About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Foreclosure Defense
Written by Craig D. Robins, Esq.Some debtors like bankruptcy so much, they come back for more, and more, and even more. . . sometimes using multiple bankruptcy filings to delay foreclosure proceedings for years. But when is enough, enough?
What Can Mortgagees and the Bankruptcy Court Do in Situations Involving Extreme Serial Filings?
In the past three months, Judge Alan S. Trust, sitting in the Central Islip Bankruptcy Court on Long Island, addressed this issue in several cases. The most recent one caught my eye based on the incredible number of related bankruptcy filings, as well as the unbelievable amount of time the debtors were able to thwart the system and delay foreclosure.
Serial Filings in Bankruptcy Cases
Some debtors file successive Chapter 13 petitions because each time they file, they get the benefit of the stay, which stops a foreclosure proceeding dead in its tracks.
Technically, Bankruptcy Code section 109(e) prohibits a debtor from refiling another case for 180 days, if the prior case was dismissed because the debtor neglected to make necessary payments or maintain other debtor responsibilities.
However the bankruptcy court has become rather liberal in permitting debtors to engage in repeated filings and will typically give the debtor the benefit of the doubt as long as the debtor can demonstrate a change of circumstances.
Nevertheless, some debtors clearly take advantage of the system, and by their sheer audacity (and desperation), give bankruptcy a bad name for those who file in good faith. The vast majority of bad faith serial filings are done by pro se debtors.
Any experienced bankruptcy attorney knows that judges will not hesitate to sanction counsel for filing a case in bad faith. The law is very clear that a case cannot be filed for the sole purpose of delay, without any good faith intent to follow through with a Chapter 13 plan.
Bankruptcy Amendment Act Made Serial Filings More Difficult
When Congress overhauled the bankruptcy laws in 2005 (BAPCPA), it imposed several new provisions designed to stop the problem of bad faith serial filers. I wrote about some of these changes in my Suffolk Lawyer column in November 2005: Consumer Bankruptcy Debtors Face New Limitations for Repeat Filings .
In particular, there are new exceptions to the automatic stay. For example, if a debtor had one pending bankruptcy case in the preceding year, then the automatic stay only lasts 30 days, effectively shifting the burden to the debtor to make an application to extend the stay. If there was more than one filing in the prior year, then the debtor is not entitled to any automatic stay at the time of filing.
Even with these provisions, debtors soon learned to game the system. After one spouse’s bankruptcy was dismissed, the other spouse would then file, and then this “tag team” filing approach would go on for years. Although this conduct was nothing new, Congress addressed this problem too, with an “in rem” provision in BAPCPA.
Debtors Filed 10 Cases to Delay Foreclosure
Debtors Filed 10 Cases to Delay Foreclosure
On December 21, 2009, Judge Trust issued companion decisions in two separate, but related cases, outlining the excessive measures taken by two Long Island debtors who filed a total of ten bankruptcy petitions over a 12-year period to stop foreclosure on their jointly-owned home. In re Janet Blair (Case No. 09-76150-ast) and In re Allen Gary Smith (Case No. 09-77562-ast).
The decision was precipitated by a motion brought by the mortgagee, seeking “in rem” relief against the premises. Most of these filings were Chapter 13 cases filed over a four-year period between 2005 and 2009. Almost all of them were filed on the eve of a scheduled foreclosure sale.
“In Rem” Relief in Bankruptcy Proceedings Stops Foreclosure Delaying Tactics
“In Rem” Relief in Bankruptcy Proceedings Stops Foreclosure Delaying Tactics
“In rem” relief is when the bankruptcy court grants an order indicating that a particular piece of property will not be affected by any future bankruptcy stays, effectively eliminating any benefit of the “tag-team” filing approach. “In rem” originates from the Latin phrase for a lawsuit directed against property, rather than a person.
In the Blair / Smith cases, the judge immediately lifted the stay and subsequently granted in rem relief, stating that the serial filings were evidence of the debtors’ bad faith, and also evidence of the fact that the debtors were abusing the bankruptcy process for several years.
Statutory Authority for In Rem Relief. In his decision, Judge Trust, delivered a well-written and detailed analysis behind the statutory authority providing for in rem relief. In doing so, the judge essentially reiterated his holding in a two-month-old similar decision, which has since been published. In re Montalvo (416 B.R. 381).
Statutory Authority for In Rem Relief. In his decision, Judge Trust, delivered a well-written and detailed analysis behind the statutory authority providing for in rem relief. In doing so, the judge essentially reiterated his holding in a two-month-old similar decision, which has since been published. In re Montalvo (416 B.R. 381).
