Pursuant to New York C.P.L.R. §3408, parties in a real estate foreclosure action are mandated to conduct settlement discussions in order to ascertain whether it is possible to avoid having a defendant lose their home. The statute requires all parties to negotiate in good faith to reach a mutually agreeable resolution, including a loan modification.
In Aurora Loan Services, LLC v. Diakite, the parties agreed that the defendant would make three trial payments as part of a HAMP loan modification. After defendant made those three payments, the Bank rejected any further payments, while also keeping the initial three payments. After twenty-five foreclosure settlement conferences, over the course of more than three years, from January 2010 to April 2013, the referee appointed by the Court found that the bank had acted in bad faith in violation of C.P.L.R. §3408. The defendant, in a bad faith hearing, testified that he submitted modification packages over and over to the bank. At the end of 2009, he was offered a trial modification, and he timely made the three trial payments. Defendant then stated that he was required by the bank to continuously submit further documents to his counsel in an effort to modify his mortgage payments, all to no avail. The bank was unable to provide any evidence that it intended to comply with C.P.L.R. §3408 and even failed to produce the original note and mortgage at the bad faith hearing scheduled by the Court.
As a result, the Court found that the bank failed to negotiate in good faith pursuant to C.P.L.R. §3408 and stayed the collection of all interest, costs, and real estate attorney fees are stayed from March 1, 2010 to October 27, 2014. The judge presiding over this action is the Hon. Genine Edwards of the Supreme Court of the State of New York, County of Kings.