Creditors Rights / Foreclosures

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In Wells Fargo Bank, N.A. v. Van Dyke et al., --N.Y.S.2d--, 101 A.D.3d 638 (N.Y. A.D. 1st Dep’t, December 27, 2012), Defendant mortgagors attempted to have a foreclosure summon and complaint dismissed against them, on the ground that Plaintiff allegedly failed to offer the defendants a loan modification pursuant to CPLR Section 3408 (the statute providing for mandatory foreclosure settlement conferences in New York). The trial court denied the motion to dismiss, and defendants appealed to the Appellate Division, Second Department. The Appellate Division, Second Department, affirmed the decision of the trail court, noting: “”Contrary to defendants’ apparent belief, Plaintiff was not required by CPLR Section 3408 to offer them a settlement. While the aspirational goal of CPLR 3408 negotiations is that the parties “reach a mutually agreeable resolution to help the defendant avoid losing his or her home,”…

The statute requires only that the parties enter into and conduct negotiations in good faith. As the motion court found, there are situations in which the statutory goal is simply not feasible for either party. Defendant Judith Van Dyke, while asserting that nearly two thirds of her income was rental property, produced no lease, no affidavits by tenants, and no bank statements showing funds traceable to the rents she alleges she has been collecting for a number of years. The bank statements she submitted covered a mere three months. Under the circumstances, it was not unreasonable for Plaintiff [Wells Fargo] to resist using her purported rental income in its loan modification calculations. In any event, even if the rental income were used, Plaintiff would be ineligible for available modifications. Contrary to defendants’ apparent contentions, the mere fact that plaintiff refused to consider a reduction in principal or interest rate does not establish that it was not negotiating in good faith. Nothing in CPLR Section 3408 requires Plaintiff to make the exact offer desired by defendants, and Plaintiff’s failure to make that offer cannot be interpreted as a lack of good faith.””

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