New York Courts Uphold Many Defenses to Foreclosures

The July 21, 2010 New York Law Journal discussed the fact that many defenses are being upheld to prevent successful foreclosure actions by lenders. The article noted that “Over the last five years, the annual number of foreclosure filings in New York state has more than doubled, from 22,350 in 2005 to 46,673 last year. More cases were filed in the first five months of 2010 than in all of 2005. In [Suffolk County], the increase has been even steeper, to 7,536 filings last year from only 2,016 in 2005. And the county had recorded 4,144 foreclosure filings as of May 24 (See County-by-County Foreclosure Numbers for 2010 as of May 24 and 2009).”

    Many of the defenses, and the assessment of damages, that have been upheld are familiar to those who represent borrowers: (a) unconscionable practices during loan modification negotiations; (b) damages for failing to obtain the legal right to go into a defaulted borrower’s home; (c) damages for the unreasonable and overreaching language of a mortgage agreement.

    These decisions have been very important in setting the stage for the mandatory settlement conferences that the New York Courts conduct in regard to foreclosures. The lenders are compelled to take the conferences seriously, given the fact that the Judges appear open to the idea of turning the foreclosure process against lenders who cause the borrower unjustified harm. In essence, it is a way of promoting settlement and restructuring of mortgage debt.

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