One of BAPCPA’s amendments was the addition of Section 362(d)(4) which provides the statutory authority to grant in rem relief. Pursuant to Section 362(d)(4), the Court can grant in rem relief from the stay as to a mortagee’s interest in the property, such that any and all future filings by any person or entity with an interest in the property will not operate as an automatic stay against the owner and its successors and/or assigns for a period of two years after the date of the entry of such an order.
To obtain this relief, the mortgagee bears the burden of showing that the various petitions filed by debtors are part of a scheme to hinder, delay and defraud the mortgagee.
A key issue in such cases is whether the court can infer an intent to hinder, delay and defraud creditors when it appears that there have been multiple, strategically timed bankruptcy filings. Judge Trust took the established view that holds that the mere timing and filing of several bankruptcy cases is an adequate basis from which a court can draw a permissible inference.
However, Judge Trust also observed that the debtors demonstrated no intent to make the bankruptcy work. They did not make plan payments, show up in court, or provide the trustee with required documents.
Standard of Proof in In Rem Litigation
Judge Robert E. Grossman also addressed this issue just over a year ago, and wrote about the standard of proof necessary to obtain in rem relief. In re Lemma (394 B.B. 315 (Bank.E.D.N.Y. 2008).
In that case, which involved a third Chapter 13 filing (with debtor representation by my friend, Babylon bankruptcy attorney Michael A. Kinzer), the judge concluded that the mortgagee was not entitled to in rem relief (and not even entitled to dismiss the case).
The reason why Judge Grossman denied the mortgagee’s application was because the mortgagee, as the party seeking in rem relief, had the burden of proving that the current filing was part of a scheme; that the scheme involved the transfer of real property, or multiple bankruptcy filings; and that the object of the scheme was to hinder, delay and defraud the mortgagee.
The mortgagee in that case was unable to provide the court with any evidence other than the fact that the debtors filed three petitions.
Thus, multiple filings, alone, are not adequate to find intent to hinder, delay and defraud.
About the Author. Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in the January 2010 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Patchogue, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.
Written by Craig D. Robins, Esq.I have discussed many times this year about the concept of defending a foreclosure proceeding by objecting to a mortgagee’s standing to bring the foreclosure suit on the basis that they do not actually own the mortgage. Many New York Foreclosure Suits Are Dismissed Because They Are Defective .
A recent comment that appeared on the on-line version of the Wall Street Journal posed an interesting take on this:
The real estate bubble was fueled, in large part, by mortgage companies who loaned to anyone on anything, then sold the paper to the banks — who repackaged this paper to sell to other investors.
Everyone passing around the paper like players at the roulette table. No-one checked the bona-fide representations of the borrowers. No-one checked the collateral. Everyone passed around paper while the little ball raced around the wheel of fortune.
If these gamblers were too busy in the casino to make sure their paperwork was properly updated and recorded . . . .tough!
That leads to the fundamental principal in any legal case pending in a court of law: the plaintiff must prove its case. Banks and mortgage companies must certainly adhere to the law and are now being called to task by the court when they fail to do so. See my post: Judicial Sentiment Against Foreclosing Banks Reaching All-Time High .
If a mortgage lender wants to bring a foreclosure proceeding, it must be able to demonstate that it actually owns the papers it is seeking to foreclose on. Homeowners who are being sued in foreclosure should consult legal counsel to ascertain how to protect their rights.
Written by Craig D. Robins, Esq.According to a recent article in the Wall Street Journal, the number of homeowners who have no equity in their property has swelled to 23%, threatening prospects for housing recovery.
As of September 2009, over ten million households in this country had negative equity in their homes. This is a situation that is also most evident on Long Island.
When a home is totally “underwater” or “upside-down,” that means the homeowner is paying more for the home than the home is worth. Many underwater homes were financed with sub-prime mortgages and the sub-prime borrowers are now having difficulty making monthly mortgage payments.
Options When Your Home is Underwater
There are several options available to homeowners whose homes are underwater. When the homeowner is also behind with the payments, Chapter 7 bankruptcy, to those who are eligible, provides the ability to walk away from the home and mortgage debt, while typically being able to stay in the home for a period of 12 to 24 months without making any mortgage or real estate tax payments, and not incurring any adverse income tax consequences.
