Foreclosure attorneys often get a jaundiced view of defaulting mortgagors and their allies. The issues which consume most of our time are the problems imposed by desperate borrowers sometimes willing to do or say almost anything to avoid the progress of a foreclosure action. So while counsel wholeheartedly joins servicers in pursuing loss mitigation, there is always the suspicion that peril lurks in any arrangement made with borrowers.
And so it turned out in a recent case where a stipulation of settlement designed to help the borrower while protecting the plaintiff contributed to overturning a foreclosure sale. [Alkaifi v. Celestial Church of Christ Cavalry Parish, 24 A.D.3d 476, 808 N.Y.S.2d 230 (2d Dept. 2005)].
After issuance of the judgment of foreclosure and sale, the parties entered into a stipulation of settlement. The foreclosing plaintiff obviously believed the borrower breached the stipulation because a foreclosure sale was conducted. The borrower, claiming that it was not in violation, moved to vacate the foreclosure sale and the court did just that.
It appears that the problem was some lack of clarity in the stipulation or not enough attention to detail in preparation for all possible alternatives – dangers inherent in any stipulation beyond the most elemental. Apparently there was a separate tax lien foreclosure action and the foreclosing mortgagee required payment of the taxes and the obtaining of a discontinuance of that action as a condition of the forbearance – all understandable. But the court found a factual dispute as to whether the borrower timely and sufficiently paid off the tax lien holder. Why that wasn’t truly pinned down with certainty in the stipulation is a mystery.
There were other disputes but these became so fact sensitive as to have little value for our analysis. The ultimate message nonetheless remains. Pursuing settlement cannot be abandoned because there may be danger there. But when some agreement is to be signed, especially meticulous care and attention to detail is essential. Without such care and attention, there is room for a servicer to get hurt as a reward for accommodating the borrower.
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.