Fein, Such & Crane, LLP, Attys. For Plaintiff
ENZA CAMMARASAMA, ESQ., Atty. For Ilardo Defendants
THOMAS F. WHELAN, J.S.C.
ORDERED that this motion (#001) by the Ilardo defendants for summary judgment dismissing this mortgage foreclosure action and directing the plaintiff to modify its mortgage in accordance with the terms of a trial period modification plan offered by the plaintiff under the federal Home Affordable Modification Program (HAMP) and an order "waiving" all interest accrued on the loan from implementation of the the HAMP offer to the resolution of this action and "expunging any alleged deficiencies in payment is denied.
This mortgage foreclosure action arises out of mortgage given by the Ilardo defendants on August 23, 2004 to secure a $320, 000.00 mortgage loan in connection with the purchase of residential real property situated in Centerport, New York. The complaint was filed on July 13, 2011, in response to which, the Ilardo defendants filed an answer with counterclaims. That answer was amended by the defendants' service of an amended answer with counterclaims dated September 16, 2011, in response to which, the plaintiff replied in October of 2011.
On December 7, 2011, the answering defendants served the instant motion in which they seek a judicially imposed loan modification and other relief. The defendants claim an entitlement to such relief under the terms of a trial plan program loan modification [hereinafter "TPP"] to which the parties agreed in September of 2009. The Illardos' further claim an entitlement to such relief by reason of the deceptive and bad faith conduct on the part of the plaintiff and its representatives in corresponding with the Ilardos in connection with their unsuccessful attempts to secure a permanent modification of the subject loan and the plaintiff's bad faith and prejudicial conduct in prosecuting this action other than in accordance with court rules and notions of fairness and justice. The Illardos urge this court to apply principles of contract law and/or invoke this court's equity powers and issue an order that: 1) compels the plaintiff to provide the defendants with a permanent loan modification as of October 1, 2009 providing for a reduced monthly payment in the amount set forth in the trial program implemented by the parties during the last three of months of 2009; 2) eradicates all interest and deficits in payment that accrued under the original loan documents; and 3) dismisses this foreclosure action.
Underlying these demands for relief are the following factual allegations, all of which are advanced in the affidavit of defendant, Dina Ilardo, that is attached to the moving papers. In August of 2004, the Ilardo defendants purchased their home with the aid of the $320, 000.00 mortgage that is the subject of this action and they regularly paid the monthly installment due for principal, interest, taxes, insurance and escrow from the loan's inception until May of 2009. At that time, the Ilardo's were experiencing difficulties in meeting their financial responsibilities and began a 27 month pursuit of a modification of their mortgage loan. The Ilardos missed their first mortgage payment on August 1, 2009, allegedly at the direction of the plaintiff's agents.
In the month preceding the August 1, 2009 default, Dina Ilardo was purportedly told by agents of Chase Bank, the loan servicer, to "stop paying" the mortgage (see ¶ 12 of the Ilardo affidavit). Such advice was allegedly issued when Ms. Ilardo called Chase in July of 2009 to follow up on a Buyer's Assistance Form completed by her in May of 2009 in connection with her initial efforts to secure a mortgage loan modification. Ms. Ilardo claims that she was told that a loan default was a necessary element of eligibility for a loan modification.
On or about September 1, 2009, the Ilardo's received correspondence from Chase advising them that they were past due on the August installment. Ms. Ilardo "immediately" called Chase and "was assured not to worry because we were now in a temporary modification program", the "specific amounts of which were confirmed in that conversation" (see ¶ 14 of the Ilardo affidavit). On September 10, 2009, the Ilardo's received written confirmation of a Home Affordable Modification Trial Period Plan ("TPP") from Chase in which a three month, trial term period was scheduled to begin on October 1, 2009. The plan provided for a reduction of the Ilardos' monthly installment payments from $2, 432.00 to $1, 953.00. The Ilardo's believed that if they paid the three trial payments beginning on October 1, 2009 and ending on December 1, 2009, Chase would provide them with a Home Affordable Modification Agreement (see ¶ 16 of the Ilardo affidavit).
The Ilardo's allege that they timely made the trial payments and that they continued to pay the reduced monthly installment following the expiration of the trial term for "months" even though Chase advised them that they were in arrears. In response, Dina Ilardo called Chase three times in January of 2010 and was allegedly told "not to worry" since they were in "a loan modification" (see ¶ ¶ 18-19 of the Ilardo affidavit). On February 11, 2010, Ms. Ilardo was advised by "Cindy" at Chase, that "our application was still in review but that Chase may have to place us in a different program" (se e ¶ 20 of the Ilardo affidavit). According to Ms. Ilardo, she continued to converse with Chase representatives through July of 2010 and continued to send to them financial documentation in connection with obtaining a loan modification under programs other than the "HAMP" program which provided the three month TPP beginning in October of 2009.
