Section 3408 of the New York Civil Practice Law and
Rules (CPLR) governs how settlement conferences are run in foreclosure cases.
Last year the state legislature made some important changes that benefit
homeowners. These changes took effect last month and will remain in force until
at least February 13, 2020.
Here is a cheat-sheet on how the law applies, and how
it may affect you if you are in foreclosure.
·
Applies to residential foreclosure
actions involving a home loan (defined in RPAPL 1304) where defendant resides
in the subject property.
·
Plaintiff required to file proof of
service within 20 days of service. Court required to hold conference within 60
days after proof of service is filed.
·
Purpose of conference:
Settlement discussions for purposes including but not limited to:
o
Determining whether the parties can
reach a mutually agreeable resolution to help defendants avoid losing their home.
o
Evaluating potential modification
of monthly payments or amount owed.
o
Explore other workout options such
as loan modification, short sale, deed in lieu of foreclosure, or any other
loss mitigation option.
o Whatever
other purposes the court deems appropriate.
·
At initial conference, any
defendant appearing pro se shall be
deemed to have made a motion to proceed as a poor person under CPLR 1101. Court
may appoint counsel for pro se
defendant under CPLR 1102(a). If it does, conference must be adjourned for
appearance of counsel. [3408(b).]
·
Mechanics of the conference.
[3408(c)]
o
Plaintiff and defendant shall
appear in person or by counsel.
o
Each party’s representative shall
be authorized to dispose of the case.
o
If defendant is pro se, court must advise
defendant of the nature of the action and his rights and responsibilities as a
defendant.
o Court
may permit plaintiff’s representative or the defendant to attend by phone or video-conference.
·
What happens when the RJI is filed.
[3408(d) and (e)]
o
Court must send copy of RJI or send
defendant’s name & contact info to a housing counseling agency on a list
designated by DHCR.
§ Agency
must use information to make homeowner aware of housing counseling and available
foreclosure prevention services and options.
o Court
must promptly send notice of conference date/time purpose and what information
the parties must bring.
o
Plaintiff is required to bring
(this is not an exhaustive list):
§ Payment
history
§ Itemization
of the amounts needed to cure and pay off the loan
§ The
mortgage and note or copies of the same
§ Standard
application forms
§ A
description of loss mitigation options, which may be available
§ Any
other documents required by the judge.
o
If plaintiff is not the owner of
the mortgage and note, plaintiff must provide the name, address and phone
number of the legal owner of the mortgage and note.
o
If lender or servicing agent has
evaluated or is evaluating eligibility for loan modification programs or other
loss mitigation options, in addition to the documents listed above, plaintiff must
also bring:
§ Summary
of the status of the evaluation
§ List
of outstanding items (if any) required from the borrower to complete any
modification application
§ Expected
date of completion of the evaluation
§ If
modification was denied, plaintiff must also bring:
·
Denial letter or other document
explaining the reason for denial.
·
Data input fields and values used
in net present value evaluation.
·
If modification was denied on the
basis of an investor restriction, plaintiff must also bring documentary
evidence which provides the basis for the denial, such as a pooling and
servicing agreement.
o
Defendant must bring documents to
the conference, including but not limited to:
§ Information
on current income tax returns
§ Expenses
§ Property
taxes
§ Previously
submitted applications for loss mitigation
§ Benefits
information
§ Rental
agreements or proof of rental income
§ Any
other documentation relevant to the proceeding required by the judge.
·
Good faith. [3408(f)]
o Both
sides must negotiate in good faith to reach mutually agreeable resolution, which
may be loan modification, short sale, deed in lieu of foreclosure, or any other
loss mitigation, if possible.
o
Factors in deciding good faith:
§ Compliance
with 3408, court rules, court orders, and directives pertaining to settlement
conference process.
§ Compliance
with mortgage servicing laws, rules, regulations, investor directives, and loss
mitigation standards or options concerning loan modifications, short sales, and
deeds in lieu of foreclosure.
§ Conduct
consistent with efforts to reach a mutually agreeable resolution. This
includes, but is not limited to:
·
Avoiding unreasonable delay.
·
Appearing at the settlement conference
with authority to fully dispose of the case.
·
Avoiding prosecution of the foreclosure
action while loss mitigation applications are pending.
·
Providing accurate information to
the court and parties.
§ Mere
failure to make or accept an offer is sufficient to establish failure to
negotiate in good faith.
·
Discontinuance. [3408(g)]
o Plaintiff
must file a notice of discontinuance and vacate lis pendens within 90 days
after settlement agreement or loan modification is fully executed.
·
No fees to borrower for conference.
[3408(h)]
o Bank
cannot require homeowner to make payment for any cost, including but not
limited to attorneys’ fees, for appearing at settlement conferences.
·
Bad-faith.
o If
court determines that a party failed to negotiate in good faith, court can issue
order, on motion or sua sponte,
finding bad faith. A referee may hear and report findings of fact and
conclusions of law concerning any party’s failure to negotiate in good faith
and remedies. [3408(i)]
o
Remedies for bank bad faith
[3408(j)]:
§ Tolling
of interest, costs, and fees during any undue delay caused by the plaintiff. This is the minimum the court must do. Court
may also impose one or more of the following:
·
Compel production of any documents
requested by the court during the settlement conference.
·
Impose a civil penalty payable to
the state that is sufficient to deter repetition of the conduct, up to $25,000.
·
Award actual damages, fees,
including attorney fees and expenses to the defendant.
·
Award any other relief that the court deems
just and proper.
o
Remedies for defendant’s bad faith.
[3408(k)]
§ Remove
case from conference calendar.
§ Court
must take into account equitable factors including, but not limited to, whether
the defendant was represented by counsel.
·
Answering the complaint: 3408(l)
and (m).
o
At the first settlement conference,
if the defendant has not filed an answer yet, the court shall:
§ Advise
defendant of the requirement to answer the complaint;
§ Explain
what is required to answer a complaint in court;
§ Advise
that if an answer is not served, the ability to contest the foreclosure action
and assert defenses may be lost; and
§ Provide
information about available resources for foreclosure prevention assistance.
§ The
court shall also give the defendant a copy of the Consumer Bill of Rights
provided for in RPAPL 1303.
§ A
defendant who appears at the settlement conference but who failed to file a
timely answer shall be presumed to have a reasonable excuse for the default and
shall be permitted to serve and file an answer, without any substantive
defenses deemed to have been waived within 30 days of the first conference.
§ The
default shall be deemed vacated upon filing an answer.
·
Motion practice [3408(n)]
o
Any motions by either side shall be
held in abeyance while the conference process is ongoing, except for motions
concerning compliance with this rule and its implementing rules.