Most homeowners whose homes are underwater owe their mortgage lenders an average of 20% more than what the home is worth. For the typical Long Island family who has no equity in their home, that means that they owe their mortgage company $60,000 to $100,000 more than the fair market value of the house. I’ve had many Long Island clients whose home values dropped many hundreds of thousands of dollars.
When a home is underwater, the homeowner can’t refinance or sell the home. Although there is always the possibility of loan modification, it appears that modifying a mortgage is often difficult. I recent wrote about Obama’s “Making Homes Affordable” Mortgage Modification Program Failing .
The Big Question for Underwater Homeowners: Do You Stay or Do You Go?
Families who owe more to their mortgage banks than what the property is worth certainly face a serious dilemma: Keep making payments and hope for the best — or walk away, and give up their home. Even if you are current on your mortgage, continuing to pay it may not be the smartest thing to do.
What I am seeing here on Long Island is that so many families are finding it necessary to dip into their savings just to make their mortgage payments. This is not prudent.
When someone’s home is underwater, they lack the cushion of equity that would protect them if illness or job loss slashes the family’s income. Refinance is just not a possibility. This, in turn, makes them more vulnerable to foreclosure because they can’t count on selling the home as doing so will not bring in enough proceeds to satisfy the existing mortgages.
I also have some clients who unrealistically think about holding out in the hope that the real estate market will rebound a great deal. However, based on all of economists’ predictions, that is most unlikely, at least for many, many years. Thus, keeping an underwater mortgage could be considered a “losing bet.”
One bet is certain, and that is getting sound advice from an experienced Long Island bankruptcy attorney who also engages in foreclosure defense. Meeting with counsel will enable the homeowner to ascertain the various options and determine if walking away is the best option. Counsel can also help the homeowner, whose thoughts about the home might be clouded because of emotional attachment, see the real picture.
Written by Craig D. Robins, Esq.It is most unfortunate, but the Obama administration’s $75 billion program to protect homeowners from foreclosure is now seen as a major disappointment.
The New York Times, in a detailed front-page article over the weekend, reported that some economists and real estate experts now contend the program has actually done more harm than good.
Here’s why: Even though the program has lowered the mortgage payments on a trial basis for hundreds of thousands of people, it has largely failed to provide permanent relief.
This is especially evident on Long Island, where the high number of foreclosure filings continue unabated.
The Program Has Not Resulted in Affordable Mortgage Payments for Most Homeowners
Most of the homeowners who have signed up for the program are not able to make their monthly mortgage payments, even if they are lowered somewhat. Consequently, many people still stand to lose their homes through foreclosure.
The Making Homes Affordable program now has many critics who are increasingly arguing that it has raised false hopes among people who simply cannot afford their homes.
Many desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting hard-earned funds they could have saved in preparation for moving to cheaper rental residences. Some borrowers have also been hurt because, unbeknownst to them, their credit ratings became tarnished since they falsely assumed that a loan modification did not result in the lender reporting negative information to the credit reporting agencies.
In addition, the program requires the homeowner to enter into a three-month trial period with no guarantee of permanent success. Another major problem with the program is that lenders can be very fickle in deciding to grant a modification.
The New York Times article pointed out that with the Bank of America, which has over a million outstanding loans that are eligible for modification, less than one percent resulted in permanent modification.
Sometimes Filing Chapter 7 Bankruptcy and Staying in the Home for Two Years Is the Best Solution
In my Long Island mortgage foreclosure defense and bankruptcy practice, I regularly meet with Long Island homeowners who have fallen behind with their mortgage payments and are facing foreclosure. Sometimes, walking away from an unaffordable home is the best option.
Here’s why: the homeowner can usually stay in the home for well over a year, and often as much as two years or more — without making any mortgage payments to the mortgage company or paying any real estate taxes to the town.
Sometimes referred to as a “strategic default,” because the homeowner intentionally stops making the payments, it often has to be done in conjunction with a Chapter 7 bankruptcy filing which will enable the homeowner to eliminate any subsequent deficiency on the mortgage after the lender eventually takes the property back.
The Obama Program Fails to Recognize that Some Homeowners Simply Can’t Afford Reduced Mortgage Payments
Although President Obama certainly had the right idea to help the American public prevent foreclosure, the program is not working. The New York Times article reported that Treasury officials appeared to have concluded that growing numbers of delinquent borrowers simply lack enough income to afford their homes and must be eased out.
As a result, there is a new, unadvertised federal program called the Foreclosure Alternatives Program, which aims to encourage arrangements that result in distressed borrowers surrendering their homes. The program will pay incentives to mortgage companies that allow homeowners to sell properties for less than they owe on their mortgages, which are referred to as short sales.
