Judge Blasts Bank's Foreclosure Conduct and Cancels Mortgage
 

Judge Blasts Bank's Foreclosure Conduct and Cancels Mortgage
Vesselin Mitev

11-24-2009

A lender's "unconscionable, vexatious and opprobrious" conduct in attempting to foreclose on a Long Island home has prompted a state judge to cancel the mortgage on the property.

IndyMac Bank v. Yano-Horoski, 2005-17926, came before Suffolk County Supreme Court Justice Jeffrey A. Spinner as the result of a state law mandating pre-foreclosure settlement conferences between lenders and borrowers of subprime, or high-cost, home loans.

The case was decided with the county facing what the judge characterized as "the yawning abyss of a deep mortgage and housing crisis with foreclosure filings at a record high rate and a corresponding paucity of emergency housing."

Spinner acknowledged that foreclosure is sometimes inevitable and proper, but he noted that a "plethora" of subprime mortgages had been successfully modified in the county's foreclosure part. And he said that he found it "deeply troubling" that the bank had spurned what would have been a "win-win" solution for all parties.

Instead of negotiating, he said that the bank had engaged in "harsh, repugnant, shocking and repulsive" treatment of the homeowner, Dana Yano-Horoski.

Yano-Horoski, appearing pro se, requested a conference in February to seek a deal with IndyMac Bank on the $292,500 mortgage she took out in August 2004 on her East Patchogue home.

Following a series of hearings attempting "to obtain meaningful cooperation" from the bank, Spinner ordered that a bank representative attend a conference in September.

Karen Dickinson, regional loss mitigation manager for IndyMac, appeared and "made it abundantly clear that no form of mediation, resolution or settlement would be acceptable" to the bank, Justice Spinner wrote.

Notably, the judge wrote, the bank asserted that the borrower had previously defaulted on a forbearance agreement when in fact the agreement had not even been sent out until after it was due.

"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," Spinner wrote.

The bank also rejected an offer Yano-Horoski's daughter to buy the house at fair market value.

"It was evident from Ms. Dickinson's opprobrious demeanor and condescending attitude that no proffer by Defendant (short of consent to foreclosure and ejectment of Defendant and her family) would be acceptable to Plaintiff," the judge wrote, adding that even a "desperate" offer of a deed in lieu of foreclosure was "met with bland equivocation."

Spinner ordered another hearing last week at which discrepancies surfaced about how much was actually owed.

The bank claimed a balance of $527,437 was due, but Yano-Horoski gave a much lower figure --according to two bank letters, she owed around $285,000 as of August 2009.

Spinner pointed out that a prior affidavit by a bank representative, "presumably one with knowledge of the account," tabbed the principal balance at $290,687.

The large disparity, coupled with Dickinson's conduct, swung "the pendulum of credibility" heavily to the homeowner, the court held.

SETTLEMENT REJECTED

The judge also remarked that despite her severe health problems, Yano-Horoski and her husband had attended every conference and tried to resolve the dispute in good faith, "only to be callously and arbitrarily turned away by Plaintiff."

The judge observed that a modification of the mortgage would have assured the IndyMac "a regular income stream, albeit with a reduced rate of interest and without sustaining a loss of several hundred thousand dollars."

"In addition, no neighborhood blight would occur from the boarding of the property after foreclosure which would, in turn, avert problems of litter, dumping, vagrancy and vandalism as well a corresponding decline of property values in the immediate area."

Moreover, rejecting the "win-win" of a negotiated settlement would result in virtually certain "undomiciled status for two physically unhealthy persons and their daughter, leading to an additional level of problems, both for them and for society."

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."

But he went further than rejecting the foreclosure.

If the case was simply dismissed, he wrote, the court "cannot be assured that Plaintiff will not repeat this course of conduct."

Also Spinner said that monetary sanctions were "not likely to have a salubrious or remedial effect" and, in any case, would not benefit the homeowner.

Imposing sanctions would bring little benefit to the homeowner, the judge wrote, leaving the "appropriate equitable disposition" of canceling the debt and discharging the mortgage.

Thus, he concluded that the original principal amount of $292,500 "should be cancelled, voided and set aside," the mortgage be discharged and the bank barred from any attempt to collect on the note.

According to state court data, Suffolk County is first among the state's 62 counties in foreclosures, recording more than 9,000 filings this year. According to RealtyTrac, one foreclosure filing was recorded last month for each 578 homes in the county. Lenders took possession of 20 homes.

Spinner leads a newly-established foreclosure unit to accommodate settlement conferences that have reached 2,400 in the county; approximately 15,000 conferences have been held statewide.

The law firm of Steven J. Baum represented the bank.

