Foreclosure Rulings From Downstate NY Trial Judges Not Flying Under The Radar For Big Banks

In Suffolk County, New York, The Washington Post reports:

• A year ago, Long Island Judge Jeffrey Spinner concluded that a mortgage company's paperwork in a foreclosure case was so flawed and its behavior in negotiations with the borrower so "repugnant" that he erased the family's $292,500 debt and gave the house back for free [See Indymac Bank F.S.B. v Yano-Horoski, 2009 NY Slip Op 52333 (NY Sup. Ct. Suffolk County November 19, 2009)].

• The judgment in favor of the homeowner, Diane Yano-Horoski, which is being appealed, has alarmed the nation's biggest lenders, who say it could establish a dramatic new legal precedent and roil the nation's foreclosure system.

• It is not the only case that has big banks worried. Spinner and some of colleagues in the New York City area estimate they are dismissing 20 to 50 percent of foreclosure cases on the basis of sloppy or fraudulent paperwork filed by lenders.

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• The situation in Suffolk and Nassau counties on Long Island and Kings County in Brooklyn- which have among the highest rates of foreclosure in the state and where the 81 judges handling foreclosures have become infamous over the past few years for scrutinizing paperwork for errors - provides a window into how the crisis could unfold across in the country.

• While the level of tolerance for document mistakes varies from judge to judge, the group as a whole has a reputation for ruling against mortgage companies when paperwork issues or other problems arise. At least one bank, J.P. Morgan Chase, requires document processors to separate foreclosures cases from these three counties from those in the rest of the country. A high-ranking executive of the company is specially assigned to sign off on the area's foreclosure filings.

• Judge Dana Winslow of Nassau County says he's thought a lot about why judges in his area are more apt to question filings. He said it comes down to one thing: Lack of trust for Wall Street. In this region, judges have seen a lot of inaccurate filings from the financial sector.

For more, see Some judges chastise banks over foreclosure paperwork.

(1) According to the story, recent examples of lower court judges already raising questions about faulty paperwork in foreclosures include:

• On June 17, Justice Karen Murphy of Nassau County ruled that Wachovia Bank lacked standing to foreclose on a home because the document used to prove ownership of the mortgage was incomplete;

• On Sept. 21, Justice Peter Mayer of Suffolk County delayed a foreclosure by Ally Financial's GMAC mortgage unit after noticing that the paperwork transferring the mortgage to the bank was dated two days after the foreclosure was initiated; see Deutsche Bank Trust Ams. v McCoy, 29 Misc 3d 1202, 2010 NY Slip Op 51664 (NY Sup. Ct. Suffolk County, September 21, 2010);

• On Oct. 21, Justice Arthur Schack of Kings County dismissed a OneWest foreclosure motion because the bank had not adequately documented how the mortgage had been sold and resold to investors. He also questioned why the employee who signed many of the documents claimed to be a vice president of several different mortgage companies at the same time; see Onewest Bank, F.S.B. v Drayton, 2010 NY Slip Op 20429 (NY Sup. Ct. Kings County, October 21, 2010);

• On May 24, in a different case, Justice Schack dismissed a foreclosure action with prejudice because the paperwork that assigned the mortgage to HSBC from the original lender, Cambridge, was "defective." See HSBC Bank USA, N.A. v Yeasmin, 27 Misc 3d 1227, 2010 NY Slip Op 50927 (NY Sup. Ct. Kings County, May 24, 2010).