis that has disproportionately struck areas like southeast Queens.
"Communities are redlined," Miller said, referring to the discriminatory practice of banks rejecting mortgages for residents of certain areas.
"You can't go through a traditional bank to get a traditional mortgage, and then we become very vulnerable and susceptible to predatory lenders."
Steven Kenner came home to a nasty surprise after a two-week vacation in Florida. Papers were strewn about the house. Cabinets were left open. Cigarette butts were ground into the floor. A lock on the door to the laundry room had been tampered with. Kenner, 71, thought his East Hanover home had been burglarized. But what actually happened may have been worse.
It wasn't a burglar. Instead, Kenner's mortgage lender hired subcontractors to break into Kenner's home as part of efforts to see if the home was vacant or abandoned, according to a lawsuit filed by Kenner against Citizens Bank, Citizens One Home Mortgage, subsidiaries of the bank and its subcontractors. The suit was filed in May in Morris County Superior Court.
While subcontractors broke into his home, Kenner was in touch with the bank about a pending mortgage modification and no one reported anything was amiss, he said. And the bank even knew he was away on vacation, Kenner said. Citizens Bank said it doesn't comment on ongoing litigation.
Before it all happened, Kenner said, he broke a bone in his back and was unable to work. In January 2015, he fell behind on the mortgage payments for his home, which he had owned for nearly 40 years.
He contacted his lender to request a mortgage modification.
Kenner entered into a trial plan in December 2015. If he paid the agreed monthly payment on time and in full for January, February and March of 2016, he would enter a mortgage modification that would start in April.
Citizens took automatic monthly payments from Kenner's bank account, and payments were on time for the trial period, Kenner said.
While Kenner was on the two-week trip in late February and early March, he said, he called the lender to check on the status of the modification, and the lender said his payments were not received.
But that wasn't so, Kenner said, and he arranged for his bank to send the proof to Citizens.
When he next spoke to Citizens, Kenner said, he was told there had been an error and yes, his payments were on time. Kenner qualified for the modification, he said he was told, and he was instructed to look for packages with all the paperwork he needed to sign when he returned from vacation.
When Kenner got back to his East Hanover home on March 14, Kenner said he entered the way he usually does: through an unoccupied first floor apartment where his mom used to live.
"The lights were on. Cabinets were open and there were papers all over the place," Kenner said. "I didn't know if I was robbed or what. I didn't know what was happening."
He next entered the home proper through a laundry room that's next to the apartment.
The inside of the laundry room showing the removed lock and the messy floor as it was found when Steven Kenner came home from his vacation.
The laundry room has a door with two locks. Kenner said one of the locks was removed and a round cylinder was placed to cover the space where the lock was.
"They must have put their hand around the round opening to open the other lock to enter my home," Kenner said.
Next, Kenner entered the main house, he said.
More lights were on, more cabinets were open, and cigarette butts were all over, he said.
When officers arrived, they proceeded as if there was a burglary, Kenner said. They dusted for fingerprints and took photos, and they asked Kenner to see if anything was missing.
As officers searched the home, Kenner opened the front door, looking for the packages he was expecting from the mortgage company.
That's when he saw a "6" -- Kenner's house number -- written on the outside of the door with some kind of marker. And then they saw a sticker affixed to the door.
"This property has been determined to be vacant/abandoned," the sticker said.
Police called the number on the sticker and learned it was all a mistake by Kenner's mortgage company, Kenner said.
"The police said they were told that the mortgage company more or less made a mistake," Kenner said. "The mortgage company had contracted with the company that broke into my home to see if the home was vacant."
But the home was not vacant, nor had the bank ever started any foreclosure proceedings, said Kenner's attorney, Philip Vinick.
Vinick said the New Jersey Supreme Court adopted amendments to court rules governing the foreclosure of vacant and abandoned residential properties in December 2012.
If a lender brings a foreclosure action and it believes a property is vacant or abandoned, the lender can ask for a quicker judgment from the court so it can take steps to maintain the property. For that to work, the lender must prove that at least two of 14 conditions must be present at the property, such as overgrown or neglected vegetation, disconnected utilities, the accumulation of mail or newspapers and the absence of window treatments.
None of the 14 conditions applied to Kenner's home, the attorney said.
"In Mr. Kenner's case the lender did not even institute a foreclosure action much less prove that Mr. Kenner's house was vacant, which it obviously was not," Vinick said.