IndyMac, which was placed in conservatorship in July 2008, is now a subsidiary of California-based OneWest Bank. The firm said on Friday it could not prepare a response by press time.

vexatious?
opprobrious?
salubrious?

:rolleyes:

whatever..

Damn people speaking english using a decent vocabulary

More like using big words to try and justify being called "Your Honor" and having people stand up when they enter the room :lol:

So they are in court because she didn't pay her loan and the bank is in trouble for wanting the money they loaned out?

Sounds like a judge who has a brain. Mediation isn't mediation, if one side never intends to budge. I frequently side with banks, because so many people have no idea how they operate, but the story makes this woman sound like she spent the meetings twirling the end of her long handlebar moustache.

If *I* have to look up a word, then the author has gone a step too far with the thesaurus :lol:

It doesn't matter anyway. This will be overturned on appeal, but that will not generate any news stories.

After a cursory look I think New York state elects their judges. I would wager that this is an attempt by the judge to pander to his constituency because he is in danger of loosing his next election.

Read past the first 5 lines. They tried to settle, the bank wouldnt even let her daughter buy the house from them at fair market value.

Im glad the bank is losing out. Fuck em. they've got no interest in actually helping anyone with financial problems.

Good for the judge. Banks get bailed out all the time and do nothing to help the people who really need help, who are going to lose everything. Maybe this will send a message that they should go into mediation with an open mind and truly mean to come to a conclusion that helps everyone.

I don't understand why banks even want to foreclose if they can help it, it's not like they are going to have an easy time reselling the property right now.

As usual, reading comprehension fail.

:lol

http://www.merriam-webster.com/dictionary/VEXATIOUS
http://dictionary.reference.com/browse/opprobrious
http://en.wiktionary.org/wiki/salubrious

:poke:

Hey Einstein did you read this part???
Reduced rate of interest which means a loss of money for the bank. Perhaps if the bank assumed they would give out a loan with a smaller percentage rate they wouldn't have given the loan in the first place. She agreed to a percentage and should have paid it. If she can't then it should be up to the bank (and not some snooty judge) on wether they want to accept less money.

I don't see the "Win-Win" there. If you loaned a buddy $100 and they said they were only going to give you $90 back, then you'd be pissed off as hell.

$90 is better than none.
The bank could take a reduced rate for a longer term which would equal the same money, but allow the homeowner to continue to make payments.

If you lost your job(I know, not possible in this booming economy), would you not try to make arragements with the bank to keep your house?
(No, you sound like an internet tough guy, who will turn into Chuck Norris and roundhouse kick money into existence to pay your mortgage)

What about the part where the bank tacked $200,000 onto the loan? What are your comments about that part?

The bank would have made their money from interest even at a reduced interest rate, anything above 0% has to yield money for the bank, hmnn I borrow 200,000 and over 30 yrs my payout to the mortage co. ends up being 325,000, at whatever interest had been established, the bank essentially had 125,000 in that scenario cushioned so even if they reduce the interest a point or few, they are still gonna get their money in the end and then some.

Still, if you were expecting $100 (let's say this week and not $110 a year from now) then you'd still be upset. Then on top of that because she couldn't make her payments (wether spending too much money on Starbucks or loosing her job which is not hte banks concern) the bank has to take a hit of anything or wait for the money they were promised?

As for the $200,000, I have no clue what that's for or from.

My main concern is that the judge upholds the terms of the original contract and not rewrite them so he looks good. Not saying what the bank is doing is right, but if it's within the bounds of the contract she signed then they should be able to do it without punishment. If what they are doing violates her contract that they both signed then I want the judge to punish them then.

No, if I loaned a buddy 100, and he said he could only pay back 90, i'd probably ask him to keep it as he probably needs that 90 dollars more than the guy who could afford to lend it, seeing he couldnt pay back the full bill. Ive got a few friends that I would GIVE 100$ in a heartbeat if they needed it. I know others whom I wouldnt piss in their mouth if they were dying of thirst.

Its far and away not the same situation. Nice try. Fail. Dont compare law, banking and global economics to a loan between friends.

Certainly not a fair comparison. After all, a friend doesn't take you to court and try to convince the judge that he loaned you $200.00, when it was really $100.00.

not in Canada anyway.

I agree that contracts should be honoured, but due to unforseen circumstances, the people wanted to work with the bank to get a mutually beneficial outcome. The bank was not interested. Why? I don't know. If they foreclose on houses, they lose more money. Houses in the area are worth less, there are less buyers, and the bank has to dump the home.

I don't know what it is like in the states, but here, I can renegotiate my mortgage any time I want. I will pay a penalty($10-20K), but that is much better than losing my home, and the bank wins(keep my mortgage, plus get a penalty from me).

I suspect the difference was due to the small number being the amount the bank loaned them and the larger number being the total repayment amount if the borrowers had followed their repayment schedule.