Whatever the merits of its plans, the Times concluded that Washington has clearly failed to reverse the foreclosure crisis.
In 2008, more than 1.7 million homes were “lost” through foreclosures. Last year, more than two million homes were lost, and a recent projection anticipates that this year’s number will swell to 2.4 million.
I have found that Increasingly, more and more of my clients in a foreclosure situation are inclined to walk away and accept foreclosure, rather than continue to make payments on properties in which they have no equity.
Assuming a homeowner is eligible for Chapter 7 bankruptcy relief, filing bankruptcy will enable the homeowner to eliminate any liability on the mortgage and, at the same time, eliminate all existing credit card debt as well. This is one way my firm regularly provides help to Long Island families in foreclosure.
Written by Craig D. Robins, Esq.Judges Have Had It with Foreclosing Mortgage Companies Who Skirt the Rules
When I discussed Judge Spinner’s recent case in the Suffolk County Supreme Court in which he canceled the IndyMac mortgage of a Long Island family, I indicated my opinion that the tides had changed in the way judges look at banks. See Judge Cancels Mortgage Due to Mortgagee’s Shocking Behavior in Long Island Foreclosure Action.
A Wall Street Journal article on December 24, 2009, provided great support for this proposition. The article mentioned the Judge Spinner decision and concluded that such cases demonstrate a new phase in the judiciary’s battle to stem the rising tide of foreclosures by punishing mortgage companies for paperwork mistakes and alleged mistreatment of borrowers.
The article highlighted a handful of cases in which state and federal judges presiding over foreclosures are going to the extraordinary lengths of wiping away borrowers’ mortgage debt, invalidating foreclosure sales and even barring some foreclosures outright.
The Current Economic Climate Is Adding to Judges’ Desires to Help the Homeowner, Thus Creating a New Breed of Activist Judges
Todd Zywicki, a law professor at George Mason University, who was interviewed for the article, questioned whether judges are changing the rules in the middle of the game . . . just because there is a financial crisis.
Apparently, about a year and a half ago, judges in foreclosure cases would routinely dismiss foreclosure cases if they could find reason to do so. But those judges usually permitted the banks and mortgage companies to refile their foreclosure proceedings after correcting any paperwork mistakes that they previously made.
Apparently, about a year and a half ago, judges in foreclosure cases would routinely dismiss foreclosure cases if they could find reason to do so. But those judges usually permitted the banks and mortgage companies to refile their foreclosure proceedings after correcting any paperwork mistakes that they previously made.
However, the times have changed. Now, after the country has been mired in a housing crisis for several years, more and more judges are penalizing lenders on their paperwork glitches, and in some cases going much further in their efforts to help homeowners.
It seems that the national housing problem has actually propelled some jurists to become activist judges who seek to protect the underdog homeowner from the evils of indifferent, careless and sloppy mortgage companies.
In my own Long Island foreclosure defense practice, this has become evident as we have been able to successfully persuade the court to dismiss foreclosure suits because we called attention to the lender’s defective paperwork. For example, in a recent case, the lender failed to demonstrate that they had legal standing. This is because the lender neglected to properly perfect some mortgage assignment documents with the County Clerk.
Mortgage Companies Have Not Been Filing Proper Documents and Are Now Paying the Price
The Wall Street Journal article commented that many of the recent foreclosure case decisions that punished the lender highlighted what became a common practice among mortgage companies: filing a foreclosure lawsuit without showing proof that they actually own the mortgage and have the right to foreclose. This occurs in large part because mortgages often change hands multiple times after the original mortgage loan is made; yet the mortgage transfer documents are never revised to reflect those changes. Consequently, years later, it can be difficult to verify who is the owner of the mortgage.
The article quoted Raymond Brescia, an assistant professor at Albany Law School, who said that it makes sense for judges to demand that mortgage companies follow the rules to the letter if they want to win foreclosure cases in court.
Massachusetts Judge Invalidates Foreclosure Sale Held Two Years Ago
There was another controversial ruling in October by Keith Long, a state-court judge in Massachusetts. Judge Long invalidated two foreclosure sales that had occurred more than two years ago because the mortgagees, U.S. Bancorp and Wells Fargo & Co., never had the right to sell the homes.
Judge Long ruled that even though the mortgage companies physically held the relevant mortgage documents, the mortgages were never legally assigned to them and recorded with the state. As such, they were selling something they don’t own, despite the fact that the mortgagees may have been operating in the same way they have done so for the past decade or two.
