Since 2008, courts have wrestled with what the requirement of good faith negotiations in NY foreclosure settlement conferences required. Recently, the appellate division took the first big step in clarifying the standard in U.S. Bank National Association v. Sarmiento:
In summary, the court concluded:
"[L]egislative history did not indicate what lawmakers thought would be a good faith standard; likewise . . . there were no published decisions that defined good faith in the context of settlement conferences.
[The court] surveyed trial-level decisions and found that some had not required demonstrations of intentional misconduct or gross negligence when deciding there was a lack of good faith. Other courts considered lenders' lost documents, confusing communications, inexcusable delays and baseless HAMP denials as a lack of good faith, he noted.
[The court] acknowledged the common-law bad faith standard had been used in other contexts, such as an insurance carrier's refusal to accept a settlement offer.
But if the court adopted the proposed standard on questions of good faith settlement conference negotiations, [it concluded] ,'we would undermine the remedial purpose of CPLR 3408.'"
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Events such as a lender's failure to expeditiously review financial information or deny modification without sufficient grounds could constitute a failure to negotiate in good faith, as could a borrower's failure to turn over requested information." (link)
While this is an important clarification of the standard for proving a bank operated in bad faith actually showing this failure takes some substantial legwork. The homeowner will need to collect extensive documentation of papers submitted to and received from the bank.
As a result, homeowners wishing to advance their right to good faith negotiations should contact an attorney as soon as possible after they learn they are in foreclosure.
