Thursday, January 19, 2012

Brooklyn judge rescinds unfair forebearance deal

NEW YORK, Jan 18 (Reuters) - A Brooklyn judge has voided what she deemed an "unconscionable" forbearance agreement that required a mortgage holder to drop his legal defense against foreclosure proceedings in exchange for reduced payments that the judge said provided him "little, if any benefit."

In a ruling dated January 6, Kings County Supreme Court Justice Marsha Steinhardt slammed the forbearance agreement struck between Brooklyn homeowner Jaime Arroyo and the company that bought his mortgage, Rossrock Fund II LP, saying the company and its counsel took advantage of the unrepresented homeowner to draft a one-sided deal.

In 2009, Arroyo was notified that his mortgage was in default. To avoid losing his home, he entered into an agreement with Rossrock that purportedly gave him a chance to catch up on his delinquent mortgage payments. Under the deal, Rossrock would continue with foreclosure proceedings but hold off on auctioning his home so long as he stayed current with the new payment schedule, according to the ruling.

Significantly , Rossrock required Arroyo to waive all defenses to the foreclosure action and not contest the proceedings, the ruling stated.

But in 2010, Arroyo asked for leave to file a late answer to the foreclosure action. In an affidavit, Arroyo said that Rossrock's lawyers told him he didn't need to answer the original complaint and that if he hired an attorney, he would have to pay not just his own legal bills, but Rossrock's legal tab as well.

Rossrock denied it told Arroyo not to hire an attorney. But Steinhardt noted that Arroyo was unrepresented during the forbearance discussions and was given just a brief window to sign the only deal he was offered, which was drafted entirely by Rossrock's lawyers.

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