[*1] US Bank Natl. Assn. v Alejandra Padilla 2011 NY Slip Op 50535(U) Decided on April 8, 2011 Supreme Court, Dutchess County Pagones, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.
US Bank Natl. Assn. v Alejandra Padilla
Decided on April 8, 2011
Supreme Court, Dutchess County
US Bank National Association, as Trustee For CMLTI 2007-WFHE3, Plaintiff,
Alejandra Padilla et al., Defendants.
Steven J. Baum, P.C.
Attorneys for Plaintiff
220 Northpointe Parkway, Suite G
Amherst, New York 14228
Ms. Alejandra Padilla
Defendant, Pro Se
One Vine Street
Beacon, New York 12508
James D. Pagones, J.
A further settlement conference in the above-captioned foreclosure action is scheduled for April 25, 2011 at 3:00 p.m., before Court Attorney-Referee Juliana Maugeri at the Dutchess County Courthouse, 10 Market Street, 1st floor, Poughkeepsie, New York. At this conference, a representative of the bank must appear in person as well as either a member or associate of plaintiff's law firm.
The homeowner Alejandra Padilla has been in mediation for a loan modification for over a year. The homeowner has appeared at every conference since February 11, 2010 and has repeatedly and consistently complied with the bank's requests to produce all financial documents. Yet, over one year later, there has been no final determination by the bank on Ms. Padilla's loan modification application.
At the March 15, 2010 conference, the bank confirmed that it had received all of Ms. Padilla's documents and needed thirty (30) days to review. At the next conference on April 28, 2010, Ms. Padilla was approved for a three month trial modification, and the matter was adjourned until she completed making the trial payments. Ms. Padilla made all three payments and at the next conference on August 23, 2010, the bank could not locate the further documents which had been requested to complete a final review. However, Ms. Padilla represented at the conference that the bank's law firm confirmed receipt of these documents. Ms. Padilla said she would send the documents again to the firm's office that afternoon and also to the bank. She was [*2]told to keep making the trial payments, that she would be considered for HAMP and an in-house modification review.
On September 27, 2010, Ms. Padilla was advised that there was a "mix-up" with her records and was told that she would be advised as to what was needed to continue the HAMP review. She was further advised that it "looks good" for a permanent modification.
At the next conference on October 4, 2010, Ms. Padilla was advised that there was a problem with the mortgage from a second home which was considered a monthly expense. On November 1, 2010, Ms. Padilla was advised that an in-house modification was denied due to a monthly deficit. There was no sale date on the other home and, until it was sold, it would continue to show up on her credit report. Ms. Padilla, a single parent and nurse, told the bank's attorney that she was starting a second job the following week. She could re-apply for HAMP and was given until November 21, 2010 to submit the packet to the bank and the bank's firm.
On January 19, 2011, Ms. Padilla appeared, despite the inclement weather, and advised the court attorney-referee that at the investor would not allow HAMP because she had a second mortgage and that she was being reviewed for an in-house modification and that the bank had all the documents. The bank attorney, who appeared by phone, told Ms. Padilla that she could still be reviewed for HAMP and gave Ms. Padilla a laundry list of documents to submit. Ms. Padilla timely sent the documents to both the bank and the bank's lawyers.
At the next conference on March 7, 2011, Ms Padilla was advised that her modification file had been coded to be reviewed for HAMP and that no further documents were needed. The court attorney-referee instructed the bank's attorney to request that the review be expedited in light of the long history without any result. The conference was adjourned until April 5, 2011
By letter dated March 29, 2011, Wells Fargo advised Ms. Padilla that she was not eligible for a modification because "You did not provide us with all of the information needed within the required time frame. For that reason, we are not able to proceed with payment assistance at this time." The bank then advised Ms. Padilla that she would sell her home, consider a short sale, or offer the bank a deed in lieu of foreclosure, and that regardless of her choice of options, the foreclosure process could nevertheless proceed.
By letter dated March 30, 2011, the law firm sent a request for further documents. In addition, counsel advised that "legal action will continue unless and until a workout has been approved."
The next conference occurred on April 5, 2011. Ms. Padilla indicated that she had only received the March 30, 2011 letter on April 4, 2011. She had sent everything which had been requested except the 4506t form for her 2010 taxes, a form which had only been recently required as 2010 taxes were not yet due. The bank attorney advised Ms. Padilla that her file had been removed from loss mitigation on March 29, 2011 because the documents had not yet been received. This removal occurred before the date of counsel's letter requesting additional documents to complete the review.
The purpose of these settlement conferences is for the parties to try to resolve the matter without litigation which "would have the immediate salutary effect of restoring the homeowner to his home" (Aames Funding Corp. v Dudley, NYLJ, Dec 7, 2009, at 42, col 3 [Sup Ct, Kings County, Kramer, J.]), thereby avoiding "[d]elays in the foreclosure context [which would] inevitably leave viable properties in a virtually ownerless limbo state and create the potential for [*3]a landscape filled with vacant, decaying edifices which could well invite further foreclosures and decreasing property values" (Mtge. Electronic Registration Sys. Inc., v Lizima, 15 Misc 3d 1118[A] [Sup. Ct, Kings County 2007]; see also CPLR 3408[a] [purpose of mandatory conference to hold settlement discussions pertaining to respective rights of the parties including a determination whether the parties can reach mutually agreeable resolution to help homeowner avoid losing his or her home]).
