A few times I have mentioned mandatory settlement conferences and you’re probably wondering what exactly those entail. So let’s begin and the beginning. The Supreme Court of the State of New York and all lowers courts are governed by the Civil Practice Laws and Rules, or CPLR. The CPLR is the collection of rules that dictate how the courts system works, when deadlines are, how to file motions, how to answer motions, what rights are guaranteed to the average citizen of New York State, etc. It’s basically the bible of New York civil practice and knowing the CPLR backwards and front is a huge asset and advantage for any attorney. Sidenote: to all you young attorneys out there, if you want to impress your boss, spend an hour a day paging through and trying to memorize bits of the CPLR, it’ll pay off.
Not far off from how I actually view the CPLR.
Amid the sub-prime crisis and the ensuing foreclosure crisis, the New York State legislature realized it had to do something to keep its citizens from being booted out of their homes for defaulting on their mortgages.
Accordingly, CPLR 3408 was enacted, which entails that before a bank or servicer can go forward with a foreclosure action on a residential property, a representative from the bank must attend mandatory settlement conferences with the borrower, or the borrower’s attorney.
Now, what the heck is supposed to happen at these conferences? Well, in sum, the judiciary is basically telling the banks “I know you had a contract (the mortgage agreement) and I know you claim that the homeowner broke that contract, but before you’re allowed to go to court and actually try to prove that, you have to consider whether or not the homeowner’s mortgage can be reasonably modified so that it can be affordable and then reinstated.”
Now, this is a novel concept. The State and the courts are basically saying that before you can seek relief from the court, you have to try to work things out. This is unique! This type of thing does not happen in other parts of the law. If I signed a contract with you to purchase 10,000 apples, you delivered them, then I stiffed you on the bill, you could just bring suit against me and it would get assigned directly to a judge. You would not be mandated to go to a settlement conference with me to see if I could afford to buy the apples under better circumstances.
In my opinion, CPLR 3408 is a terrific slice of state law that shows that our legislators are in touch with reality. They saw that an exception had to be made to protect its citizens so they took steps to ensure that people had a chance to keep their homes.
So! Back to the conferences.
The conferences appear before a court-attorney referee. A referee is an attorney who has been hired by the court to preside over the conferences. They can direct the parties to produce or review documents, adjourn the conferences, or if the conferences have come to an impasse, remove the case from the settlement conference part and hand it over to a judge with a written recommendation regarding the status of the case.
If a case is handed over, it can be either a good thing or a bad thing for the homeowner. It may have been handed over because the homeowner cannot show enough income to justify a modification of their loan, that would be a bad thing because it basically means that a foreclosure action is likely to succeed. On the other hand, it may have been handed over because the referee thinks the bank has been negotiating in bad faith, which are grounds for a variety of relief for the homeowner.
Tomorrow, I explain what the heck happens at these conferences and share some stories of my first-hand experience in said conferences.