Just To Feel Good; Loss Mitigation (A Defense Which Failed)

Mortgage servicers know that in a certain percentage of foreclosures, dedicated borrowers (and others) can abuse the system with bizarre, baseless defenses and unending delaying tactics.  Sometimes (not so often, though) an attempt to slow-up a foreclosure is so dumb that it goes absolutely nowhere – except the law books.  There is some comfort in seeing a really nutty posture disposed of – thus our mention of a new case for your delectation.  [Contimortgage Corp. v. DeJesus, 23A.D.3d 603, 805 N.Y.S.2d 400 (2d Dept. 2005)]

A mortgage foreclosure action was going forward when along came a mortgage brokerage company (not a party to the foreclosure) offering to pay off the mortgage.  (The decision doesn’t say so, but we can surmise that the broker was likely refinancing the owner.)  The foreclosing lender was agreeable and sent a document it called an addendum to the broker to sign to make the deal, so long as the paper was signed by a certain date.  And if the signing didn’t happen, the agreement was to be void.

The date came and went with no broker’s signature and no paper returned to the foreclosing lender.  Then when a foreclosure sale was held, the broker moved to stay delivery of the referee’s deed, presumably on the ground that it had some contract with the lender.

“No” said the court, there was no contract between the broker and the lender.  Why the broker thought an appeal was a good idea is puzzling but they tried that route and lost again – not surprisingly.

But there is still a lesson here.  Usually, we urge caution with even desirable settlement paths because they are so often fertile ground for someone to later make a fuss and slow-up a foreclosure.  Special care and attention to detail can help avoid problems, though.

Here, the lender was careful.  Its agreement had a set timeframe and would become void if the date to sign and return was not honored.  Even with such wise caution the lender was dragged through a motion and an appeal, costs which likely could not be recovered.

So an absurd defense was banished.  Care saved the day, but not all the expense.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.