Ultimately what this comes down to is the lender and the borrower signed a contract. The borrower is no longer able to fulfill their requirements under the contract. If the lender is willing to change the terms of the contract to accommodate the borrower that is great, but the lender is completely within their rights to hold the borrower to the original terms. What would be most beneficial to the lender is irrelevant. They can choose to do whatever they want within the law no matter what this shithead judge says. Cases like this are why the appellate courts exist.

Except in this case the law is against the lender. The required settlement conference requires that both parties bargain in good faith, not just sit there and draw a line in the sand.

While I generally believe that banks get a bad rap from people who don't understand the realities involved, after having two parents in the industry for my whole life, this is a case in which a lending institution needed to be hammered down.

Ftr, even with the astronomical Rates if people unable to pay their mortgages, and with sufficient efforts made to remedy the issue, most banks are still refusing to assist the homeowners and are the main contributing force behind the housing foreclosure issue.

Foreclosure is a very costly process.
The bank is responsible for legal cost associated with the foreclosure.
They become responsible for all taxes owed once the foreclosure process begins.
They lose revenue from the halt of principle and interest payments
Once they do get the deed to the house they have to deal with the effect a foreclosed home has on market value, meaning one foreclosed home on the block automatically brings the value of surrounding homes down as well as the market value of the home.
they have to pay for upkeep and bringing the house up to a sell-able condition.
They have to pay whatever real estates broker cost to get the house on the market.
As a reminder...they are not receiving any money for the property during this period. From the first missed payment to sale of the home can take over a year.

Once it is accepted that the homeowner will not be able to catch up but will be able to pay under new terms it is a win win situation to work with the homeowner.

The only good that comes out of a foreclosure is the deal the next buyer gets. Everyone else losses big time. The homeowner is out of the home and loses any equity in the home, neighbors lose as there equity takes a hit from the foreclosed house and the bank can lose anywhere from 40 to 80cents on the dollar.

If the lender believes they have the legal right to have the house foreclosed and they want the home foreclosed they operate in good faith up to that point. Good faith doesn't require them to accept less than what they feel they are entitled to under the law.

The main contributing forces behind the housing foreclosure issue are stupid people borrowing and stupid bankers lending way more money than the borrowers could hope to afford to pay back.

Greed all around

Lenders, trying to make a few extra $$$ start offering non traditional loans to regular folk offsetting the risk by increased rate.

Folks - we shall call them by the common name "idiots" jump on the bandwagon and start chasing homes they normally could not afford.
The next group of folks -also known as"asshats" - start taking out jack ass loans like ARMs, interest only and whatever fuckall "should only be for wealthy people" loans because:

• Their friends told them about all the money that can be made from flipping houses and they no a "friend" who does it.
• They read this great book about how to make money in real estate
• They'll just sell it before the mortgage resets and then they'll make a killing because "you can't go wrong " in real estate

Finally you have "the jackasses" all the folks who were the core demographic for sub prime loans.

Lenders stop taking ownership of loans by selling them off as soon as soon as the borrower signs the paper work. So the guy working the mortgage doesn't give a shit about the quality of the application or loan because they are just going to sell it off to Ginnie Mae or some other institution so that the loan could be bundled up with a bunch of other loans in a mortgage backed security. Hell, maybe that MBS wilol get bundled up in a collateral debt obligation and then they can take out a credit default swap on it and make a fucking killing on the market.
And guess what? It doesn;t matter if half your mortgages were made to unemployed convicts and homeless people...the ratings agencies will still slap a triple A rating on the security those mortgages are bundled into!!

Since there is such a nice revenue stream from selling off these mortgages lets generate as many loans as possible to whatever demographic we can find that can sign their name. Hell, the government is always pushing to up homeownership and all those stupid reports we have to submit to the gov have to breakdown the portfolio to make sure we are abiding by all the regulations so lets mipress em by listing a bunch of mortgages to poor people!! Who the fuck cares if they probably will defualt on the mortgage 2 years from now...by the time we won't even own the mortgage (or the risk that goes along with it) anymore.

Lets just sell sell sell. Maybe even hire some PR firms to spread the word to the public that all these kooky mortgages are a sure thing and that everyone should by a home. Who cares if these people don't know what they are getting into.

Don't get me started on the people that took out all these fruity mortgages to buy houses.



who that was a fucking tangent...

Anyway...now it looks like most of the foreclosures are being generated by people who took out regular mortgages and were prime. So now the foreclosure rate is being pumped up from poor economic conditions. Lets not forget that a lot are health related as is the case with the people in the story.

must stop typing.

now I'm rambling

Good faith isn't demanding double the current debt amount. If the term of the loan is cut short by the lender, then said lender has no claim to 20+ years worth of interest.

