Delaying Borrowers Banished


1 July, 2007


Mortgage Lender and Servicer Alerts

Mortgage servicers are all too familiar with borrowers who manipulate the system, delaying cases interminably.  The dismay is that the system, in an effort to be neutral and to give everyone their day in court, seems too often to be mesmerized by dilatory tactics.

Two new cases, however, present principles and attitudes to counter these abusive efforts by borrowers.  [See Wells Fargo Bank Minnesota v. Dorestant, 36 A.D.3d 692, 830 N.Y.S.2d 174(2d Dept. 2007); Norwest Mortgage v. Brown, 35 A.D.3d 682, 830 N.Y.S.2d 158 (2d Dept. 2006)].

In the first mentioned case, the borrower defaulted and a foreclosure sale was conducted.  That sale generated a surplus and it was the borrower who twice moved to confirm the referee’s report of sale and to claim against the surplus.  Then the borrower moved to vacate the judgment of foreclosure and sale, claiming she was never served.

The court would have none of it.  An appeals panel said that the borrower’s motions and surplus money proceeding demonstrated the borrrower’s willingness to accede to the terms of the judgment.  Her own conduct impliedly acknowledged the validity of that judgment.  Therefore, the borrower consented to the court’s jurisdiction over her and she was held to have waived the jurisdictional objection which was in her motion to vacate the default judgment.

In the second case, the borrower obtained an eve of sale order to show cause which, while it did not stay the foreclosure sale, did stay the delivery of the deed and reserved the borrower’s right to redeem even though the sale had been conducted.  But the borrower never served that order to show cause upon the bidder at the sale, nonetheless still trying to upset the conveyance.

The court would hear none of this either.  It said that the equities did not favor the borrower whose “manipulation and gaming of the system” had gone on for years.  The appeals court ruled that the lower court had improperly exercised its discretion to vacate the foreclosure sale.  (Yes, the lower court had been fooled.)

In sum, two courts saw through the empty tactics of abusive borrowers.  The principles advanced here are well worthy of consideration the next time – and it is inevitable – a borrower tries to use the system.

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.