Suffolk County NY Judge Wipes Out Foreclosed Upon Couples Debt to IndyMAc

A Suffolk County NY Judge , Judge Jeffrey Spinner, wiped out the mortgage debt of a foreclosed upon couple in Patchogue – claiming that IndyMac Mortgage Services exhibited conduct that was “harsh, repugnant, shocking and repulsive”. For the entire story please go to Newsday.com – but if you aren’t an online subscriber good luck accessing the article! Credit must be given to Alfonse A. Castillo’s article in today’s Newsday titled Ruling A Message To Lenders. This is my cliff notes version of his article.

The Horoski family fell behind in their mortgage payments in 2005 after Diane Yano-Horoski became ill and was unable to work. They stopped paying their mortgage for about a year. IndyMac refused loan modification offers and refused the offer their daughter made to buy their house with third party financing. IndyMac did offer Diane Yano-Horoski a payment agreement which she accepted, but did not send her the paperwork until after the first payment was due, so she was in default of the agreement before she even received it. On top of that IndyMac could not tell the judge exactly how much of the principal balance was owed, and then claimed to be owed $527,437.73, but the judge calculated it to be $447,028.50.

The outcome of the case is that the judge erased The Horoski’s nearly $300,000 debt, and in the nine page decision “invoked the courts “equity jurisdiction” citing an 1890 Court of Appeals decision and numerous other cases in concluding that the mortgage company’s actions were so egregious that it had no claim, morally or ethically, to equitable relief in the matter. “

Clearly the Judge was sending a message to the mortgage companies that they better clean up their act. But this case might have interesting ramifications down the road. On the positive side it might force the banks to hire more qualified individuals for their loan modification departments and tighten up their standard operating procedures. On the negative side – if the banks can’t rely on getting paid they won’t loan money. It will be interesting to see how this all turns out.

New York is a judicial process state regarding foreclosure. At this time the process from lis pendens filing to sale of the property takes approximately 18 months in Suffolk County.