Most mortgage foreclosures continue to be routinely processed by the courts because the homeowners neglect to take steps to protect their rights. The proceedings go unchallenged. However, any Long Island homeowner who has fallen behind with their mortgage payments, and who has been served with foreclosure papers, should consider consulting with a Long Island foreclosure defense attorney to learn how to protect their rights.
Most mortgage foreclosures continue to be routinely processed by the courts because the homeowners neglect to take steps to protect their rights. The proceedings go unchallenged. However, any Long Island homeowner who has fallen behind with their mortgage payments, and who has been served with foreclosure papers, should consider consulting with a Long Island foreclosure defense attorney to learn how to protect their rights.
Written by Craig D. Robins, Esq.The Debtors Filed 10 Bankruptcy Cases to Delay the Foreclosure
A decision issued Monday by Judge Alan S. Trust, sitting in the Central Islip Bankruptcy Court for Eastern District of New York, outlined the excessive measures taken by two Long Island debtors who filed a total of ten bankruptcy petitions over a 12 year period in an effort to stop the foreclosure of their jointly-owned home.
Most of these bankruptcy filings were Chapter 13 cases filed over a four-year period between 2005 and 2009. Almost all of them were filed on the eve of a scheduled foreclosure sale.
Judge Trust issued the decision in each of two separate cases: In re Janet Blair (Case No. 09-76150-ast) and In re Allen Gary Smith (Case No. 09-77562-ast).
The decision was precipitated by a motion brought by Barbara Dunleavy, Esq. of the Nassau County foreclosure law firm, Rosicki, Rosicki & Associates, in which she sought in rem relief against the premises, located in Wyandanch, New York.
“In Rem” Relief in Bankruptcy Proceedings
“In rem” relief is when a mortgagee seeks a court order indicating that the bankruptcy stay that arises in any further bankruptcy cases will not affect a particular piece of property. At the conclusion of the hearing on the mortgage company’s motion, which occured on November 24, 2009, Judge trust lifted the stay to enable the mortgagee to proceed, but reserved decision on the issue of granting in rem relief.
At that bankruptcy court hearing , Mr. Smith conceded that he was really looking to stay in the house for as long as he could. That did not bode to well for the the debtors, as the judge concluded that the serial filings were evidence of the debtors’ bad faith, and also evidendce of the fact that the debtors were abusing the bankruptcy process for several years.
The decision issued yesterday, which granted in rem relief, will now make any further bankruptcy filings by these debtors or any others useless, as far as staying the pending foreclosure proceeding.
It was interesting that Judge Trust did not sanction the debtors for their conduct.
More Posts and Articles About In Rem Bankruptcy Relief to Follow
In his decision, Judge Trust provided an interesting and detailed discussion about the law which enables a bankruptcy court to grant in rem relief. I will likely make that the topic of my January 2010 article which will be published in the Suffolk Lawyer, and I will discuss the new statutory aspects set forth in BAPCPA as well as case authorities for granting in rem relief.
Suffolk County Supreme Court Judges Hon. Jeffrey Spinner, Hon. Peter Mayer, Hon. Ralph Costello, and Hon. Thomas Whelan
Written by Craig D. Robins, Esq.
Four Suffolk County Supreme Court judges presented a views-from-the-bench program on December 9, 2009 about Mortgage foreclosure. The well-attended seminar at the Suffolk County Bar Association had over 100 participants. Cheryl Mintz was the moderator.
The program enabled the judges to provide some important insight into the rapidly-growing area of foreclosure litigation, especially considering a flurry of new legislation dealing with foreclosure procedural law and practice.
Foreclosure Caseloads Putting Strain on Court
Judge Ralph F. Costello commented on the lack of a sufficient number of Supreme Court judges that are necessary to adjudicate the ever-increasing number of foreclosure cases. He acknowledged the difficulty that the Office of Court Administration would have to provide additional judgeships, but felt that it was entirely reasonable to find budgeting to enable each judge to hire a second full-time law clerk. Doing so, he believed, would enable each judge to double their caseload.
There was an in-depth discussion about Governor Patterson’s new comprehensive foreclosure legislation which was just passed last month. The bill will greatly strengthen protections for homeowners, tenants and even neighborhoods, which can be plagued by blight.