Given what I've absorbed regarding the North American banking system by osmosis over the years that my parents worked in banks, in various capacities, this particular bank has some agenda other than simply maintaining their profit on this loan. The amount of money that they would lose on a property that has been devalued, by foreclosing on it, could approach the amount that they were legally entitled to. Something else is going on here.

The best interests of the bank's stock holders are served by extending the loan and reducing the interest rate, in order to either minimize or eliminate losses. The judge recognized that the bank's representative wasn't dealing in good faith and apparently had more than a little to hide, so he slapped the bank down. This seems to be a completely appropriate approach in this situation.

Here's the real issue: Banks were making loans to people who probably never should have qualified for them. They used predatory lending practises in order to do so. The loans were upside-down from day one. It doesn't take a stupid person to fail to understand finance. I've run into loan officers who don't.

The banks were using these essentially worthless loans in order to create profit in other arenas. If a regular business rather than a lending institution cooked the books the way that they did, the board of directors would be out on the street and the stock holders would be storming the gates. The stupid people were the excessively greedy ones who didn't think that this massive Ponzi Scheme would ever come crashing down on their heads.

so sigining a 30yr loan really doesn't mean you have to honor..........IC

That's about as reasonable a comment as, "So killing someone means that you don't have to go to jail."

and i agree

The term of the loan was cut short by the borrowers deciding they were no longer going to pay. The borrowers were the first ones to fail to live up to the terms of the loan.

You are making a lot of assumptions here about what is in the best interests of the bank and its shareholders. You assume that the only sources of revenue available are the value of the house or payments by the borrowers. That isn't necessarily the case. Is the bank going to receive TARP money to make up for the difference between the value of the house and the value of the loan? Will they receive a similar payment for modifying the loan?

You also assume modification of the loan is best for the shareholders. If the loan is modified the bank may have to carry the lost revenue on their balance sheet for the life of the loan. If they foreclose they can take one big hit in an already crappy year and be back to showing a profit in a few years. The latter alternative is usually better for the value of a company's stock, thus better for the company's shareholders.

If you want to absolve the borrowers of all responsibility for the current situation that is your purgative. I place the blame equally on the lenders and the borrowers.

Yes, I make a lot of assumptions. They're based on hearing a lifetime of experience from two parents, who work(ed) in the field.

And yet they are still assumptions. If your assumptions are fact it means the bank is desperate to loose as much money as they possibly can for no benefit to themselves. This makes me think there is more to the story and at least one of your assumptions may be wrong.

Then you obviously chose to miss the part where I said that there must be something that they haven't disclosed.

I think there's rather fucking obviously more at play here - the woman's daughter offered to buy the fucking house at fair market value. No fucking banker in their right mind would walk from that deal in the midst of a foreclosure situation.

Agreed

I never post out here but this is just WRONG on all parts.

If you bought a house you can't afford you don't get to keep it, end of discussion! Sorry you are sick, sorry times are tough, sorry you lost your job, deal with it.

The banks should have never loaned money to someone who can't make the payments. This is what started this whole mess.

I am sorry you have hit on hard times and can no longer afford your house. So you daughter offers to buy the house at a much reduced fair market value and you get to keep a house you still can't afford? How is this right in anyones mind.

Now for what really pisses me off, I live simply, pay my bills on time, buy with cash, work my ass off, pay tons of taxes and have payed my student loans off, drive an older car, do without what I would like (maybe a nicer, bigger house) and put the money into savings so that if something happens I will be ok, can make my house payment if I lose my job or get sick.....and

What do I get out of all of this mess......to pay more taxes and watch people who were not financially responsible get to keep houses they can't afford, never could afford and will never be able to afford because the goverment has decided they didn't know better, don't have to be financially responsible or have fallen on hard times. Sorry just pisses me off!

easy solution

The daughter who has the money should let her mother/parents move in with her until they get back on there feet financially to purchase a new home/find a rental within their budget. Thats what children should do, your parents raised you.....help them out when they get into trouble. (no I do not like my mother but if that was the situation I would suck it up and put a roof over her head, because that was how I was raised).

The bank/s should be burned to the ground for giving the/these loan/s in the first place, messing up the paperwork and being greedy leaches but in the end if you don't fulfill you morgage requirements you don't get to keep the house....that is the collateral on the loan, it goes back to the bank and the bank can deal with it.

The Judge should be shot because he just set a precidence and every greedy tom/dick and harry who thinks they might get out of their morgage will be filing more irrelevent lawsuits to get out of more responsibility for their financial responsibilities and with the way the goverment is going they will financially support these lawsuits causing further chaos to our economic system

Sorry for sounding harsh but I am fed up!!!!! Flame away!