What to Expect at the Foreclosure Settlement Conference and Beyond

New York State implemented a mediation program known as the foreclosure settlement conference in response to the ongoing foreclosure crisis. The program is intended to provide homeowners the opportunity to meet with the lender. During the conference the borrower meets with the bank’s attorney under court supervision. The goal is to come to a settlement or agreement between the homeowner and bank whereby the mortgage can be modified to be made more affordable, thereby avoiding foreclosure. A modification agreement can include lowered or adjusted monthly payments and lowered interest rates. Recently under CPLR 3408(a), the law has expanded the scope of the settlement conference to include other loss mitigation options, such as short sales and deeds in lieu.

Before the advent of foreclosure settlement conferences confusion and unanswered questions abounded for the homeowner. It was extremely difficult or impossible to negotiate a loan modification. So many of our clients tell stories of frustration they endured with their bank. Most had made several attempts to contact the bank to work on their mortgages and save their homes. Countless phone calls led to being put on hold for hours at a time, only to be transferred to an unknowledgeable bank employee. If lucky enough to finally speak to someone who appeared to have some knowledge, that representative suddenly left the company after gaining their trust. Other times the representative gave false information, leading to more debt. Often clients experienced a change in the loan servicer, requiring a whole new and fruitless search for answers. Homeowners were reaching out in good faith to the banks to try to settle theibureaucratic banks failed to responsibility communicate and respond to the people in crisis.

The foreclosure settlement conference helps to get much needed answers for homeowners. By meeting face to face with the bank’s attorney, who is fully briefed on the case and given authority to act on modification decisions, the foreclosure settlement conference can be a valuable asset. While the case is being heard in the foreclosure settlement part, all foreclosure litigation is “stayed”, which means the bank cannot actively pursue the foreclosure action. In this way, it is a safe place for the homeowner, at least temporarily.

The procedure goes as follows: The court sends notice of the foreclosure conference date and time and place via mail. Bank attorney and homeowner appear at the conference. If the homeowner is represented by an attorney, then their attorney appears on behalf of the homeowner. The attorney represents the homeowner’s legal interests and the homeowner has the option to either appear with their attorney or not. Outside the court meeting room, the attorneys form both sides discuss the case, or “pre-conference” before being called in to meet with the court representative. After pre-conferencing, the case is ready to be called for a meeting with the court representative. The court representative is an attorney, not necessarily a judge, who is appointed to represent the Supreme Court. He or she hears the facts of the case and decides whether it fits the requirements needed to remain in the settlement part of the court. Basic requirements include that the homeowner resides in the premises and is seeking to modify the loan. If met, then the court referee reviews the case and sets forth a schedule for the submission of documents needed for a modification review. The conference itself is supposed to be generally amicable, or at least non-adversarial, with both parties working toward achieving a mortgage modification. The homeowner is given approximately one month to complete an application for a modification, known as a Request for Modification Application or “RMA”. The court then gives the bank a date when it must complete its review and request any further information, known as a Missing Documents Letter or “MDL”. The homeowner is given a date in which to provide the missing documents. Although the schedule can be intimidating, our law firm provides guidance every step of the way including assistance in completing the application if there are any questions. We also send the application and all related documents directly to the bank’s attorney. Finally, the court orders a new conference date in which to return to court for the purpose of monitoring the case. Assuming the application is timely sent, the next conference will assess the bank’s review progress and whether a modification has been offered. If so, the modification terms will be provided by the bank and thoroughly analyzed.

Strategic moves are vital in the conference. Although it is intended to be a non-adversarial settlement, an experienced foreclosure defense attorney must be ready to anticipate anything. They must be ready and able to both advocate and legally defend their clients as needed in the conference.

Our law firm’s goal is to apply the law to meet our client’s needs, whether is an affordable loan modification or staying in their home as long as possible. Each client is unique. And our legal approach is strategically correlated to our client’s desired outcome.

The conference is the perfect opportunity to communicate the issues facing the homeowner. In addition, it is an important time to be prepared for and defend against any aggressive moves by the bank’s attorney to release the case. Further the conference is the time to fight for our clients.The court holds the standard that all parties must work together in “good faith”.

Typically there are several conferences before the bank makes a decision. There can be several twist and turns in between. For example, if the bank is taking too long, the homeowner’s attorney may request that the court give the bank a warning, known as a “conditional order”. The order could impose fines on the bank and even stop or “toll” the interest on the loan until the bank makes a good faith effort to comply. Submission dates must be followed. If not, the court referee can remove the case from the settlement part, known as a “release”. However, if the homeowner’s attorney can effectively explain legitimate circumstances that delayed submission, the court referee will often agree to an extension of time. Our firm has developed a solid reputation and rapport the court referees and with the bank’s attorneys. As a result, most bank attorneys work well with us toward achieving the desired outcome. In a win-win outcome, the bank makes an offer, it is accepted by the homeowner and the case is deemed “settled” by the court referee. The court referee sets forth a future conference date in order to monitor that the modification has in fact been made. No appearance would be needed if all parties are proceeding with the modification and the case has been officially discontinued.

On the other hand, if the bank issues a denial of the modification application (often due to financials), or the homeowner decides to not accept a modification offer, then the matter will be thoroughly discussed at the conference. If merited, the homeowner’s attorney requests to appeal the decision. If appealed, then a follow up conference will be ordered. In any event, should the case not be settled due to denial by bank, unacceptance by homeowner, or failure to follow court ordered schedule, then, as long as some documents have been submitted, the court may order a time period, usually 30 to 45 days, known as a “stay” during which time the bank is prohibited from pursuing foreclosure action. Thereafter, the case is transferred to the litigation part of the court. In litigation, a judge is assigned and the law suit proceeds. Here our firm continues to zealously defend against the foreclose utilizing the full arsenal of laws protecting the homeowner.

As you can see, the conference is not always clear cut and linear. For example, it can be mired with unreasonable requests for documents and unwarranted attempts by the bank to release the case. Even with the benefit of a court mandated foreclosure settlement conference, it is critical to secure quality representation from an experienced attorney in foreclosure settlement and at every stage of the process to ensure protection, efficacy and positive results.

Our law firm has built a solid reputation in defending against foreclosure for our clients. We provide foreclosure defense including counsel and guidance from the start and during all stages of the process, including assistance with completing and sending the application to the bank, legal counsel and effective communication with the court and bank attorneys. Contact us if you would like to discuss foreclosure or real estate matters.