To: Readers of WiseLawNY
From: Dan Wise
Date: Sept. 3, 2014
On Friday Aug. 29, the New York Law Journal published my analysis that the Appellate Division, Second Department’s ruling in U.S Bank N.A. v. Sarmiento, 2014 NY Slip Op 05533, heralds an era of greater protection for homeowners facing foreclosure.
The outcome in Sarmiento was somewhat muddy. The Court did not disturb a Brooklyn judge’s order requiring a lender topossibly forfeit as much as $300,000 in interest and attorneys fees for failing to bargain in good faith with a homeowner at a mandatory, court-supervised settlement conference. Nor, however, did the Court affirm the judge’s order.
Nonetheless, the ruling reflects a significant shift in the Court’s approach to enforcement of a 2009 state law requiring lenders to negotiate in good faith over a reduction in a homeowner’s mortgage payments before moving forward with a foreclosure case.
That conclusion is supported by the tone, content and context of the Sarmiento ruling. The good-faith statute is silent on the question of remedies for violations, and a year ago the Second Department had issued a full-throated plea for guidance from the Legislature and the Judiciary. Nothing has changed in the last year.
During the five years since enactment, the Court had issued several rulings knocking down possible remedies but never put its imprimatur on a remedy. The Sarmiento case presented the first test of a remedy that was commensurate with bank misconduct—the forfeiture of interest and fees during periods in which lenders had failed to act in good faith.
During the intervening years, there has been a growing body of case law at the trial level in which judges have expressed extreme displeasure with lenders’ handling of the conferences, which have resulted in lengthy delays of two years or more. By my count, since the start of 2013, 21 judges in nine counties have found lenders to have violated the good-faith requirement.
My article appears on page 6 of the Aug. 29 Law Journal. Subscribers to the Law Journal can get direct electronic access to the article by logging in and clicking on this link: http://www.newyorklawjournal.com/id=1202668409276?
When non-Law Journal subscribers click on the above link, they will be asked to “register” for the Law Journal. Once you register, you should be taken directly to the article. Persons registering are allowed access to five Law Journal articles every 30 days before they will hit a paywall.
If you encounter problems, please send me an email, and I will try to straighten it out. There is a more complicated way that non-subscribing registrants can access the article.