“It is well settled that a plaintiff seeking equitable relief, such as Wells Fargo in the instant foreclosure action, has the burden of satisfying the requisites of equity by coming to court with “clean hands.” (Dunn v Moss, 64 AD2d 838 [4th Dept 1978]; see also M & T Mtge. Corp. v Foy at 275.)”
2. In the case of U.S. Bank National Association v. Padilla 31 Misc.3d 1208(A), 2011 WL 1348387 (N.Y. Sup) Judge James D. Pagones threatened the Plaintiff and their attorneys, Steven J. Baum, P.C., with a bad faith hearing unless they reopened the homeowners file to consider her for a modification. In reaching his decision, Judge Pagones detailed the obligations under CPLR 3408(f), 22 NY CRR 202.12a[c] and banking regulation 3 NY CRR 419.11 for the bank to engage in “good faith negotiations towards a mutually agreeable resolution including a loan modification or other loss mitigation. The decision states as follows:
“ 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” … 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;”
3. Judge Pagones further stated:
“This court has the affirmative obligation to ensure that the primary statutory goal of keeping homeowners in their homes… 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.”
4. See also, BAC Home Loans vs. Westervelt, 29 Misc.3d 1224(A) 920 NYS 2d 239 (N.Y. Sup. Dutchess County 2010).
Based on such caselaw foreclosure defendants in Long Island should carefully keep records of their efforts at foreclosure conferences and in communications with a lender since it is possible to pressure the lender into a negotiation upon s showing of bad faith in the negotiation process.