Even after Citizens was made aware of the error, the bank's subcontractors continued to contact Kenner, the homeowner said. One wanted to come into the home. Another wanted to shut off his water.
And two days after Kenner returned home, Kenner's son passed the home and saw workers on property, according to a statement provided to Kenner's attorney. The son said he asked the workers what they were doing, and they said they were hired by the mortgage company to remove some shrubs. The workers then called the mortgage company, which in turn told them to leave the property, the statement said.
And, Kenner realized, the cylinder that replaced the lock on the laundry room door could be removed by anybody at any time.
At first he moved a washing machine in front of the door. Now a table blocks the passageway.
"I've been very upset," Kenner said, noting that he doesn't feel comfortable in his own home. "I'm thinking very seriously of selling because of what happened to me."
After the suit was filed, Citizens offered to settle, but Kenner's attorney called the amount "insufficient" to "compensate him for his physical and psychological damages, including being embarrassed and having to explain to his neighbors what happened."
"The laws were bypassed or disregarded. It will eventually be left up to jury to determine how much Mr. Kenner's nightmare is worth," Vinick said.
Plaintiff HSBC Bank moved for summary judgment against Murphy, among other things, in this foreclosure on a mortgage action against the subject real property. It alleged it was in possession of the original note with proper endorsement and/or allonge, thus, was the holder of the note and mortgage, stating Murphy defaulted by failing to make scheduled monthly payments. The court granted bank's motion to consolidate two actions, and for a default judgment against defaulting, non-answering defendants. Murphy alleged bank lacked standing arguing the copy of the original note and blank endorsement annexed to its motion and affidavits was invalid as it was on a separate, undated, otherwise blank page. The court agreed, finding the affidavit of Doublin, a document execution specialist for bank's servicer, attesting its physical possession of the original note endorsed in blank, was insufficient on its face. It stated the endorsement itself failed to contain any evidence it was "firmly affixed thereto as to become a part thereof." Doublin also offered no information as to the original note's condition, simply noting Nationstar, as bank's agent, received the original note Sept. 3, 2013, and remained in possession. Thus, bank was not entitled to summary judgment.
Plaintiff bank moved for summary judgment and an order of reference in this action to foreclose a mortgage on an owner-occupied, two-family dwelling. Mitchell cross-moved to dismiss the action alleging bank's failure to serve him with RPAPL §1303 notice. Bank's process server alleged he personally served Mitchell with the §1303 notice when he served the summons and complaint, stating same was effectuated at Mitchell's residence. Mitchell's affidavit averred he was never personally served with §1303 notice or the summons and complaint, stating at the time the process server allegedly served papers, Mitchell was more than one mile away from the home at a local store. The court stated as Mitchell submitted admissible proof controverting the process server's affidavit, the matter was referred for a traverse hearing, and the special referee concluded service of process was not properly effectuated on Mitchell. It found no merit to bank's claim Mitchell waived bank's noncompliance with §1303, noting a lender's failure to comply with §1303 was not an affirmative defense that a defendant to a foreclosure action was required to assert in an answer. Therefore, Mitchell's cross-motion to dismiss was granted and the motion denied.
However, it is often the case that the Statute of Limitations is about to expire during this 90-day period, and servicers are often concerned that if they wait the 90 days to comply with the 90-day notice requirement imposed by RPAPL 1304, the Statute of Limitations will expire. Those who are unaware of CPLR 204A may, therefore, be tempted to initiate the action without first complying with RPAPL 1304.
This is a big mistake, as the failure to comply with RPAPL 1304 will cause the foreclosure to be fatally defective, and the action to be dismissed. (See my prior article - Recent Decisions Regarding New York’s Pre-Foreclosure Requirements).
New York’s CPLR 204A, however, expressly provides “Where the commencement of an action has stayed by a court or by statutory prohibition, the duration of the stay is not a part of the time within which the action must be commenced.” Furthermore, when New York State’s Court of Appeals, New York's highest court, decided the case Archer v. New York City Transit Authority, they expressly ruled that CPLR 204A extends the Statute of Limitations by the amount of time during which Plaintiff has stayed from commencing the action.
Accordingly, banks and servicers should meticulously comply with the requirements of RPAPL 1304, wait to file the summons and complaint until after the 90 days has expired, and take comfort in the extension granted by CPLR 204A.
This Story is from Peter T. Roach & Associates, P.C. click here to view their blog.

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