Issue of Mortgagee’s Standing Is Becoming Increasingly Litigated
Judge Peter H. Mayer discussed the concept of standing and assignment, which is becoming an increasing source of consternation for mortgage companies. Apparently, there are many problems resulting from the sale of mortgages on the secondary mortgage market. Many foreclosing plaintiffs lack standing to bring the foreclosure suit, which can result in the dismissal of the case.
What a Foreclosure Judge Looks For
Judge Thomas F. Whelan broke his discussion into two sections, dealing with how the Court responds to foreclosure matters if an answer is filed, and if no answer is filed. He discussed the importance of asserting affirmative defenses if available, and also addressed the new Request for Judicial Form that is now used in foreclosure actions.
He also discussed how the law clerks review cases to make sure that certain prerequisites have been met, such as adherence to the relatively-new 90-day foreclosure notice rule, whether parties appeared at mandatory settlement conferences, whether the subject property is owner-occupied (if so, special protections under the new statute exist), and whether additional default notices as required by the CPLR have been provided.
He also discussed how the law clerks review cases to make sure that certain prerequisites have been met, such as adherence to the relatively-new 90-day foreclosure notice rule, whether parties appeared at mandatory settlement conferences, whether the subject property is owner-occupied (if so, special protections under the new statute exist), and whether additional default notices as required by the CPLR have been provided.
Mandatory Foreclosure Settlement Conferences
Judge Jeffrey Arlen Spinner, who is in charge of the Mortgage Foreclosure Conference Part, discussed the relatively new requirement of mandatory settlement conferences for all foreclosure proceedings involving sub-prime mortgages.
“My role as a judge is to be impartial. I try to broker a settlement, if that’s at all possible,” said the judge. He commented on the high number of these conferences, now numbering between 100 and 120 each Tuesday, saying “we’re buried in cases; we’re buried in motions.”
Ray Vorhees, Law Secretary to Judge Mayer, also addressed the audience to highlight the fact that the legislative intent of these various statutes is to protect homeowners, and that the court must and will honor the import of such legislative intent.
Judge Spinner’s Controversial Horoski Decision Which Canceled Mortgage
Towards the end of the evening, Cheryl Mintz asked Judge Spinner to comment on the case everyone wanted to hear about – Horoski – and the audience expressed their excitement. This was the very recent case in which the Judge totally cancelled the mortgage in a foreclosure proceeding citing the bank’s egregious conduct. [See Judge Cancels Mortgage Due to Mortgagee’s Shocking Behavior in Long Island Foreclosure Action ].
Judge Spinner, however, mentioned a prohibition on commenting publicly on any case that is pending. He did mention that a new issue had arisen in the case which will result in the matter appearing before him on his calendar in the next few weeks.
Judge Spinner, however, mentioned a prohibition on commenting publicly on any case that is pending. He did mention that a new issue had arisen in the case which will result in the matter appearing before him on his calendar in the next few weeks.
In response to some pressing commentss about the case from one rather-insistent attendee, Judge Spinner did mention that his decision was one that is based in equity, rather than one based on law.
About the Author. Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in the December 2009 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Patchogue, Commack, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.
Long Island Bankruptcy Attorney Craig Robins Quoted In Newsday Article About Canceled Mortgage
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Written by Craig D. Robins, Esq.One of the biggest stories in years about foreclosure defense litigation on Long Island was the subject of my post on Tuesday: Judge Cancels Mortgage Due to Mortgagee’s Shocking Behavior in Long Island Foreclosure Action .
The next day, Newsday reporter Alfonso A. Castillo interviewed me about the story and wrote a great article that appeared in Sunday’s Newsday, containing several quotes from me.
Here is the Newsday article, taken from the Sunday November 29, 2009 edition:
Foreclosure Ruling Sends Message to Lenders
A Suffolk judge’s decision to wipe out the mortgage debt of a foreclosed-upon East Patchogue couple may send a message to predatory subprime lenders that unless they work to save their customers’ homes, they stand to lose everything, some real estate attorneys said.
“This case shows the change in the tide as to the sentiment about mortgage foreclosures in general,” said Woodbury bankruptcy attorney Craig Robins, who called Suffolk County Court Judge Jeffrey Spinner’s decision “a good demonstration that courts are not going to tolerate this type of conduct by the mortgage companies anymore.”
“This case shows the change in the tide as to the sentiment about mortgage foreclosures in general,” said Woodbury bankruptcy attorney Craig Robins, who called Suffolk County Court Judge Jeffrey Spinner’s decision “a good demonstration that courts are not going to tolerate this type of conduct by the mortgage companies anymore.”
