One of the aspects of law – the legal process – which often frustrates lenders and servicers is the sense that what ought to be perceived as right and fair does not typically prevail. This can too often be true in the sometimes trying realm of process service.
In a judicial foreclosure state like New York, it is no mystery that slippery borrowers can abuse the legal system and delay mortgage foreclosure cases for what seem to be interminable durations (lately abetted by new state statues). Of the many opportunities such borrowers have to slow the process down, perhaps one of the most fertile is in the mentioned area of process service.
Borrowers might not live at the mortgaged premises; they might not ever give accurate information to the lender or servicer. Or, they may pretend not to be home and might even go into hiding. They can in these ways stretch the process service period, sometimes for many, many months.
Even assuming the wily parties are ultimately pinned down, the sharp borrowers retain in their arsenal the ability to pounce (and how often is that on the eve of sale?) with an order to show cause alleging they were never served. Although most often that posture is utterly false, many borrowers are perfectly willing to swear about not being served so as to require a hearing (a traverse). That then takes time to schedule, time to conduct and time to wait for a decision, although on some occasions the ruling could be issued by the court on the day the witnesses are heard.
But even courts inclined to afford borrowers the benefit of the doubt sometimes recognize that these last-minute thrusts are too frequently delay tactics disguised as requests for justice. Accordingly, from time to time courts have imposed conditions upon stays or the right to be heard. In one case [Apple Bank for Savings v. Georgatos, 228 A.D.2d 459, 643 N.Y.S.2d, 670 (2d Dep’t 1996)] a judge was (understandably) not so impressed by the borrowers’ claim of lack of service. He was willing, however, to set the matter down for a hearing, but only upon condition that the borrowers tendered $6,000 to the mortgagee. When the borrowers failed to make the payment (surprise), the hearing was cancelled and the motion to vacate the judgment of foreclosure and sale was denied. (Lenders and servicers would be heartened by this enlightened approach.)
But upon appeal, the court said where a sworn denial claiming lack of service has been submitted, there is an entitlement to a hearing on the propriety of service without any conditions being imposed. [Citing Dime Savings Bank v. Steinman, 206 A.D.2d 404, 613 N.Y.S.2d 945; Copeland v. Gross, 39 Misc.2d 619, 241 N.Y.S.2d 481.]
The trial level judge had the right idea–why tolerate what appears to be transparent without some demonstration of good faith and some compensation to the already battered lender? But good ideas don’t always make good law and this is an example of that. No relief here from the borrowers who enjoy distorting legal avenues.
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.