Another house falling to the foreclosure market
Another house falling to the foreclosure market ()

As pending residential foreclosure cases pile up, state court administrators will make judges available to address issues that arise during mandatory settlement conferences.

The upcoming assignments at the four jurisdictions with the heaviest foreclosure volume—Kings, Queens, Nassau and Suffolk counties—are a response to complaints from homeowners’ attorneys that lenders are sending representatives to conferences who have no authority to make decisions.

Justice Barry Kamins, chief of policy and planning for the courts, said the court officials are responding to homeowners’ concerns expressed in meetings with their attorneys from various groups over the past month.

The legal service providers also on Wednesday released a report that found in 80 percent of 252 settlement conferences observed over a three-month period last year, attorneys appearing for the lender either lacked necessary information or appeared with out settlement authority.

Under the assignment plan, Kamins said both lenders and homeowners would have “immediate” access to judges who could resolve issues or disputes.

Kamins noted that he has reached out to representatives for both lenders and homeowners for their feedback.

The assignments will be made in cooperation with the administrative judges, who have not yet selected judges. Kamins said he hoped to have the judges in place by June.

By the end of 2013, there were 87,016 pending foreclosure cases statewide. As of March 30, there were 90,275 pending cases. Last year, there were 100,334 settlement conferences.

Report Findings

The report by JASA/Legal Services for the Elderly in Queens, Legal Services NYC and MFY Legal Services scrutinized mandatory settlement conferences, which occur once the foreclosure commences, under CPLR 3408.

The proceedings are held in the hopes that borrowers and lenders can negotiate an outcome short of foreclosure, such as a mortgage modification.

CPLR 3408 (c) says, “the plaintiff shall appear in person or by counsel, and if appearing by counsel, such counsel shall be fully authorized to dispose of the case.”

Another part of the statute, CPLR 3408(f) says both sides “shall negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible.”

Yet the report claimed lenders regularly ran afoul of those rules.

The three organizations and a number of attorneys from other groups observed 252 conferences from September to November 2013 in the five boroughs of New York City. Of those conferences, 36 percent of lender attorneys appeared without needed information, such as claimed investor restrictions on modifications.

Meanwhile, the report said in 44 percent of the observed cases, plaintiff attorneys did not have settlement authority.

Eight percent appeared with authority and in 12 percent of the cases, the attorney’s authority was unclear, said the report.

According to court statistics, in approximately that same time period—from Sept. 9 through Dec. 1—there were just over 8,600 settlement conferences citywide.

The report urged courts to “not tolerate rampant violation of the settlement conference law and should enforce the law as it is written vigorously.”

When lender attorneys do not appear with full settlement authority, requisite information or fail to negotiate in good faith, the report said judges should mete out consequences like the tolling or barring of interest collection or staying actions until lenders meet their “obligations under the settlement conference law.”

In an interview, Jacob Inwald, director of foreclosure prevention for Legal Services NYC and one of the report’s authors, said the report aimed to encourage enforcement of the law “as currently written, so the process is not dragged out indefinitely” and conferences were productive.

He said in some cases judges have already imposed remedies like tolling interest. But that sort of relief occurred only after motion practice or hearings which requiring legal representation, he noted.

Just over half of homeowners were represented at settlement conferences from October 2012 to 2013, according to court statistics.

Inwald said he and colleagues were “definitely supportive” of judge assignments to settlement conferences and noted one judge in the Bronx already has such a task and one judge in Queens did too for a period of time.