Toward that end, CPLR 3408(f) requires that "[b]oth the plaintiff and defendant shall negotiate in good faith." The Uniform Rules of the Trial Court impose an affirmative obligation upon the court to "ensure that each party fulfills its obligation to negotiate in good faith" (22 NYCRR 202.12-a[c]). At the settlement conference, plaintiff's counsel must be fully authorized to dispose of the case and plaintiff's representative, when "appropriate," may attend telephonically (see CPLR 3408[c]).
Not surprisingly, in the wake of this new legislation, decisions are beginning to emerge in which the courts are finding that the banks have engaged in discriminatory, unconscionable, and onerous lending practices and are now negotiating settlements of these oppressive loans in bad faith (see e.g. IndyMac Bank v Yano-Horoski, 26 Misc 3d 717 [Sup. Ct, Suffolk County 2009], rev'd as to sanction 78 AD3d 895 [2d Dep't 2010] [finding that the bank's conduct "has been and is inequitable, unconscionable, vexatious and opprobrious"]; Emigrant Mtge. Co., Inc. v Corcione, NYLJ, Apr. 21, 2010, at 25 col 3 [Sup. Ct, Suffolk County, Spinner, J.] [upon finding that the bank's conduct "shockingly inequitable" and in bad faith, court forever barred the bank from collecting claimed interest accrued on the loan from the date of default and any claimed legal fees and expenses; fixed the mortgage obligation to be no more than the principal balance, and awarded exemplary damages in the amount of $100,000]).
This court has the affirmative obligation to ensure that the primary statutory goal of keeping homeowners in their homes (see CPLR R3408[a]) and the concomitant obligation of ensuring that the parties act in good faith (see 22 NYCRR 202.12-a[c]) are met. Toward that end, this court has the power, upon a finding of bad faith, to impose a equitable remedy commensurate with the Bank's conduct regarding this loan modification. Based on the record to date, the bank's unnecessary, dilatory tactics and contradictory information have had the inexorable effect, whether or not intentional, of plunging this homeowner deeper and deeper into arrears, raising the very real probability that she will never be able to extricate herself from this debt and work out an affordable loan modification.
This homeowner has appeared at every conference and has provided every document plaintiff has requested in a timely manner. Plaintiff's piecemeal requests at each conference only serve to unnecessarily delay the modification application process while racking up interest, fees, and penalties to plaintiff's benefit and the homeowner's detriment.
In addition to possible violations of the amended statute and uniform rules of the trial court, the bank also appears to be in violation of many of the subsections of the recently adopted banking regulation 3 NYCRR 419.11, which sets forth the bank's obligations regarding loss mitigation efforts.
In order to avoid a hearing on whether the bank has acted in bad faith and has violated New York State Banking regulations, the bank is directed to provide an answer on a permanent loan modification, HAMP or in-house, at the next conference. In the event the homeowner is [*4]denied a permanent modification, the bank shall give a full and detailed explanation as to the reason for the denial. If the bank denies the application, it must be prepared to discuss the reasons why its actions did not contribute to the denial. Indeed, the mere passage of time and accumulation of arrears and interest while plaintiff was giving contradictory information regarding the review process may have rendered an otherwise eligible candidate ineligible for either a HAMP or in-house modification, and indicate bad faith negotiations on the bank's part, subject to a bad faith hearing. And, if no answer is given on the next conference date, the matter will be referred to the IAS part for a bad faith hearing.Based on the foregoing, it is hereby
ORDERED that plaintiff is directed to re-open the homeowner's file and consider her for a modification taking into consideration the bank's delay in reaching a decision; and it is further
ORDERED that plaintiff is barred from collecting any interest incurred from October 4, 2010, until the date the matter is released from the settlement part; and it is further
ORDERED that any unpaid late fees are waived; and it is further
ORDERED that any loan modification fees are to be either waived or refunded to the homeowner; and it is further;
ORDERED that any attorney's fees and other bank fees claimed to have been incurred from the date of the default until the date of this matter is released from the settlement part are not to be included in the calculation of the homeowner's modified mortgage payment or otherwise imposed on the homeowner, but, rather, any request for attorney's fees is hereby severed and to be submitted to the court for separate, independent review as to their reasonableness; and it is further
ORDERED that a bank representative fully familiar with the file and with full authority to approve and enter into a loan modification appear in person at the next conference, and it is further
ORDERED that an attorney associated with plaintiff's firm must appear at the hearing (local counsel may not appear); and it is further
ORDERED that the parties appear for a further conference in the Foreclosure Settlement Part on April 25, 2011 at 3:00 p.m. Adjournments are granted only with leave of the Court.
Failure to comply with this order may result in sanctions.
The foregoing constitutes the order of the Court.
Dated:Poughkeepsie, New York
April 8, 2011
HON. JAMES D. PAGONES, A.J.S.C. [*5]