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Bank Properly Sanctioned for Not Negotiating in Good Faith in Mandatory Foreclosure Settlement Conferences

The Second Department determined plaintiff bank had not negotiated in good faith in the mandatory foreclosure settlement conferences (required by CPLR 3408(f)).  The bank was sanctioned by precluding it from collecting interest on the mortgage for a period of several months:

Pursuant to CPLR 3408(f), the parties at a mandatory foreclosure settlement conference are required to negotiate in good faith to reach a mutually agreeable resolution (see CPLR 3408[f]; Wells Fargo Bank, N.A. v Meyers, 108 AD3d 9, 11). ” The purpose of the good faith requirement in [CPLR 3408] is to ensure that both plaintiff and defendant are prepared to participate in a meaningful effort at the settlement conference to reach resolution'” (US Bank N.A. v Sarmiento, 121 AD3d 187, 200, quoting 2009 Mem of Governor’s Program Bill, Bill Jacket, L 2009, ch 507, at 11). To conclude that a party failed to negotiate in good faith pursuant to CPLR 3408(f), a court must determine that “the totality of the circumstances demonstrates that the party’s conduct did not constitute a meaningful effort at reaching a resolution” … .

Here, the totality of the circumstances supports the referee’s finding that the plaintiff failed to negotiate in good faith. The referee’s finding was based, in part, upon the plaintiff’s failure to follow guidelines pursuant to the federal Home Affordable Mortgage Program (hereinafter HAMP). The applicable guidelines required the plaintiff, as a lender participating in HAMP, to attempt to obtain a waiver of an investor prohibition or restriction in lowering the interest rate and to keep such evidence in the loan file (see Making Home Affordable Program, Handbook for Servicers of Non-GSE Mortgages, version 4.0, ch 2, § 6.5 at 99 [August 17, 2012]). However, despite repeated requests by the referee to produce evidence that the plaintiff attempted to obtain a waiver of the investor’s restrictions in the PSA, the plaintiff failed to do so for more than one year. Therefore, the plaintiff failed to demonstrate that it followed HAMP regulations and guidelines, which, as several trial courts have concluded, constitutes a failure to negotiate in good faith pursuant to CPLR 3408(f)… . US Bank NA v Smith, 2014 NY Slip Op 08832, 2nd Dept 12-17-14

 

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