Long Island Judge Voids Mortgage

BUT WILL IT WORK IN NEVADA?
A Suffolk judge’s decision to wipe out the mortgage debt of a foreclosed-upon East Patchogue couple may send a message to predatory subprime lenders that unless they work to save their customers’ homes, they stand to lose everything.

Click on the map to read the Court’s Decision.

“This case shows the change in the tide as to the sentiment about mortgage foreclosures in general,” said Woodbury bankruptcy attorney Craig Robins, who called Suffolk County Court Judge Jeffrey Spinner’s decision “a good demonstration that courts are not going to tolerate this type of conduct by the mortgage companies anymore.”

The judge’s ruling against the lender – IndyMac Mortgage Services, based in Pasadena, Calif. – was without doubt highly unusual. In addition, it was perhaps without precedent. A search of published reports nationally turned up no similar action, and several attorneys said the decision was the first of its kind, at least on Long Island.

But some wondered whether the precedent set is a positive one and others questioned the legal soundness of the ruling.

“It’s encouraging as a citizen, but as a practitioner, I can only think that if the judges have the authority to throw out mortgages, who’s going to be lending money?” Commack real estate attorney Lita Smith-Mines said.

In a statement, OneWest Bank E.S.B., IndyMac’s parent company, has said the bank will appeal. A spokeswoman for OneWest Bank did not return a call last week for comment.

Behind the rulingIn his Nov. 19 decision, Spinner wrote that IndyMac Mortgage Services exhibited conduct that was “harsh, repugnant, shocking and repulsive” in its proceedings against Diana Yano-Horoski, owner of the Oakland Street home at issue.

Spinner wrote that IndyMac “soundly rebuffed” even the most reasonable of settlement offers, inflated the amount of debt of Yano-Horoski and her husband, Gregory Horoski, and seemed determined to kick them out of their home. In order to deter IndyMac from such “unconscionable” behavior in the future, Spinner erased the Horoskis’ nearly $300,000 debt – in effect turning over the home to the family free and clear.

“The laws of banking and real estate have been around since men and women lived in caves. A bank lends you money, you buy a house, and you have to pay the bank back the money, or it takes the house away. That’s not going to change,” said Sabino, who added that the ruling may not set a precedent at all if OneWest Bank is successful in its planned appeal.

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