U.S. Bank v Shinaba, Bronx County Supreme Court, Index No. 381917-2009

This case provides another example of New York courts coming down on residential  lenders that fail to participate in the statutorily mandated settlement process in good faith. In this residential mortgage foreclosure case, Judge Robert Torres found that the lender never properly evaluated the borrower for relief under the Home Affordable Modification Program (“HAMP”) even after two years.  The borrower attended seventeen settlement conferences; she timely submitted multiple HAMP applications; and timely complied with ever request for financial information.  She also successfully completed two trial periods.  The Court found that the lender, for the most part, “ignored her application” and failed to accurately compute NPV as to the borrower’s HAMP eligibility.  The Court also found the lender “egregiously failed to comply with the rules regarding timely review and notice.”

The Court directed the lender to provide a “supportable answer” on her HAMP loan modification and to give a “full and detailed explanation” if the application was denied.  Further, the Court directed that in the event the lender denied the HAMP application, it was to consider the borrower for a Principal Reduction Alternative (“PRA”).  The Court also assessed costs against the lender equal to the interest, late fees, and attorneys fees that had accrued on the loan since the date the Court determined that review of the borrower’s HAMP application should have been completed.

The lesson of U.S. Bank v Shinaba is that, at least in Judge Torres’s court, lenders will be required to demonstrate strict compliance with all HAMP deadlines on pain of losing accrued fees and interest.