The judge’s ruling against the lender - IndyMac Mortgage Services, based in Pasadena, Calif . - was without doubt highly unusual. In addition, it was perhaps without precedent. A search of published reports nationally turned up no similar action, and several attorneys said the decision was the first of its kind, at least on Long Island.
But some wondered whether the precedent set is a positive one and others questioned the legal soundness of the ruling.
“It’s encouraging as a citizen, but as a practitioner, I can only think that if the judges have the authority to throw out mortgages, who’s going to be lending money?” Commack real estate attorney Lita Smith-Mines said.
In a statement, OneWest Bank E.S.B., IndyMac’s parent company, has said the bank will appeal. A spokeswoman for OneWest Bank did not return a call last week for comment.
Behind the Ruling
In his Nov. 19 decision, Spinner wrote that IndyMac Mortgage Services exhibited conduct that was “harsh, repugnant, shocking and repulsive” in its proceedings against Diana Yano-Horoski, owner of the Oakland Street home at issue.
Spinner wrote that IndyMac “soundly rebuffed” even the most reasonable of settlement offers, inflated the amount of debt of Yano-Horoski and her husband, Gregory Horoski, and seemed determined to kick them out of their home. In order to deter IndyMac from such “unconscionable” behavior in the future, Spinner erased the Horoskis’ nearly $300,000 debt - in effect turning over the home to the family free and clear.
In the nine-page decision, the judge found IndyMac’s credibility wanting and invoked the court’s “equity jurisdiction,” citing an 1890 Court of Appeals decision and numerous other cases in concluding that the mortgage company’s actions were so egregious that it had no claim, morally or ethically, to “equitable relief” in the matter.
“Thus, where a party acts in a manner that is offensive to good conscience and justice, he will be completely without recourse in a court of equity, regardless of what his legal rights may be,” Spinner wrote.
IndyMac, at its height, was known as a subprime lender that doled out high-cost loans to borrowers with less-than-perfect credit. According to Federal Reserve data, IndyMac approved the fourth-highest number of home mortgage loans out of 440 lenders, with 3,893 in 2007. They were fourth-highest in 2006 as well, with 5,058 mortgages.
Out of more than 500 lenders, IndyMac Bank brought the seventh-highest number of foreclosure actions on Long Island, with 970 between January 2008 and June 2009.
Special Circumstances
Robins said such improper and irresponsible practices were not isolated to IndyMac. But, while Spinner’s decision could create important case law that will likely be cited by homeowners’ attorneys in future foreclosure proceedings, Robins said he did not think it should “open the floodgates” for similar decisions.
“I do see a lot of the irresponsible practices that mortgage lenders commit frequently, but I think what sets this case apart was that there were several irresponsible practices in this one case,” said Robins, adding that Spinner “used this case to send a loud warning to all mortgage companies . . . that they better shape up and get their act together.”
Anthony Sabino, a law professor at St. John’s University who practices bankruptcy law in Mineola , said Spinner’s decision to wipe out a homeowner’s debt to a bank may seem like a victory for the underdog, but it could send a dangerous message.
“If all of a sudden banks couldn’t rely on being paid back their mortgages - you think it’s tough to get a mortgage now?” said Sabino, adding that a multitude of similar decisions could slow down construction and put people out of work and out of their homes.
Spinner’s ruling resembled - but went further than - so-called “cram-down” legislation that passed the House of Representatives in March but was defeated in the Senate. The legislation would have allowed homeowners in foreclosure to ask a bankruptcy judge to reduce their mortgage payment if their lender had not offered better terms.
Sabino said he doubted decisions similar to Spinner’s would follow, because while lenders may routinely engage in “nasty” practices, they would not usually rise to the level of that admonished in the Horoskis’ case.
“The laws of banking and real estate have been around since men and women lived in caves. A bank lends you money, you buy a house, and you have to pay the bank back the money, or it takes the house away. That’s not going to change,” said Sabino, who added that the ruling may not set a precedent at all if OneWest Bank is successful in its planned appeal.
Attorneys said judges usually deal with unscrupulous lenders by dismissing their cases or, in extreme instances, issuing monetary sanctions paid to the court.
However, Hauppauge attorney Arshad Majid, who has represented several homeowners in foreclosure proceedings, said, while they rarely use it, judges have the power in some instances to void mortgages. He was not surprised to hear that Spinner would take the drastic step.
“It’s not only a court of law that he presides over, but it is also a court of equity,” Majid said of Spinner. “The court, in making this decision, wanted to stop a pattern of abuse.”
