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.
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.