Expands the provisions relating to mandatory settlement conferences in residential foreclosure actions

SUMMARY OF PROVISIONS OF BILL

Section 1. Subdivisions (a), (c), (e)-(g) of Rule 3408 of the civil practice law and rules (CPLR) are amended and subdivisions (i)-(k) are added to make some clarifications to the mandatory settlement conference provisions in residential foreclosure actions.

Subdivision (a) is amended to clarify that all settlement options short of judgments of foreclosure and sale, including loan modifications, short sales and deeds in lieu of foreclosure are encompassed within the purposes of the mandatory settlement conferences in residential foreclo- sure actions and that all such settlement options can be considered during these settlement conferences.

Subdivision (c) is amended to clarify that the Plaintiff's represen- tative that appears at the mandatory settlement conferences shall be fully authorized to dispose of the case, and that similar to the plain- tiff, the borrower defendant may also be permitted by the court to attend the settlement conference telephonically or by video-conference.

Subdivision (e) is amended to clarify that compliance with the document production requirements the subdivision are not optional. The amendment also supplements the documentation production requirements to include contact information for an authorized representative of the plaintiff capable of disposing the case along with documentation requirements for loss mitigation application options.

Subdivision (f) is amended to provide clarifying guidelines relating to good faith negotiations during the mandatory settlement conferences, including providing guidelines to measure good faith negotiations by the totality of the circumstances.

Subdivision (g) is amended to change the time frame to file the notice of discontinuance and vacatur of the lis pendens to thirty days after execution of a settlement agreement or loan modification.

Subdivision (i) is added to preserve the ability of an unrepresented homeowner defendant who has participated in a mandatory settlement conference to answer the complaint within thirty days following the release of the case from the settlement conference, It also preserves the ability of such a defendant to seek relief for violations of the provisions of the mandatory settlement conference section.

Subdivision (j) is amended to clarify that motions shall be held in abeyance during settlement conferences except motions for relief for violations of the provisions of the mandatory settlement conference section.

Subdivision (k) is amended to clarify the court's obligation to enforce the mandatory settlement conference provisions with a list of penalties including ones tailored to the harm occasioned by violation of the provisions. This subdivision also authorizes a referee or judicial hear- ing officer to ensure compliance with all provisions of the mandatory settlement conference section and to make findings of fact relating to good faith negotiations and violations of terms of the settlement conference provisions.

Section 2 provides for an immediate effective date with the terms of the act to apply to actions pending or filed after such date.

Justification

New York State has implemented various laws to help avoid foreclosures and preserve homeownership. CPLR section 3408 is among the laws instituted that foster the early settlement of foreclo- sure actions as a means of preserving homeownership, A key provision of this law requires the court to hold mandatory settlement conferences in any residential foreclosure action involving a home loan, The purpose of this conference is to determine whether the parties can reach a mutually agreeable resolution to help the homeowner avoid losing his or her home, and evaluate the potential for a resolution in which payment schedules or amounts may be modified or other workout options may be agreed to (CPLR 3408(a)).In addition, CPLR 3408 requires both sides to negotiate in good faith to reach a mutually agreeable resolution (CPLR 3408(f)).

We have learned that some banks sometimes flout the express statutory language and the core purpose of the settlement conference law designed to promote negotiation of affordable loan modifications or other home- saving solutions. They do this in a number of ways, including incorrect- ly arguing that the law permits only certain types of workout options, providing misinformation, repeatedly losing homeowner paperwork, improp- erly denying loan modifications, commencing foreclosure actions after promising not to do so in a loan modification offer, and employing a range of dilatory tactics, including sending counsel to settlement. conferences unprepared, without required information and/or without settlement authority, and delaying the appearance at such conferences of a bank representative with full settlement authority. This conduct frus- trates the purpose of New York's settlement conference law, prolonging the foreclosure process, often for over a year, which results in costs to the homeowner that make home-saving solutions difficult, if not impossible.

This bill would provide clarification and guidance on the rights and remedies of the parties to ensure compliance with the express provisions of the settlement conference law and its original purpose.

Legislative history

New bill.

Fiscal implications for state and local governments

None.

Effective date

Immediately and shall apply to actions pending or filed after such date.