NY Judge Throw Down Gauntlet On Bank Servicers For Acting In Bad Faith

Dental hygienist Charmaine Davis’ ordeal with Deutsche Bank began soon after she found herself facing foreclosure while helping her mother deal with cancer.


After 17 negotiation conferences, her effort to modify her loan had gone nowhere – until a Brooklyn judge stepped in and punished the bank for “bad faith” bargaining.

Davis’ case is hardly unique. Banks have come under increasing fire for mishandling the growing number of foreclosed properties on their books.

More and more distressed homeowners have complained that lenders refuse to work with them to modify loans so they can keep their properties and continue paying down their debt.

In 2009 a New York law began requiring banks to make a “good faith effort” to negotiate with homeowners and try to work something out. In recent months judges have begun cracking down on banks that don’t make that “good faith” effort.

From November 2009 through last month, New York judges have slammed banks for their lack of good faith in at least seven cases. In one case a judge ordered the mortgage debt wiped out. In the others substantial sanctions were imposed or threatened.

In Davis’ case, she had promised her mother she would do everything she could to keep her Midwood, Brooklyn, house, and at first, she figured she could work something out. “I didn’t want her dying thinking it was because she got sick that I was in this situation,” she said.

Starting in April 2009, she began attending settlement conferences with the bank to try and modify the loan. Her mother died in December 2009, and through February of this year Davis participated in 17 conferences – about one every five weeks.

During that time, the bank lost her first three applications for a loan modification. She submitted five in total. “Everything they required – even it if was the tip of the needle – we gave them,” she said.

In February 2010, the bank said it could neither offer nor deny a modification because Davis had failed to provide a tax return for self-employed persons.

Davis had never been self-employed.

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