(mrbill)
In a legal twist that resembles the game show Who Wants To Be Absolved Of Their Predatory Mortgage, a New York judge zapped away more than $500,000 a couple owed OneWest Bank on its house, ABC News New York reports:
Greg Horoski and wife Diane Yano-Horoski, who fell behind on their mortgage payments because of health problems and an interest rate change, say they tried repeatedly to restructure their loan, but that the bank would not cooperate.The Horoskis were freed of $291,000 in principal and $235,000 in interest and penalties.
This sure is one way to stop the foreclosure epidemic in its tracks.
Judge erases Long Island couple’s $525,000 debt [ABC News New York]
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Great! So where do I line up?
I am right there behind you.
I caught another edition of this story that was a bit more in depth (I think it was in Google News, but I can’t find it) and the one thing that keeps coming up in my mind is was the bank REALLY being unreasonable? I believe this will be overturned.
If the bank can show with actuarial tables that the original loan, even with risk of default/foreclosure, was more advantageous than modifying the loan (with its own risk of default/foreclosure), who are the courts to disagree? And the reason I say that is actuarial tables are the end-all-be-all of insurance companies… if the courts say that basis is not enough to stand up in court, what kind of precedent will that leave?
We really, really need more information in this case.
This article gives a little more detail, although I don’t know if this is the detail you’re looking for:
http://www.law.com/jsp/article.jsp?id=1202435781738&Judge_Blasts_Banks_Foreclosure_Conduct_and_Cancels_Mortgage
You can bet this is going to get appealed really strongly, though. As to whether it will get overturned, hard to say. Hopefully not. OneWest was definitely acting in bad faith.
Don’t get too excited–this has “overturned on appeal” written all over it.
This sounds more like a judge penalizing a bank for being uncooperative, rather than just wiping away someone’s bad mortgage. The Horoski’s essentially are the lucky recipients of this penalty.
There seem to be two issues here:
1. The amount actually owed: the bank seems to have been all over the place on this, and I can understand the judge being angry.
2. The bank’s (apparent) unwillingness to modify the loan, do a short sale, etc. This seems irrelevant to me – the bank is certainly free to reach a compromise, but it is under no legal obligation to do so, and should not be penalized by a court for refusing to do so. A mortgage is pretty straightforward – make the payments, or give back the property.
Yup, #1 especially. Straight from the court documents:
This was provided as an aside:
Here is the Court’s decision in full.
After all, who is John Galt?
Even Rick Steiner thinks that’s a shitty catchphrase. And he’d know. Lay off the L. Ron Hubbard-on-amphetamines and pick up real literature.
Who is Rick Steiner?
A wrestler, his catchphrase was (at one point) “If you want some, come get some! And if you don’t like me, bite me!” Boring, uninspired, too long… F minus minus. And yet, better than the drug-addled spoiled brat far too many people seem to worship could come up with.
From the law.com article that burnedout posted, it sounds like the State of New York requires lenders to conference with home-owners and in good faith reach a repayment agreement when possible. The homeowners in this case clearly did so (including an offer to buy the house at market value), and the bank was clearly in bad faith.
Offering to pay new market value is not acting in good faith. While not clear, it sounds like they purchased their home during the boom and want the benefits of the bust. a loan modification would be in the owner’s interest, but depending on the rate being sought and the actual value vs. purchased value, it may not have been in the bank’s interest.
The judge’s assertion that foreclosure would certainly lead to a boarding up of the home and “problems of litter, dumping, vagrancy and vandalism as well as a corresponding decline in the property values in the immediate area” is absurd. Many of those homes that are boarded up are those that are destroyed by the evictees. The homes that are simply left behind in normal condition are picked up by buyers who cannot otherwise afford to enter the market. This turnaround happens as quick as the bank is able, as it is in their interest to get the home off their books. the faster it happens, the less we see litter, etc.
This is just bad form all around.
That’s a little harsh, and I don’t think you’ve done enough reading to make that claim. The full ruling on the case says that they took out the loan 16 years ago and either had it paid off or nearly paid off when they refinanced to pay medical debt. The only thing this couple did was get sick and find themselves in a place where a sub prime refi loan was all they could get.
Where the “bad faith” comes in – as far as I can tell from the judge’s ruling – is that a) the bank was not acting in good faith with their customers when they sent out a payment plan agreement AFTER the first payment was due and then called the poor couple delinquent and b) did not make decisions in the best interest of the bank and the surrounding community when they opted to turn down a market value offer in order to pursue foreclosure and selling for much less at auction. Meaning, the judge cited spending money on foreclosure proceedings + selling for less at auction as being not in the company’s best interest when the couple found a seller willing to pay market value. Moreover, foreclosure brings down the value of the entire neighborhood and often leads to blight, which the judge said the bank should weigh when an offer is on the table. Since the bank appeared to be prioritizing making an example of the couple, and not finding a “win-win” outcome, he said they acted in bad faith and were therefore not owed money (there were a lot of legal citations to back that up – I don’t feel like copying them down.)
Point is, read the whole thing before you start calling names
Darn it – I thought I was responding to someone else…sorry. I’ll re-post in the right spot.
It’s sad that what drove this family into ruin is our incredibly broken health care system. Oh wait, I mean The Best Health Care System IN THE WORLD!!
I also like how the mortgage companies are starting to be expected to act freaken’ human. And actually produce documentation proving they hold title.
The bank SHOULD be required to demonstrate they are in fact the true plaintiffs. That’s one downside that is coming up from all this securitization… who actually is owed the money?
As for the medical debt causing the bankruptcy… are we totally sure that it caused it, or did it contribute to it? Their loan went from 10 to 12%… that kicks the monthly payment up ~17%. Most households couldn’t handle that to begin with… hence the bubble popping.
