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Currently, New York’s Civil Procedure Laws & Rules § 3408 (“Rule 3408”) 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. The new law amends Rule 3408 to define what it means to negotiate, or fail to negotiate, in good faith, and authorizes the court to impose sanctions if either party fails to meet the obligation to negotiate in good faith.

NEGOTIATE IN GOOD FAITH

Compliance with the obligation to negotiate in good faith shall be measured by the totality of the circumstances, including but not limited to the following factors:

  1. Compliance with the requirements of Rule 3408 and applicable court rules, orders, and directives by the court or its designee pertaining to the settlement conference process;
  2. Compliance  with  applicable mortgage servicing laws, rules, regulations, investor directives, and loss mitigation standards or options concerning  loan  modifications, short sales, and deeds in lieu of foreclosure; and
  3. Whether the parties have conducted themselves in a manner consistent with efforts to reach a mutually agreeable resolution, including, but not limited to: (a) not causing undue and unreasonable delay; (b) appearing at the settlement conference with authority to fully dispose of the case; (c) avoiding prosecution of foreclosure proceedings while loss mitigation applications are pending; and (d) providing accurate information to the court and parties.

Notably, neither the failure to make a settlement offer nor to accept an offer made by the other side is sufficient to establish a failure to negotiate in good faith.

PENALTIES

A plaintiff’s failure to negotiate in good faith will result in a tolling of the accumulation and collection of interest, costs, and fees.  Where appropriate, the court may take one or more of the following steps:

  1. compel production of any documents requested by the court or the court's designee during the settlement conference;
  2. impose a civil penalty payable to the state that is sufficient to deter repetition of the conduct and in an amount not to exceed twenty-five thousand dollars;
  3. award actual damages, fees, including attorney fees and expenses to the defendant as a result  of  plaintiff's  failure to negotiate in good faith; or
  4. award any other relief that the court deems just and proper.

A defendant’s failure to negotiate in good faith will result in removal of the case from the conference calendar.

Updated 12/07/2016

 

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