New York state courts have recently grappled with how to punish banks for failing to negotiate in "good faith" in residential mortgage foreclosure actions. Although the applicable statute and court rules1 require that parties engage in "good faith" settlement negotiations, both are silent as to the specific remedies or sanctions that courts can, or should, impose upon lenders that do not abide by the rules.
This article discusses some recent lower and appellate court decisions in which judges have attempted to fill this void. In a nutshell, these recent decisions confirm that, while courts have broad discretion to award attorney fees and costs, reduce interest and/or principal on residential mortgages, or even stay foreclosure actions, courts cannot compel parties to settle or enter into mortgage modification agreements.
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