Predatory mortgage or not, the couple bought a house than they were not able to pay for. Why is this a problem that they were foreclosed on? This judge is setting a really dangerous precedent. Sounds like he’s gearing up for a political run.
One of the issues was that the Bank would not give a straight answer on how much money was owed and always tended to “round up” without a shred of reason. So, the bank is essentially lying to the judge about how much is owed, but blaming paperwork errors for the inconsistency. When either party in a case lies to the judge, there should be consequences. It seems that the bank also failed to even consider a repayment plan which is required by NY law. So, when you add all these insults together, the judge got pissed and taught them a lesson. I agree with the result. If I can’t hide behind paperwork or administrative errors, why should a bank?
How about you take a second to RTFA. They did not “buy a house they could not afford.” They paid off their house, but were then forced to refinance it because of medical problems.
“Who fell behind on their mortgage payments…”, I’m pretty sure if you still have an mortgage, you do not have the house paid off.
Sometimes when banks act in bad faith it bites them on the ass…. a srsly true Christmas story:
Last month I purchased a house in which a good friend lives in for $32k (cash) in a short sale. He owed just over an order of magnitude more than this on his mortgage. The bank refused to give him a principle reduction and offered him a ‘modification’ that would have made him indebted till he was 90. He would have happily kept paying his mortgage if they had offered him a reasonable principle reduction (and thus a mortgage he could afford), but they were complete assmunches about it.
So he was forced to place it up for short sale. A buyer (me) showed up pretty quickly and made an (insanely low) offer, that they took (I’m guessing because they want it off their books before the end of the fiscal year). So I paid cash and now my friend is leasing it from ‘the buyer’ who has told him through his agent that he’s welcome to lease it (which he plans to as long as he’s allowed). The buyer even suggested that if my friend is able in a few years that they would be willing to re-sell it to him for a more reasonable amount (so he’s not totally freaking… honestly he has a really positive attitude about it. I’m not that evil.)
However I’m getting him a special Christmas present this year. I have the title and I purchased a “Vanilla Ice Is Back: Hip Hop Classics” CD. I convinced one of the dudes at my local indie music store to re-shrink-wrap the CD (with title inside) which he will be getting this wrapped in a ginormous box with a huge bow.
Sees big box: AWESOME!
Opens to find wrapped CD case: Well ok. Sure. I love music!
Opens to find one of the classics of American rap: You’re kidding me, right?
Opens CD case after much urging from me: Merry Christmas!
(And who says Atheists like me don’t love Christmas?)
You are a very good friend.
Where do you live? I’m going to scour the used CD stores for a shrink wrapped Vanilla Ice CD…
Seriously. Make sure he opens it.
Got it covered. I printed a sticker that says “special bonus inside!”
this is bad, if they couldn’t afford the payments, get rid of the house and go back to renting. Im afraid the banks will charge more money and increase the prices just to protect themselves from this kind of stuff.
Res Judicata
I agree with that professor that says we should just not pay our mortgages if we are in over our heads. Buy everything we think we will need for a couple of year on credit like a car, etc and then walk away from the home. Our credit will suffer a couple of years but if we pay all our other bills on time it really want hurt us that much. Besides, in 7 to 10 years it will vanish from your credit report completely. We will save thousands to hundreds of thousands of dollars.
yes, when you make a bad decision, just say screw it and make the person who trusted you suffer. Thats a great way to live life.
I agree with that professor that says we should just not pay our mortgages if we are in over our heads. Buy everything we think we will need for a couple of year on credit like a car, etc and then walk away from the home. Our credit will suffer a couple of years but if we pay all our other bills on time it really want hurt us that much. Besides, in 7 to 10 years it will vanish from your credit report completely. We will save thousands to hundreds of thousands of dollars.
One happy ending out of a million. Nice ratio.
If the judge had done some form of cramdown, his decision might stand but this is pure penalty and I don’t see any way the decision will be upheld on appeal. What’s interesting, depending on the mortgage terms, is that the bank’s costs in appealing the decision may be added to the mortgage principal. Even if the bank was being unreasonable (and “reasonable” and “bank” are not often used in the same sentence), they still had a security interest in the property and had every right to foreclose if they weren’t getting paid. They may have to negotiate a restructure in good faith but they don’t have to give a way the store for a defaulting borrower.
I disagree with this. The couple signed a contract and agreed to the terms of that contract. They failed to live up to their end. The bank has no obligation to renegotiate the contract, it may be in their favor to do so, but thats their choice, not the courts.
If you asm me to borrow 10000 dollars for a car, and I agree on the conditions that you pay me back by date X or I get your car, and you also agree, then thats the end. If you dont pay me back, I get my car on X. Thats all there is to it, it doesnt matter if you lost your job, got sick and couldnt work, etc. You can ask me to extend the loan, or apply for a new loan, but if i determine its too much of a risk, I can say no and take the car.
Besides, why would I lend more money to somone who has already proven unable to pay back their loans, especially when they are in worse financial shape than before. Thats a terrible idea. The only reason to do it would be if it is more profitable than taking the item and reselling it.
Sorry, BY LAW, they are required to minimize damages. Failing to renegotiate shows they did not do so.They also are utilizing GOVERNMENT FUNDS as a bank, so they do not get to say yes or no to anything. Their contract was with a company that went out of business and taken over by the government
xtc46 – thinksmarter on twitter: remember that this was a contract with both sides agreeing that the buyer would make payments on the loan, but if they couldn’t then the lender would take the property as settlement. No screwing here at all, just both sides doing what they agreed to.
I like how this article doesn’t say how much the house was worth, or what their original mortgage was for. Dodgy.