As of December 15, 2009, New York promulgated a civil practice rule1 that requires the parties to a foreclosure action to participate in a mandatory settlement conference with the court within the first 60 days after service of process. The purpose of this conference is to determine whether the parties can reach an agreement to help the defendant avoid losing his or her home. The statute recommends the parties consider a loan modification in reaching a resolution. However, prior to initiating a foreclosure action, the lender is required to send a 90-day notice letter that essentially offers the same option to the defaulting borrower. This includes information pertaining to loan modification and non-profit financial counseling. So if the parties were unable to reach an agreement prior to litigation, is there a benefit to judicial oversight of a mandatory compromise negotiation to ensure the parties negotiated in good faith?

Mandatory Judicial Compromise

The statute directs the court to hold a compromise conference as a means of explaining the rights and obligations of the parties under the mortgage and “reach a mutually agreeable resolution to help the defendant avoid losing his or her home.” The legislature recommends the parties consider the following:

  • Loan modification, including modification to payment terms and amount due;
  • Short sale;
  • Deed in lieu of foreclosure; or
  • Other loss mitigation as the court deems appropriate.

In order to ensure the negotiations are conducted in good faith, the legislature further requires the lender to provide the court with the following documents:
The lender’s payment history;

  • Itemized amounts needed to cure and pay off the loan;
  • Copies of the mortgage and the note;
  • Application forms and loss mitigation options available to the defendant;
  • A summery of the status of the lender’s modification evaluation; and
  • Any other documents the judge may require.

After the financial crash in 2008, New York has taken a strong stance on ensuring that the parties to a residential foreclosure proceeding have negotiated in “good faith.” As such, the lender is also required to bring to the compromise any information available regarding what the borrower has left outstanding after applying and being rejected for a loan modification. This includes the reasons for the denial and the data and value used in the evaluation. The borrower is also required to submit documentation to the court, including his income tax returns, expenses, benefits, and information regarding any additional sources of income. Lastly, the statute actually mandates that the parties negotiate in “good faith” to reach an agreement, but what is “good faith” at this stage?

“Good Faith” Negotiations in New York

The State of New York has one of the longest foreclosure processes2 in the United States, often taking several years. Accordingly, the parties would have had ample time prior to litigation to discuss the potential for loan modification. While some lenders may legitimately attempt to assist defaulting borrowers in keeping their homes, others may make a minimum effort as a means of eventually forcing a short sale or foreclosure. For this reason, the courts require documentation of the process itself to determine whether negotiations have been undertaken in “good faith.” This term is defined subjectively as the states of mind of the parties during negotiation. “Good faith” includes honesty in purpose, faithfulness to the obligation, observance of reasonable commercial standards of fair dealing in the business, and lack of an intent to defraud or seek an unconscionable advantage.

A recent case3 out of King’s County—Deutsche Bank Natl. Trust Co. v. Husband (2015)— sheds light on what New York courts consider to be a “good faith” negotiation. In that case, the plaintiff lender was required to produce an itemized breakdown of all amounts claimed to be due and owed on the defaulting mortgage note for the compromise conference, including all relevant files concerning the loan and any modification requests. Not only did the plaintiff lender fail to comply with the full terms of the court’s request, a review of the evidence led the court to discover that the defendant’s rejection of a previous loan modification offer was proper because the plaintiff lender did not act in good faith when it presented the defendant with the loan modification terms. For example, the court found that the loan modification offer was not based on the defendant’s well-documented income, as the monthly payment requested constituted nearly 60% of it; the interest rate offered was too high; and the defendant was only given nine days to accept or reject the modification.
Standards for New York Foreclosure Litigation

As is often the case, because “good faith” in New York is a relatively subjective standard, it is often defined as what not to do. There is an abundance of case law on the matter of “bad faith” negotiations in the context of foreclosure litigation, which includes providing conflicting information, refusing to honor agreements, unexcused delay, unexplained charges, and misrepresentations to the other party. Good faith typically entails approaching negotiations with an honest purpose, an intention to deal with the opposing party fairly, and an absence of intent to defraud or mislead.

An amendment to CPLR 34085 that became effective December 20, 2016 states that good faith will be measured by the totality of the circumstances when considering a variety of factors, including compliance with Rule 3408’s requirements; compliance with applicable court rules and orders; compliance with applicable mortgage servicing laws, rules, and loss mitigation standards; and whether the parties have conducted themselves in a way that demonstrates efforts to reach a mutually agreeable outcome, such as not causing unreasonable delay and providing accurate information.

As the primary goal of the compromise hearing required under CPLR 3408 is to keep the borrower in his or her home and ensure that all previous modification offers were made in good faith, failure of the lender to negotiate in good faith can result in sanctions. Such sanctions can generally include a reduction of the interest rate on any balance that has accrued since the date of the bad faith, payment of a civil penalty to the state, actual damages payable to the defendant, or a denial of all attorneys’ fees and costs.

Contact a Long Island Foreclosure Attorney with Questions

Whether you are in the process of working with your bank on a loan modification, have recently received a 90-day foreclosure notice, or a foreclosure complaint has recently been filed against you, it is important to note that the goal of a foreclosure compromise hearing is to help you remain in your home. As such, your lender must adhere to strict standards of good faith negotiations intended to help you make fair, affordable payments on your mortgage. If your HAMP application has been rejected or you believe your lender is not negotiating with you in good faith, contact Ronald D. Weiss, P.C., Attorney at Law. He is your premier foreclosure attorney on Long Island, specializing in Nassau and Suffolk Counties, and he can analyze the specific facts of your case in order to determine whether your lender is abiding by federal and New York modification standards. Contact us today online or at 631.479.2455 for a no-risk consultation.
The Law Office of Ronald D. Weiss, P.C., for over twenty-five (25) years, has concentrated in legally representing residents of Suffolk County and Nassau County, Long Island under Chapters 7, 11 and 13 of the Bankruptcy Code, foreclosure defense litigation, mortgage loan modification, and general debt negotiation.

