N.Y. Civil Practice Law & Rules § 3408: Mandatory settlement conference in residential foreclosure actions

Rule 3408. Mandatory settlement conference in residential foreclosure

actions. (a) 1. Except as provided in paragraph two of this subdivision,

in any residential foreclosure action involving a home loan as such term

is defined in section thirteen hundred four of the real property actions

and proceedings law, in which the defendant is a resident of the

property subject to foreclosure, plaintiff shall file proof of service

within twenty days of such service, however service is made, and the

court shall hold a mandatory conference within sixty days after the date

when proof of service upon such defendant is filed with the county

clerk, or on such adjourned date as has been agreed to by the parties,

for the purpose of holding settlement discussions pertaining to the

relative rights and obligations of the parties under the mortgage loan

documents, including, but not limited to: (i) determining whether the

parties can reach a mutually agreeable resolution to help the defendant

avoid losing his or her home, and evaluating the potential for a

resolution in which payment schedules or amounts may be modified or

other workout options may be agreed to, including, but not limited to, a

loan modification, short sale, deed in lieu of foreclosure, or any other

loss mitigation option; or (ii) whatever other purposes the court deems

appropriate.

2. (i) Paragraph one of this subdivision shall not apply to a home

loan secured by a reverse mortgage where the default was triggered by

the death of the last surviving borrower unless:

(A) the last surviving borrower's spouse, if any, is a resident of the

property subject to foreclosure; or

(B) the last surviving borrower's successor in interest, who, by

bequest or through intestacy, owns, or has a claim to the ownership of

the property subject to foreclosure, and who was a resident of such

property at the time of the death of such last surviving borrower.

(ii) The superintendent of financial services may promulgate such

rules and regulations as he or she shall deem necessary to implement the

provisions of this paragraph.

(b) At the initial conference held pursuant to this section, any

defendant currently appearing pro se, shall be deemed to have made a

motion to proceed as a poor person under section eleven hundred one of

this chapter. The court shall determine whether such permission shall be

granted pursuant to standards set forth in section eleven hundred one of

this chapter. If the court appoints defendant counsel pursuant to

subdivision (a) of section eleven hundred two of this chapter, it shall

adjourn the conference to a date certain for appearance of counsel and

settlement discussions pursuant to subdivision (a) of this section, and

otherwise shall proceed with the conference.

(c) At any conference held pursuant to this section, the plaintiff and

the defendant shall appear in person or by counsel, and each party's

representative at the conference shall be fully authorized to dispose of

the case. If the defendant is appearing pro se, the court shall advise

the defendant of the nature of the action and his or her rights and

responsibilities as a defendant. Where appropriate, the court may permit

a representative of the plaintiff or the defendant to attend the

settlement conference telephonically or by video-conference.

(d) Upon the filing of a request for judicial intervention in any

action pursuant to this section, the court shall send either a copy of

such request or the defendant's name, address and telephone number (if

available) to a housing counseling agency or agencies on a list

designated by the division of housing and community renewal for the

judicial district in which the defendant resides. Such information shall

be used by the designated housing counseling agency or agencies

exclusively for the purpose of making the homeowner aware of housing

counseling and foreclosure prevention services and options available to

them.

(e) The court shall promptly send a notice to parties advising them of

the time and place of the settlement conference, the purpose of the

conference and the requirements of this section. The notice shall be in

a form prescribed by the office of court administration, or, at the

discretion of the office of court administration, the administrative

judge of the judicial district in which the action is pending, and shall

advise the parties of the documents that they shall bring to the

conference.

1. For the plaintiff, such documents shall include, but are not

limited to, (i) the payment history; (ii) an itemization of the amounts

needed to cure and pay off the loan; (iii) the mortgage and note or

copies of the same; (iv) standard application forms and a description of

loss mitigation options, if any, which may be available to the

defendant; and (v) any other documentation required by the presiding

judge. If the plaintiff is not the owner of the mortgage and note, the

plaintiff shall provide the name, address and telephone number of the

legal owner of the mortgage and note. For cases in which the lender or

its servicing agent has evaluated or is evaluating eligibility for home

loan modification programs or other loss mitigation options, in addition

to the documents listed above, the plaintiff shall bring a summary of

the status of the lender's or servicing agent's evaluation for such

modifications or other loss mitigation options, including, where

applicable, a list of outstanding items required for the borrower to

complete any modification application, an expected date of completion of

the lender's or servicer agent's evaluation, and, if the modification(s)

was denied, a denial letter or any other document explaining the

reason(s) for denial and the data input fields and values used in the

net present value evaluation. If the modification was denied on the

basis of an investor restriction, the plaintiff shall bring the

documentary evidence which provides the basis for the denial, such as a

pooling and servicing agreement.