On January 12, 2011, Chase returned the Ilardo's monthly payment (see ¶ 25 of the Ilardo affidavit). The Ilardos continued to receive notices from Chase advising of loan deficiencies (see ¶ 28 of the Ilardo affidavit). Ms. Ilardo nevertheless claims that she was only notified by letter dated June 1, 2011 that Chase was unable to offer a HAMP loan modification or a modification under any Chase modification programs (see ¶ 31 of the Ilardo affidavit). The Ilardos made no further payments to Chase following receipt of that letter (see ¶ 27 of the Ilardo affidavit). Undaunted by these circumstances, Ms. Ilardo continued to pursue loan modifications possibilities with Chase until August 23, 2011 (see ¶ ¶ 33-34 of the Ilardo affidavit).
The plaintiff challenges the accuracy and completeness of Ms. Ilardo's narrative of the conversations she purportedly had with Chase. Such challenges are premised on the self-serving and unsubstantiated nature of Ms. Ilardo's factual allegations regarding her dialogue with Chase representatives. The plaintiff also points to a glaring omission on the part of Ms. Ilardo and her counsel in failing to mention or include a copy of Chase's April 27, 2010 rejection letter. Therein, Chase advised the Ilardos that it was unable to offer a HAMP modification because the Ilardo's housing expense was less than 31% of the gross monthly income and that they did not qualify for a modification under any programs offered by Chase, including the Making Homes Affordable program to which the defendants were first referred in February of 2010. The April 27, 2010 rejection letter references the trial plan documentation and advises that delinquencies in the loan must be addressed to avoid the "negative impact a possible foreclosure may have on your credit rating, the risk of a deficiency judgment being filed against you and the possible adverse tax effects of a foreclosure on your Property". The plaintiff further challenges Ms. Ilardo's claim that bank representatives advised her that she had to be in default under the terms of her loan to qualify for a loan modification since the TPP documentation itself clearly provides otherwise. The plaintiff also contests the merits of the defendants' claims for dismissal of this action, reinstatement of the trial modification as of the date of its inception on October 1, 2009 and a waiver of all interest and an expungement of all loan deficiencies under HAMP or the common law theories advanced by the defendants.
Without denying the existence of the plaintiff's April 27, 2010 rejection letter or the accuracy of the assertion set forth therein that the Ilardo's housing expense was 26% of their gross monthly housing income and thus less than the 31% required for a positive NPV result, the defendants claim that their right to a permanent loan modification upon the same terms as the trial modification rest upon the language of the TPP itself. In support of this claim, the Ilardos rely upon the following language set forth on page 2 of the TPP: "If I am in compliance with this Loan Trial Period and my representations in Section 1 continue to be true in all material respects, then the Lender will provide me with a Loan Modification Agreement, as set forth in Section 3, that would amend and supplement (1) the Mortgage on the Property, and (2) the Note secured by the Mortgage." The Illardo's thus contend that under HAMP and principles of contract law and the law governing waiver and estoppel, the court should mandate that the plaintiff permanently modify the loan by reinstating the terms of the TPP.
In opposition to these arguments, the plaintiff contends that it was not required to permanently modify the mortgage loan if it determined during the trial period that the borrower did not meet the requirements under HAMP for a modification. In support of these contentions, the plaintiff cites the following language from the Trial Period Plan: "I understand that the Plan is not a modification of the Loan Documents and that the Loan Documents will not be modified unless and until: (i) I meet all of the conditions required for modification, (ii) I receive a fully executed copy of a Modification Agreement, and (iii) the Modification Effective Date has passed. I further understand and agree that the Lender will not be obligated or bound to make any modification of the Loan Documents if I fail to meet any one of the requirements under this Plan".
As an alternate ground for the granting of this motion, the defendants assert that the plaintiff engaged in outrageous and deceptive conduct and has acted in such bad faith that the defendants are entitled to a judicially mandated loan modification. As legal authority for this position, counsel assiduously relies on a decision issued in a mortgage foreclosure proceeding in this court in the case of Wells Fargo Bank v Meyers, reported at 30 Misc.3d 697, 913 N.Y.S.2d 500 (Sup. Ct. Suffolk Cty. 2009; Sweeney, J). Therein, the Meyers defendants were offered a TPP under HAMP and performed by paying the reduced monthly installments for the three month trial period. Immediately following the start of that trial period, the bank instituted the foreclosure action. The case was assigned to the specialized mortgage foreclosure conference part and referred to Acting Justice Sweeney after the plaintiff steadfastly declined to offer the defendants a permanent modification of their mortgage loan over the course of four settlement conferences in the conference part. When the plaintiff again refused to modify the loan at conferences before Acting Justice Sweeney, a hearing on the issue of the plaintiff's "bad faith" was scheduled. Following that hearing, the court issued the order reported above in which the plaintiff was directed to specifically perform "the original modification agreement ...