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Empire Justice Memo of Support: Improving Mortgage Foreclosure Settlement Conferences

March 14, 2016

 

A.1298 (Weinstein)/S.5242 (Savino)

Civil Practice Law and Rules (CPLR) Rule 3408, established the settlement conference process mandated in high-cost home loan foreclosure cases in 2008 and was extended to all residential mortgage foreclosure cases in 2009.   The Office of Court Administration issued rules in 2008 which have been amended periodically and most recently in November 2014.  This bill provides clarifying amendments to CPLR 3408, bringing the statute in line with the rules and practice of the courts.

To a great extent, the amendments codify what is already prescribed in court rules or has become common practice.  The majority of the amendments provide more clarity to courts where there has been question.  For example, although the statute states that the purpose of the conferences is to see if the parties can reach a mutually agreeable resolution such as a loan modification, “or other workout options may be agreed to, and for whatever purposes the court deems appropriate,” some courts have questioned whether a short sale, deed in lieu of foreclosure or other resolution where it is clear the homeowner can no longer afford to remain in the home could be considered as part of the settlement conference discussions.  The OCA court rules include language which clearly state such non-retention options should be discussed as part of the conferences and one of the proposed amendments in A.1298/S.5242 would codify that rule.

Other amendments that bring the statute in line with practice include changing a “should” to a “shall” when talking about what documents the parties must bring to the settlement conferences, and amending language around the documents the defendant must bring to be more in line with what is in their possession and would be meaningful to the settlement discussions.  Another such amendment that already happens in practice by many courts, affirmatively allows the defendant who appears at a settlement conference to defend their case, a chance to file an answer after the case is moved out of the conference part and after the initial 20 or 30 day timeline, giving the defendant the benefit of the doubt that their appearance at the conference shows an intention to defend the case even if they didn’t understand what was technically meant by having to “file an answer.”  

Another practical amendment proposed in A.1298/S.5242 regards motions.  The law was amended back in 2009 to prescribe all motions to be held in abeyance pending resolution of the conferences, in response to the fact that in the first year of the conferences, plaintiffs were routinely filing motions for summary judgment even while active settlement negotiations were taking place in the conference part.  The amendment resolved the issue of unnecessary motion practice in many cases, however, it created a practical problem when a party needed to file a motion to enforce a provision of CPLR 3408, such as the requirement that the parties negotiate in good faith.  In such instances, courts have had to illogically remove the case from the settlement conference part in order to decide the motion, only to return the case to the conference part.  One of the proposed amendments in A.1298/S.5242 would clarify that such motions can and should be heard as part of the conference part.  

Similarly, the law was originally written with the intent that a judge would be overseeing each settlement conference.  Given the volume of foreclosure cases, however, the reality is that in many courtrooms around the state, the conferences are necessarily overseen by a referee or a judicial hearing officer.  A.1298/S.5242 includes an amendment formally incorporating these parties into the process and authorizing them to do what they have been doing in practice including ensuring compliance by the parties, making findings of fact, and making reports and recommendation for relief.

The most significant amendments included in A.1298/S.5242 are defining what constitutes good faith, and outlining penalties a court may provide for either party when there is a violation of the statute.  Both of these points have been areas of confusion for courts and have led to lack of uniformity around the state.  A.1298/S.5242 follows court decisions and will finally provide clarity for all.  Regarding the definition of good faith, it is a straightforward definition including compliance with applicable statutes and regulations and constructive efforts to reach a resolution, based on the totality of the circumstances.  Regarding penalties, the proposed amendments set forth typical remedies invoked in mortgage foreclosure cases such as tolling of interest and fees when delays are caused by the lenders, a stay in proceedings, and fees and costs to the wronged party.   

Empire Justice Center strongly supports this legislation and urges immediate passage of A.1298/S.5242.

For more information, please contact:


Kirsten E. Keefe

Empire Justice Center
119 Washington Avenue
Albany, NY  12210 


(518) 462-6831
(518) 935-2852
kkeefe@empirejustice.org