For millions of Americans, including many tens of thousands of Filipino-Americans, who are struggling mightily to pay their bank mortgages and stay “above water” to avoid bank foreclosures, a recent decision by a New York judge may offer much-needed relief.
On November 19, 2009, New York Judge Jeffrey Arlen Spinner issued a decision canceling the $527,437 mortgage of a Long Island couple whose bank refused to negotiate a modification of their mortgage loan that would have allowed them to keep their home. In his decision, the judge criticized the bank’s "unconscionable" lack of good will in refusing to help the couple avoid foreclosure.
The couple, Diana Yano-Horoski and Greg Horoski, originally secured a $292,500 loan in 2004 with an adjustable-rate mortgage at 5 percent that ballooned to anywhere from 10 percent to 13 percent in the four years that followed. They had originally obtained their mortgage loan from Deutsche Bank which was serviced by IndyMac, until it collapsed with the mortgage crisis and was bought by a group of billionaire investors who renamed the California bank as OneWest Bank.
When the Horoskis fell behind in their mortgage payments, OneWest Bank immediately filed a complaint to foreclose on the property. A judgment of foreclosure and sale was granted on January 12, 2009.
In accordance with New York law, if the loan is deemed to be “sub-prime” or “high cost” in nature, the defendant homeowners can request the court to convene a settlement conference, which the Horoskis asked for. Their plea was granted and a settlement conference was set for February 24, 2009. Because the bank refused to attend the settlement conference, it was postponed on five separate occasions.
As a result of the bank’s “intransigence in its continuing failure and refusal to cooperate, both with the Court and with the Defendants’ multiple and reasonable requests,” the judge ordered the bank to produce an officer of the bank to attend the sixth scheduled settlement conference on September 22, 2009.
OneWest Bank assigned its loss mitigation manager, Karen Dickinson, to attend the hearing but, at the hearing, she refused to even consider the offer by the Horoskis’ daughter, who lived with them, to buy back the home at fair market value or to help finance a modification with income from her job.
At the hearing, according to the judge, Dickinson made it “celeritously” clear that the bank "had no good faith intention whatsoever of resolving this matter in any manner other than a complete and forcible devolution of title from the Defendants”. In other words, it was the bank’s way or the highway.
The judge found the bank’s attitude “deeply troubling” especially since the county’s courts had been successful in securing loan modifications from banks which had issued sub-prime loans in cases where the lenders relied on “the income of non-obligors who reside in the premises under foreclosure”.
At a final hearing on November 18, 2009, the judge asked the plaintiff for the amount it claimed as the principal balance. Ms. Dickinson informed the court that as of September 22, 2009, it was $527,437.73. But the Horoskis produced two letters from the bank stating that the principal balance they owed as of February 9, 2009 was $285,381.70 and $283,992.48 as of August 10, 2009.
After the hearing, the judge reviewed the documents and issued a ruling the following day declaring that it is the court’s obligation to determine issues regarding credibility. Citing the Latin principle “Falsus in uno, falsus in omni” (“false in one, false in all”), the judge wrote that “the Court has been unable to find even so much as a scintilla of good faith on the part of the Plaintiff.”
“Plaintiff comes before this Court with unclean hands yet has the temerity to demand equitable relief against the Defendant.”
The judge noted “as a relevant aside” the “greater social problem…of housing those persons whose homes are foreclosed and are thereafter dispossessed. It is certainly no secret that Suffolk County is in the yawning abyss of a deep mortgage and housing crisis with foreclosure filings at a record high rate and a corresponding paucity of emergency housing.”
If the bank would only be reasonable and work with the Horoskis on a reasonable settlement, then, according to the judge, the Horoskis would “continue to maintain the property’s physical plant, pay taxes thereon, and the property would retain or perhaps increase its market value….(the bank) would receive a regular income stream…without sustaining a loss of several hundred thousand dollars. In addition, no neighborhood blight would occur from the boarding of the property after foreclosure which would, in turn, avert problems of litter, dumping, vagrancy and vandalism as well as a corresponding decline in the property values in the immediate area.”
It could have been a “win-win” for all the parties, the judge opined.
After “careful consideration”, the judge then ruled that the indebtedness of the Horoskis to plaintiff OneWest Bank shall be “canceled, voided and set aside…to decree anything less than the foregoing would be for the Court to be wholly derelict in the performance of its obligations.”
"I was just actually surprised and elated that a judge finally came down on the banks who have been extremely uncooperative in negotiating equitable settlements with borrowers," said lawyer Anthony Michael Camisa about the ruling.
In a written statement, the bank said it would appeal. “We respectfully disagree with the lower court's unprecedented ruling. The law does not authorize a judge to cancel a borrower's loan obligation because he did not like the way loan modification discussions were handled."
The appeal process may likely take years. But until it is reversed, homeowners in situations similar to that of the Horoskis may take a similar course of action and just hope that they find a similarly thoughtful judge.
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