Solomon-Like Court Orders Lender And Borrower To Split Difference On Mortgage Refi

Mortgage foreclosure actions are continuing at a rapid rate. Overwhelmed courts are struggling to keep people in their homes, while treating lenders fairly. A recent decision by a New York State Supreme Court justice shows the dilemma facing the judicial system and the problems both borrowers and lenders have to address. It also offers what some may view

as an equitable resolution to this particular dispute. 

As the court explained, the mortgage in this case went to foreclosure in July 2007. A number of sales were scheduled and cancelled as a result of bankruptcy filings and several pro se applications to the court. In May 2008, the parties entered into a forbearance agreement that was to have had a life of two years. It required a down payment of $10,000, which was made. However, the defendant later defaulted and the dispute went back to court. The court directed the parties to conduct settlement negotiations. Conferences were held on a once per month basis until the parties reached an impasse. The problem: The lender agreed to a modification that would lower the monthly payment to $3,000 per month and the defendant offered to pay $2,000 per month.

The court decided that the lender was entitled to assurances that the defendant was going to be ready willing and able to maintain the payments under the mortgage. To that end, it ordered the defendant to deposit $10,000 with the clerk and, in addition, to make payments of $2,500 per month no later than the 15th day of each month. If the defendant fails to make any required payment, the court ruled that the plaintiff could immediately enter an amended judgment of Foreclosure and Sale.
 
The case is AAMES Funding Corp. v. Dudley, 2009 N.Y. Slip Op. 52410(U) (Sup. Ct. Kings Co. Nov. 30, 2009). The lender was represented by Sheldon May & Assoc., and the defendant was pro se.