Whether it is commonplace or just a regular occurrence, foreclosing plaintiffs can make mistakes with their bids at foreclosure sales which can lead to significant losses. The legal or practical problem which emerges is that when the miscue is on the lender’s or servicer’s part, the courts will not offer relief. A somewhat different twist on this theme appears in a recent case and offers a sobering lesson. [PHH Mtg. Corp. v. Hamer, 56 Misc.3d 517, 55 N.Y.S.3d 856].
For whatever reason, some plaintiffs elect to have the referee put in the bid for them at the foreclosure sale. While a referee cannot bid for him or herself, that referee can, if acceptable, bid for the plaintiff and this is a recognized, if not recommended, practice. In the noted case, however, while the plaintiff had prepared a provision in the judgment allowing the referee to put in the bid for it, that language was crossed out by the court. Moreover, the court added verbiage requiring the plaintiff to be present at the sale.
When at the foreclosure sale a bidder objected to the referee bidding for the plaintiff, the ultimate result was that the bid was taken only from this bidder (at $90,000, considerably below what the plaintiff’s bid would have been) and was struck down to the bidder.
The plaintiff thereupon moved to vacate the sale (it was being conveyed for a woefully deficient amount) on the ground that the referee should have been allowed to bid for the plaintiff and, in any event, the bid price was only 64% of the market value of the property and therefore the sale should have been stricken on that basis alone.
The court denied the motion in all respects. It was apparent to the court that this was an instance where the referee was barred from bidding for the plaintiff. The court had in this judgment, as it pointed out it has done in any number of other judgments, required the plaintiff to be present. Because the plaintiff was not at the sale, then no one else could bid in its stead. As to the bid being only 64% of the value, there is much case law holding that such a percentage does not shock the conscience of the court and that amount will not be a basis to assault the sale.
What is obvious here is that either the plaintiff will silently suffer a substantial loss, or it is going to seek recompense from its counsel, neither of which outcomes is welcome. It is quite clear that punctilious care in preparing for the foreclosure sale is essential.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2018), 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.