Your Lifeline in Foreclosure: How New York Homeowners Can Request Mandatory Settlement Conference Motions to Save Their Homes

When facing foreclosure in New York, homeowners have a powerful legal tool at their disposal that many don’t know about: mandatory settlement conferences under Civil Practice Law and Rules § 3408 (“Rule 3408”), which requires parties to a residential foreclosure action to “negotiate in good faith” to reach a mutually agreeable resolution at a mandatory settlement conference, which is to take place within sixty days of the filing of the summons and complaint.

Understanding Settlement Conference Motions in New York Foreclosure Cases

Settlement conference motions represent a critical opportunity for New York homeowners to avoid losing their homes to foreclosure. As an effort to assist homeowners facing foreclosure, New York law requires that lenders engage in settlement conferences with the defendants to see if another resolution is possible. Foreclosure settlement conferences are mandatory in many cases under New York Civil Practice Law and Rules (CPLR) Rule 3408.

A settlement conference is a meeting between you, someone from the Court (a Judge, Court Attorney, or Court Referee), and the plaintiff. The meeting is to talk about your case and to see if your foreclosure can be resolved. Common resolutions include mortgage loan modifications, deeds in lieu of foreclosure, and short sales. A loan modification is generally the preferable agreement, however, a short sale and deed in lieu of foreclosure allow the property owner to surrender their property on their own terms instead of due to a foreclosure judgment.

Who Qualifies for Mandatory Settlement Conferences

Not every foreclosure case qualifies for these protective conferences. Section 3408 of the Civil Practice Law and Rules of New York now provides that the court shall hold a mandatory settlement conference for all loans for one to four family homes within sixty days following the date proof of service is filed with the county clerk. The property must be owner-occupied residential property where the defendant actually resides.

The Court mails you a date, time and place for a settlement conference. The Court date is sometime during the first two months after the plaintiff files proof of service and a RJI. This automatic scheduling means homeowners don’t need to file a separate motion to request the conference – it’s built into the foreclosure process.

What Happens During Settlement Conferences

Settlement conferences are structured meetings designed to facilitate meaningful negotiations. The new law also provides that both the defendant homeowner and the plaintiff lender negotiate in good faith during their mandated settlement conference. The plaintiff lender is required to have a representative or attorney appear at the settlement conference with the authority to fully negotiate and settle the matter.

As the defendant, you must bring copies of your financial papers to the conference, like pay stubs, benefits information, list of monthly expenses, mortgage statement, proof of any rental income, property tax statements, income tax return, proposals to change your loan terms, and any information about attempts to work out a settlement before.

You and the plaintiff will talk with the court about settlement options, like paying the money owed over time, changing loan terms, selling at a short sale or agreeing to a deed in lieu of foreclosure. The court referee or judicial hearing officer facilitates these discussions to help both parties reach a mutually beneficial agreement.

The Good Faith Negotiation Requirement

One of the most important aspects of settlement conferences is the requirement that both parties negotiate in good faith. Both the plaintiff and defendant shall negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible. This requirement has teeth – lenders who fail to negotiate in good faith can face serious consequences.

A plaintiff’s failure to negotiate in good faith will result in a tolling of the accumulation and collection of interest, costs, and fees. The court may determine whether either party fails to comply with the duty to negotiate in good faith pursuant to subdivision (f) of this section, and order remedies pursuant to subdivisions (j) and (k) of this section, either on motion of any party or sua sponte on notice to the parties, in accordance with such procedures as may be established by the court or the office of court administration.

Success Rates and Outcomes

The settlement conference system has shown promising results for New York homeowners. Of the conferences that do reach a conclusion, Lewis says about half go on to foreclosure while the other half result in a settlement, usually a loan modification. In the New York City borough of Queens, for example, 54 percent of the completed cases this year avoided foreclosure.

Through the screenings and other outreach efforts, the settlement conferences have helped engage more homeowners in the foreclosure process. Previously, 90 percent of homeowners did not challenge or fight their foreclosure notices at all; the conferences brought that rate down to 20 percent.

When Lenders Act in Bad Faith

Unfortunately, not all lenders approach settlement conferences with genuine intent to resolve matters. In U.S. Bank National Association v. Padilla, the parties attended numerous settlement conferences with no clear resolution. The bank made many contradictory requests at each different conference, delaying the proceedings substantially. The court found the bank was acting in bad faith, stating, “This homeowner has appeared at every conference and has provided every document plaintiff has requested in a timely manner”.

When lenders fail to negotiate in good faith, homeowners can file motions requesting sanctions. This is where understanding the broader foreclosure process becomes crucial, including knowing about other legal procedures like a Foreclosure Motion and how settlement conferences fit into the overall timeline.

The Importance of Legal Representation

Your foreclosure defense lawyer can identify when a lender is not in compliance with the law and can take appropriate action to ensure you get a fair chance at a settlement. Nearly two-thirds of homeowners don’t have attorneys or advocates, which contributes to the stress on the courts. The report says the lack of representation is one of the program’s “great challenges” because the burden has instead shifted to the judges and court officials to explain the process and help homeowners as much as is legally possible.

The Law Office of Ronald D. Weiss, P.C., located on Long Island and serving Suffolk and Nassau Counties, understands the complexities of New York’s settlement conference system. The Law Office of Ronald D. Weiss, P.C. looks at each client’s case individually based on their specific situation and needs. Our goal is to offer highly effective legal help that is both compassionate and affordable. We often use multiple debt solution tools – bankruptcy, litigation, and negotiation – together as part of a larger strategy where they support and strengthen each other. For each client, we examine all options by considering how realistic they are, the risks versus benefits, timing, costs, and approach. We work with our clients to create a plan that gives them the best chance of successfully resolving their debt problems and overcoming their financial challenges.

Preparing for Your Settlement Conference

Preparation is crucial for a successful settlement conference. It is important to prepare for the settlement conference. Try to figure out your budget and what you can afford to pay. This way you have the best chance of saving your home. Homeowners should gather all required financial documentation and work with their attorney to develop realistic proposals for loan modifications or other alternatives.

Even if you go to the settlement conference you still need to Answer the Summons and Complaint. If you go to the first settlement conference, you have an extra 30 days to file your Answer. This additional time can be valuable for preparing a comprehensive defense strategy.

The Impact of Settlement Conferences on Foreclosure Timelines

The foreclosure proceedings are effectively stopped until the referee or judicial hearing officer (JHO) in the settlement conference determines that the settlement conferences are concluded, either because the parties have successfully modified the home loan or obtained some other foreclosure alternative or the referee has determined that one of the parties has not satisfied its requirements under the law.

The conferences could add another year, on average, to New York’s already slow foreclosure process. Homeowner advocates and some government officials say slowing down the process provides time to fight wrongful foreclosures as well as forestalling a flood of the housing market at a time when prices are already so low.

Settlement conference motions and the mandatory conference system represent a significant protection for New York homeowners facing foreclosure. By understanding these rights and working with experienced foreclosure defense attorneys, homeowners can maximize their chances of saving their homes through loan modifications, negotiated settlements, or other alternatives to foreclosure. The key is acting quickly, preparing thoroughly, and ensuring that lenders meet their obligation to negotiate in good faith throughout the process.