Mr. Weiss is a member of the American Bankruptcy Institute, the National Association of Consumer Bankruptcy Attorneys, the Suffolk County Bar Association and the Nassau County Bar Association, and is admitted to practice in the State of New York, the State of Connecticut, and the federal courts for the Eastern and Southern Districts of New York. Mr. Weiss is a 1988 graduate of New York University School of Law where he was a recipient of the Galgay Fellowship in Bankruptcy and Reorganization Law and has published several law journal articles. Mr. Weiss’ past experience includes having been a law clerk to the Honorable Prudence B. Abram, a United States Bankruptcy Judge in the Southern District of New York, and having practiced corporate bankruptcy law at several large Manhattan law firms, including Moses & Singer, LLP, and Walter, Conston, Alexander & Green, P.C. Mr. Weiss later worked for Fischoff, Gelberg & Director in Garden City, NY where he had practiced consumer and business bankruptcy before starting the Law Office of Ronald D. Weiss, P.C.

PRACTICE AREAS:
Long Island Bankruptcy Solutions Law
Chapter 7 Bankruptcy Attorneys Long Island
Long Island Chapter 11 Bankruptcy Law Firm

CONTACT:

Law Office of Ronald D. Weiss, P.C.
734 Walt Whitman Rd #203
Melville, NY 11747
Phone: (631) 479-2455
Email: weiss@ny-bankruptcy.com












Ronald D. Weiss, Esq.


Ronald D. Weiss, Esq., is an attorney who since 1987 has specialized in bankruptcy solutions, foreclosure solutions, and modification and negotiation solutions for individuals and businesses in the greater Long Island and New York areas undergoing financial hardship.

Mr. Weiss is a member of the American Bankruptcy Institute, the National Association of Consumer Bankruptcy Attorneys, the Suffolk County Bar Association and the Nassau County Bar Association, and is admitted to practice in the State of New York, the State of Connecticut, and the federal courts for the Eastern and Southern Districts of New York. Mr. Weiss is a 1988 graduate of New York University School of Law where he was a recipient of the Galgay Fellowship in Bankruptcy and Reorganization Law and has published several law journal articles. Mr. Weiss’ past experience includes having been a law clerk to the Honorable Prudence B. Abram, a United States Bankruptcy Judge in the Southern District of New York, and having practiced corporate bankruptcy law at several large Manhattan law firms, including Moses & Singer, LLP, and Walter, Conston, Alexander & Green, P.C. Mr. Weiss later worked for Fischoff, Gelberg & Director in Garden City, NY where he had practiced consumer and business bankruptcy before starting the Law Office of Ronald D. Weiss, P.C.

Mr. Weiss started the Law Office of Ronald D. Weiss, P.C. in 1993, which has been located in Melville, New York since its inception.

Please call us at (631) 479-2455, or e-mail us at weiss@ny-bankruptcy.com for a free consultation to discuss your legal options in greater detail.

BAR ADMISSIONS:
New York 1989
Connecticut 1989

EDUCATION:
J.D, New York University School of Law - 1988
B.A, Brandeis University - 1985

WORK EXPERIENCE:
Ronald D. Weiss, PC (President) 1994 - Present
Fischoff, Gelberg & Director (Attorney) 1992 - 1994
Walter, Conston, Alexander & Green, PC (Associate) 1991 - 1992
Moses & Singer, LLP (Associate) 1990 - 1991
Hon. Prudence B. Abram, Southern District of New York (Clerk) 1988 - 1989
New York University School Of Law (Research Assistant) 1988 - 1989

PROFESSIONAL ASSOCIATIONS:
American Bar Association, Law Student Division (Past Chair)

HONORS AND AWARDS:
Preeminent 4.5 out of 5 (Martindale-Hubbell) 2015

PUBLICATIONS:
Bankruptcy Developments Journal (The Contempt Power of the Bankruptcy Court) 1989

CONTACT:
Law Office of Ronald D. Weiss, P.C.
734 Walt Whitman Rd #203
Melville, NY 11747
Phone: 631-479-2455



CONTACT:
Law Office of Ronald D. Weiss, P.C.
1129 Northern Boulevard Suite 404
Manhasset, NY 11030
Phone: 516-307-0262
Business Email: weiss@ny-bankruptcy.com



CONTACT:
Law Office of Ronald D. Weiss, P.C.
150 Motor Parkway Suite 401, Rm 424
Hauppauge, NY 11788
Phone: 631-223-4810
Email: weiss@ny-bankruptcy.com



CONTACT:
Law Office of Ronald D. Weiss, P.C.
626 RexCorp Plaza Rm 681
Uniondale, NY 11556
Phone: 516-858-3003
Business Email: weiss@ny-bankruptcy.com



CONTACT: 
Law Office of Ronald D. Weiss, P.C.
80 Orville Drive, Suite 100, Rm 225
Bohemia, NY 11716
Phone: 631-223-4502
Business Email: weiss@ny-bankruptcy.com