Mortgage Foreclosures and the New York Courts

Following the financial crisis of 2008, there was a dramatic increase in the rate of mortgage foreclosures in many markets, including New York.  While most of these cases have been resolved, we are seeing a new wave of foreclosures, many involving homeowners “lucky” enough to have obtained an ARM just before the market collapsed who now find themselves 5 years into the loan and faced with the balloon payments they had hoped to avoid through refinancing.

What should a homeowner faced with a Notice of Default do?  The short answer is to be proactive and respond to the lender’s notices.  Under the Home Affordable Refinance Program (HARP) and the Home Affordable Modification Program (HAMP), homeowners who qualify are able to modify their loans according to the rules of the program.  Many homeowners have been able to obtain manageable terms for their loans without going through angst of a foreclosure proceeding. In addition, most banks have various “in house” programs for the modification, refinancing or temporary forbearance of loans.

Don't think you will qualify?  That’s where the courts come in. In response to the foreclosure crisis, Albany enacted changes in the law requiring lenders and homeowners to enter into a mandatory mediation process. In the downstate courthouses, this usually means that a referee (court attorney) sits down with both sides and tries to work out a resolution short of foreclosing on the home. The parties have an obligation under law to “negotiate in good faith.”  In practice, the trend we have seen is that downstate courts are extremely reluctant to displace homeowners if there is any possibility of working out the loan.  Banks who deny terms are often required to reassess their positions in order to show “good faith” and homeowners who were told they did not qualify for a given program are often accepted after further negotiations with the assistance of the court.

The bottom line is that help is available in all but the most hopelessly underwater loans. DO NOT WALK AWAY FROM YOUR HOME. HELP IS AVAILABLE AND THE COURTS ARE FORCING THE BANKS TO DEAL WITH THE MESS THEY CREATED.

WHAT IS THE DIFFERENCE BETWEEN A LIVING WILL AND A HEALTH CARE PROXY?

It may be difficult to talk about, but at some point in our lives many of us will be faced with a serious illness or injury involving ourselves or our loved ones.  New York’s laws give individuals the right to make important decisions regarding their care and treatment, including the right to accept or reject life-sustaining measures, to donate organs, to receive palliative or hospice care, or to instruct doctors not to resuscitate them in the event they go into cardiac arrest.  Unfortunately, these rights often suffer in cases where a person becomes unable to communicate their wishes to their health care professionals.

As with most other things, the best way to address your health care wishes is to put them in writing.  In New York these writings, known as “Advanced Directives”, are typically three major types, a Health Care Proxy, a Living Will, and a Do Not Resuscitate (DNR) Order.  Do you need all three?

A Health Care Proxy is a document appointing an agent to make health care decisions on behalf of an incapacitated person.  In the proper form, the document allows a trusted person to make decisions regarding the patient’s care and treatment, either in general or as limited in the document. it is enforceable under New York Law.  The form typically designates a health care agent and an alternate.  It is strongly recommended that this decision be weighed carefully and discussed with the designated agent and any alternate before the document is executed.  This may seem obvious to most of you, but some of you have also had the experience of showing up in the hospital with a sick parent and learning for the first time that a spouse, child or relative has been designated to make decisions who is deceased, absent or wholly unprepared to handle the burden.

A Living Will is not actually a Will.  It is statement of the individual’s wishes and directives in the event he or she is no longer able to communicate due to illness or incapacity.  LIVING WILLS ARE NOT ENFORCEABLE IN NEW YORK COURTS, but they will be taken as evidence of a person’s wishes and intentions regarding treatment.  A Living Will is of great use where children or relatives or do not agree on how the patient should be treated.

Do Not Resuscitate Orders are self-explanatory.  While the decision to forego resuscitation may be included in the other two documents, a DNR order can be placed directly into a patients chart and noted by the health care staff.  In the absence of an explicit order flagged on the patient’s chart, a health care professional responding to a cardiac arrest is not realistically going to stop to call a health care agent or search for the advanced directives before jumping into action, and the directive can be inadvertently ignored.

Ideally, the Living Will and Health Care Proxy are used in tandem to designate a decision-maker who can use the Living Will to clearly and unambiguously document the patient’s intentions in the event of a dispute.  It is an unfortunate fact that these wishes are sometimes challenged by hospitals and nursing homes, or even other family members, and can wind up in court.  The best way to avoid this is to get these documents in order before they become necessary and to clearly state the patient’s intentions and wishes in detail.