Judge Cancels Mortgage Due to Mortgagee’s Shocking Behavior in Long Island Foreclosure Action
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Written by Craig D. Robins, Esq.Suffolk County foreclosure proceeding resulting in total cancellation of mortgage spells a major victory for homeowner
A Suffolk County homeowner who fell behind on her mortgage was sued by the mortgagee, IndyMac Bank, in a foreclosure proceeding that just produced one of the most startling results I have ever seen in foreclosure litigation.
The judge determined that the lender engaged in “unconscionable, vexatious and opprobrious” conduct in attempting to foreclose the property. The judge concluded that the appropriate penalty was to cancel the mortgage in its entirety, essentially punishing the mortgagee and bestowing a windfall on the homeowner.
Thus, the mortgagee, even though they brought the foreclosure action against the homeowner, ended up losing the entire value of the mortgage.
The case, IndyMac Bank v. Yano-Horoski, was decided Novermber 19, 2009 by Suffolk County Supreme Court Justice Jeffrey A. Spinner.
Foreclosure Judge determines that lender’s attitude was absolutely unconscionable
In a stinging and especially eloquent decision, Judge Spinner highlighted the relatively new law in New York which mandates pre-foreclosure settlement conferences between lenders and borrowers of sub-prime loans, and the problems caused by IndyMac’s wantonly-indifferent attitude towards participating in those conferences.
Judge Spinner determined that IndyMac refused to negotiate, and instead, treated the homeowner in a “harsh, repugnant, shocking and repulsive” manner by spurning what he thought could have been a “win-win” situation.
The homeowner, Ms. Yano-Horoski lives in East Patchogue. She took out a $292,500 mortgage in 2004.
IndyMac Bank refused to cooperate with settlement
The lender apparently refused to participate in any kind of settlement on the ground that the homeowner defaulted on a forbearance agreement. However, it later came out that the lender did not even mail the forbearance agreement to the homeowner until after payments were due.
The judge stated: “Defendant, through Plaintiff’s duplicity, found herself to be in unique and uncomfortable position of being placed in default of the ‘agreement’ even before she had received it.”
In addition, the judge blasted Karen Dickinson, the regional loss mitigation manager for IndyMac, stating that she had an “opprobrious demeanor” and a “condescending attitude.”
To make matters worse for IndyMac, they claimed that $527,437 was due when almost all other documents indicated that the amount actually due, was less than $300,000.
The judge concluded that the banks’ conduct was “wholly unsupportable at law or in equity, greatly egregious and so completely devoid of good faith that equity cannot be permitted to intervene on its behalf.”
In addition, Judge Spinner determined that merely sanctioning the lender was not enough and would not benefit the homeowner.
The law firm of Steven J. Baum, who we regularly interact with in our bankruptcy and foreclosure defense practice, represented IndyMac.
Judges have had it with irresponsible lenders’ practices
What is important about this case is that it illustrates the changing tide against mortgagees, lenders and banks. Whereas years ago mortgagees got away with murder, now judges won’t tolerate any improprieties.
Thus, there is all the more reason to defend foreclosure proceedings if the lender engaged in any bad faith conduct. An experienced foreclosure defense attorney can review a foreclosure situation and advise the homeowner of their legal rights.
I previously wrote that Many New York Foreclosure Suits Are Dismissed Because They Are Defective .
In a case earlier this year, I personally was successful in having the Nassau County Supreme Court dismiss a foreclosure proceeding on technical grounds. See Long Island Foreclosure Case Dismissed!
Written by Craig D. Robins, Esq.For many, purchasing a home in the past few years with no money down was the way to go. Now, however, with real estate values plummeting, many homeowners are finding themselves owing substantially more than their homes are worth. This is a concept I’ve focused on repeatedly in many blog posts over the past several months.
The concept of taking a loss with such real estate purchases has to do with leveraging — putting very little down, but purchasing a lot.
When property values are increasing, the homeowner is considered a winner. However, with the collapse of real estate values, often combined with an increase in the costs of monthly mortgage payments because of adjustable-rate mortgages, the costs of home ownership become especially difficult.
Homeowners faced with this pressure have to make a decision as to whether it is worth it to keep their home if they can barely afford to pay the mortgage and they have absolutely no equity at all.
Our Long Island bankruptcy attorneys help counsel homeowners with exploring the various options. To those who qualify, a bankruptcy can provide an opportunity to walk away from over-leveraged bad real estate without any future liability.