A judge in Suffolk County on Long Island had enough with a bank’s arrogance and attitude and completely voided a mortgage. This may be the start of a trend where now the judicial system is getting fed up with lenders and are taking matters into its own hands.
The case is actually pretty straight forward. A couple purchased a house in 1994 and refinanced in 2004. They fell behind on their mortgage payments because of loss of income due to the wife having triple bypass surgery. The couple tried to work out a payment plan but the bank refused and initiated a foreclosure action. In New York, whenever there is a foreclosure action, there is a mandatory conference to see if something can be worked out short of foreclosure. It was during these conferences that the judge became fed up and ordered the $292,500 mortgage “canceled, voided, avoided, nullified and set aside.” The judge gave the reason for this decision because the actions of Indymac Mortgage Services were “harsh, repugnant, shocking and repulsive.” The judge went further and specifically gave six points that were the underlying rationale for his decision:
- A conference in February had to be rescheduled five times because of Indymac’s intransigence in its continuing failure and refusal to cooperate and the judge ordered that an officer of the bank appear at a September 22 conference
- The bank officer that appeared on September 22 had a “opprobrious demeanor and condescending attitude” and no offer by the homeowners, including purchase of the house by their daughter was acceptable.
- At a November 18 conference, Indymac could not specify the principal balance owed on the house.
- Noting Suffolk County’s foreclosure rate, the judge said the home owner’s desire to keep and maintain their home and property would prevent it from becoming “neighborhood blight.”
- The company’s actions toward the home owner were “harsh, repugnant, shocking and repulsive” and sanctions were needed to prevent it from “further mortifying abuse.”
- Indymac would not consider any loan modification
The house is currently underwater and the daughter of the home owners was willing to buy the house in a short sale at its current market value. It made the judge mad when Indymac refused to do a short sale. There are two other remarkable things about this case. One is that the homeowners do not have a lawyer and came to court every time representing themselves. Secondly, the homeowners did not ask the judge to void the mortgage. The judge did this entirely on his own.
One of the messages of this case is that if a lender is going to use the courts to take back a property and kick out the current homeowners, the bank better act in good faith. I had a previous blog that asked the question of whether a lender can be forced to modify a mortgage? If the bank is going to use the judicial system, it may be open to having that question being answered in the affirmative.
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