NY Judge CANCELS IndyMac Loan due to BAD FAITH

JUDGING INDYMAC – New York Judge Finds IndyMac’s behavior “Repugnant, Shocking, Repulsive and Completely Devoid of Good Faith”.

Yesterday, November 24th in a Long Island courtroom, Judge Jeffrey Arlen Spinner ruled in essence that a bank who is seeking foreclosure against a homeowner must act and negotiate in good faith in an attempt to mitigate damages.

In the case of INDY MAC v YANO HOROSKI, Judge Spinner found that the bank's conduct was “wholly unsupportable at law or in equity, greatly egregious and so completely devoid of good faith that equity (in the nature of granting foreclosure) cannot be permitted to intervene on its behalf.”

However, Judge Spinner went further, stating that IndyMac's unapproachability, insensitivity and contemptuous conduct toward the borrower throughout the entire case made him believe that the bank would repeat this conduct -- SO HE EXTINGUISHED THE ENTIRE DEBT!

The facts are as follows: Ms Yano Horoski is a college professor who refinanced her existing residential mortgage for $ 292,500.00 with an adjustable whose interest rate went from 10% to 12%. Due to unforseen financial and medical hardships she and her husband could no longer afford the monthly payment, so they contacted IndyMac with the hope of obtaining a loan modification.

As Judge Spinner noted in his ruling, the borrower and her husband made countless attempts to mediate their loan with IndyMac - and even made a proposal under which their daughter would purchase the home. But the bank turned a deaf ear to all efforts to resolve the issue, and instead went forward with demanding foreclosre (DESPITE the fact that IndyMac, now known as "OneWest", received millions of dollars in "bailout" money from the government's "Troubled Asset Relief ("TARP") Program").

Judge Spinner's ruling also pointed out several things that homeowners and their advocates have long known and understood - but that Courts (until now) have been unwilling to recognize.

His findings included:

“Were IndyMac amenable, the homeowner would presumably continue to maintain the property’s physical condition, pay taxes thereon and the property would retain or perhaps increase its market value. IndyMac would receive a regular income stream, albeit with a reduced rate of interest and without sustaining a loss of several hundred thousand dollars."

"In addition, no neighborhood blight would occur from the boarding of the property after foreclosure, which would, in turn, avert problems of litter, dumping, vagrancy and vandalism as well as a corresponding decline in the property values in the immediate area. In short, a loan modification would result in a proverbial “win-win” for all parties involved. To do otherwise would result in virtually certain undomiciled status for two physically unhealthy persons and their daughter, leading to an additional level of problems, both for them and for society.”

The judge said that the court, when attempting to reach a decision as to whether to permit the foreclosure, is required to look at the "entire situation", and to give careful consideration to “whether the remedy sought by Plaintiff (IndyMac) would be repugnant to the public interest when seen from the point of view of public morality”.

He added:

“Equitable relief will not lie in favor of one who acts in a manner which is shocking to the conscience, neither will equity be available to one who acts in a manner that is oppressive or unjust or whose conduct is sufficiently egregious so as to prohibit the party from asserting its legal rights against a defaulting adversary."

"The compass by which the questioned conduct must be measured is a moral one and the acts complained of need not be criminal nor actionable at law but must merely be willful and unconscionable or be of such a nature that honest and fair minded folk would roundly denounce such actions as being morally and ethically wrong. Thus, where a party acts in a manner that is offensive to good conscience and justice, he will be completely without recourse in a court of equity, regardless of what his legal rights may be.”

And then in closing, the Judge wrote:

“The Court cannot be assured that Plaintiff will not repeat this course of conduct if this action is merely dismissed and hence, dismissal standing alone is not a reasonable option. Likewise, the imposition of monetary sanctions is not likely to have a salubrious or remedial effect on these proceedings and certainly would not inure to Defendant’s benefit.

"This Court is of the opinion that cancellation of the indebtedness and discharge of the mortgage, when taken together, constitute the appropriate equitable disposition under the unique facts and circumstances presented herein.”

CONCLUSION: It's important to note that this decision is not an appellate court decision, and cannot be used as a "precedent" for courts in other states and jurisdictions. Further, Judge Skinner's decision will be agressively appealed, and many legal commentators throughout the internet already are predicting that the ruling stands a good chance of being overturned.

However, as professionals close to the foreclosure crisis are well aware, Judge Skinner's observations as to how many lenders conduct business with homeowners are "right on the mark".

The bottom line is that if homeowners believe they are being victimized, ignored or given the "runaround" by their lenders, they need to IMMEDIATELY stand up for their rights, secure the services of experienced legal counsel, and avail themselves of remedies currently available under applicable State and Federal laws.