2. For the defendant, such documents shall include, but are not

limited to, if applicable, information on current income tax returns,

expenses, property taxes and previously submitted applications for loss

mitigation; benefits information; rental agreements or proof of rental

income; and any other documentation relevant to the proceeding required

by the presiding judge.

(f) Both the plaintiff and defendant shall negotiate in good faith to

reach a mutually agreeable resolution, including but not limited to a

loan modification, short sale, deed in lieu of foreclosure, or any other

loss mitigation, if possible. Compliance with the obligation to

negotiate in good faith pursuant to this section shall be measured by

the totality of the circumstances, including but not limited to the

following factors:

1. Compliance with the requirements of this rule and applicable court

rules, court orders, and directives by the court or its designee

pertaining to the settlement conference process;

2. Compliance with applicable mortgage servicing laws, rules,

regulations, investor directives, and loss mitigation standards or

options concerning loan modifications, short sales, and deeds in lieu of

foreclosure; and

3. Conduct consistent with efforts to reach a mutually agreeable

resolution, including but not limited to, avoiding unreasonable delay,

appearing at the settlement conference with authority to fully dispose

of the case, avoiding prosecution of foreclosure proceedings while loss

mitigation applications are pending, and providing accurate information

to the court and parties.

Neither of the parties' failure to make the offer or accept the offer

made by the other party is sufficient to establish a failure to

negotiate in good faith.

(g) The plaintiff must file a notice of discontinuance and vacatur of

the lis pendens within ninety days after any settlement agreement or

loan modification is fully executed.

(h) A party to a foreclosure action may not charge, impose, or

otherwise require payment from the other party for any cost, including

but not limited to attorneys' fees, for appearance at or participation

in the settlement conference.

(i) The court may determine whether either party fails to comply with

the duty to negotiate in good faith pursuant to subdivision (f) of this

section, and order remedies pursuant to subdivisions (j) and (k) of this

section, either on motion of any party or sua sponte on notice to the

parties, in accordance with such procedures as may be established by the

court or the office of court administration. A referee, judicial hearing

officer, or other staff designated by the court to oversee the

settlement conference process may hear and report findings of fact and

conclusions of law, and may make reports and recommendations for relief

to the court concerning any party's failure to negotiate in good faith

pursuant to subdivision (f) of this section.

(j) Upon a finding by the court that the plaintiff failed to negotiate

in good faith pursuant to subdivision (f) of this section, and order

remedies pursuant to this subdivision and subdivision (k) of this

section the court shall, at a minimum, toll the accumulation and

collection of interest, costs, and fees during any undue delay caused by

the plaintiff, and where appropriate, the court may also impose one or

more of the following:

1. Compel production of any documents requested by the court pursuant

to subdivision (e) of this section or the court's designee during the

settlement conference;

2. Impose a civil penalty payable to the state that is sufficient to

deter repetition of the conduct and in an amount not to exceed

twenty-five thousand dollars;

3. The court may award actual damages, fees, including attorney fees

and expenses to the defendant as a result of plaintiff's failure to

negotiate in good faith; or

4. Award any other relief that the court deems just and proper.

(k) Upon a finding by the court that the defendant failed to negotiate

in good faith pursuant to subdivision (f) of this section, the court

shall, at a minimum, remove the case from the conference calendar. In

considering such a finding, the court shall take into account equitable

factors including, but not limited to, whether the defendant was

represented by counsel.

(l) At the first settlement conference held pursuant to this section,

if the defendant has not filed an answer or made a pre-answer motion to

dismiss, the court shall:

1. advise the defendant of the requirement to answer the complaint;

2. explain what is required to answer a complaint in court;

3. advise that if an answer is not interposed the ability to contest

the foreclosure action and assert defenses may be lost; and

4. provide information about available resources for foreclosure

prevention assistance.

At the first conference held pursuant to this section, the court shall

also provide the defendant with a copy of the Consumer Bill of Rights

provided for in section thirteen hundred three of the real property

actions and proceedings law.

(m) A defendant who appears at the settlement conference but who

failed to file a timely answer, pursuant to rule 320 of the civil

practice law and rules, shall be presumed to have a reasonable excuse

for the default and shall be permitted to serve and file an answer,

without any substantive defenses deemed to have been waived within

thirty days of initial appearance at the settlement conference. The

default shall be deemed vacated upon service and filing of an answer.

(n) Any motions submitted by the plaintiff or defendant shall be held

in abeyance while the settlement conference process is ongoing, except

for motions concerning compliance with this rule and its implementing

rules.