Yes, there is authority for that, but they are seldom awarded – however a recent case actually imposed them upon a borrower! [U.S. Bank National Association v. Nunez, 208 A.D.3d 711, 173 N.Y.S.3d 627 (2d Dept. 2022)]
The standards for sanctions are found in part 130 of the Rules of the Chief Administrator and for those seriously interested in the topic, reading that is recommended. Considerable expansion upon the subject with case law is found at 3 Bergman On New York Mortgage Foreclosures, § 21.09, LexisNexis Matthew Bender (rev. 2023).
Despite what the New York State Legislature believes, foreclosing plaintiffs are overwhelmingly dedicated to proceeding through a foreclosure action as quickly as possible for readily apparent reasons. Borrowers, on the other hand, can benefit from delay of a foreclosure by remaining at the premises, often without any actual need to make payments – including taxes, insurance, maintenance and other mortgages which may burden the property. Accordingly, it is most often a foreclosing plaintiff who is troubled by dilatory or outrageous conduct by a defaulting borrower. In the face of such tactics, lenders often wonder why sanctions are not imposed; indeed they sometimes implore their counsel to pursue just that.
Seeking sanctions requires a separate or cross-motion, although it is not so burdensome to prepare. The problem is that courts are generally indisposed to imposing sanctions. One could speculate as to why, but clearly experience reveals the reluctance of the judiciary in this regard.
That said, on occasion a sanctions motion is granted whereby costs, and typically legal fees, are assessed. While there are any number of informative examples, one is found in the recent case cited. There, the ruling stated the standard underlying proposition that courts have discretion to award costs or impose financial sanctions against a party or attorney in a civil action for engaging in frivolous conduct. In turn, conduct may be deemed frivolous if it is undertaken primarily to delay or prolong the resolution of the litigation or to harass or maliciously injure another or if its asserts material factual statement that are false. (Lenders and servicers will recognize such events.)
In the noted case there were allegations made by the borrower’s attorney against the referee and the plaintiff’s attorneys in support of a borrower’s motion to vacate an order, allegations which were found to be wholly unsubstantiated and speculative and constituting an attempt to mislead the court into delaying the resolution of the action.
Given those facts and that conclusion, sanctions were indeed imposed. While this may offer some comfort to lenders and servicers compelled to prosecute a mortgage foreclosure action, it does not change the reality that sanctions are seldom pursued with success.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2022), 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.