Couple owes bank 525K, Judge gets pissed, erases entire debt

[Superman]

Link

Judge blasts bad bank, erases 525G debt

By KIERAN CROWLEY, RICH WILNER and DAN MANGAN

Last Updated: 4:18 PM, November 25, 2009

Posted: 3:46 AM, November 25, 2009

A Long Island couple is home free after an outraged judge gave them an amazing Thanksgiving present -- canceling their debt to ruthless bankers trying to toss them out on the street.

Suffolk Judge Jeffrey Spinner wiped out $525,000 in mortgage payments demanded by a California bank, blasting its "harsh, repugnant, shocking and repulsive" acts.

The bombshell decision leaves Diane Yano-Horoski and her husband, Greg Horoski, owing absolutely no money on their ranch house in East Patchogue.

Spinner pulled no punches as he smacked down the bankers at OneWest -- who took an $814.2 million federal bailout but have a record of coldbloodedly foreclosing on any homeowner owing money.

"The bank was so intransigent that he [the judge] decided to punish them," Greg Horoski, 55, said about Spinner's scathing ruling last Thursday against OneWest and its IndyMac mortgage division.

It erased up to $291,000 in principal and $235,000 in interest and penalties.

The Horoskis -- who had been paying only interest on their mortgage -- had no equity in the home.

Horoski, who had begged the bankers to let him restructure the loan, said, "I think the judge felt it was almost a personal vendetta." Dealing with the bank, he said, was "like dealing with organized crime."

OneWest said, "We respectfully disagree with the lower court's unprecedented ruling and we expect that it will be overturned on appeal."

It claimed it "has been extremely active in working with consumers on home loan modifications through the Obama administration's Home Affordable Modification Program and other loan modification initiatives."

The bank is owned by a private equity group that purchased the failed IndyMac bank.

Yano-Horoski, a college professor of English and cognitive reason, and Horoski, who sells collectible dolls online, bought their 3,400-square-foot, one-level house 15 years ago for less than $200,000.

In 2004, court records show, they refinanced, paying off their original mortgage with part of a $292,500 sub-prime loan from Deutsche Bank. They used what was left for health care and for his business.

The loan carried an initial adjustable interest rate of 10.375 percent, which soared to 12.375 percent.

It eventually ended up being either owned or serviced by IndyMac, and the bank sued the couple in July 2005 when they began having trouble making payments because of Horoski's health problems.

After a foreclosure was approved last January, Yano-Haroski successfully asked for a court settlement conference.

Spinner excoriated OneWest for repeatedly refusing to work out a deal, for misleading him about the dollar amounts at stake in the case, and for its treatment of the couple over months of hearings.

OneWest's conduct was "inequitable, unconscionable, vexatious and opprobrious," Spinner wrote.

He canceled the debt because the bank "must be appropriately sanctioned so as to deter it from imposing further mortifying abuse against [the couple]."

The bank is involved in a similar case in California, where it's trying to foreclose on an 89-year-old woman, despite two court orders telling it to stop.

Wow, if this is correct, score one for the little guy. I'm curious to see how the appeal will turn out.

[Andrew_Fireborn]

Especially since it sounds like they were nearing a medical bankruptcy.

It definitely will be one should this get over turned.

[Superman]

Too bad we weren't in that courtroom to see the looks on the bankers' faces while the judge came down on them.

[Tanasinn]

I will be sorely surprised if this isn't reversed. For now, it's both funny and delicious.

[Sriad]

Too bad we weren't in that courtroom to see the looks on the bankers' faces while the judge came down on them.

Don't be too disappointed... Like fish, corporate lawyers have neither pain nor emotion. Had one of them colored, flinched, or blinked upon hearing of the judge's decision, after retiring to the privacy of their firm his pack-mates would have set on him like piranhas on a penguin.

Now THAT would be something to see.

Oh right, posting with substance... I think it's most likely that a higher court might reverse the ruling, but would order the bank into arbitration with the family and probably excise much of the $235,000 (!!!) in penalties accrued, and possibly a chunk of the principal that their payments SHOULD have been going to under any reasonable terms.

I mean... The whole "HURRR, no mercy for da greedy plebes who got greedy" argument is briefly tempting (how does an initial rate of >10% look attractive?) but 1: by this point the Mortgage industry was full of bottom-feeding opportunists who could sell snake-oil to snakes, and 2: OneWest (let's not lose the thread: it was actually IndyMac before its death and rebirth) didn't try to negotiate, it SUED THE FAMILY about a year into the loan... at a time I should add when prices were still going UP.

You know why those imbeciles needed bail out money? I'd give pretty good odds that it's because they engaged in vicious speculation right up to the day the finance bubble popped by selling poison-pill ARMs to people in nice homes, throwing them out, and then getting stuck with a bunch of unsellable devalued real-estate. No wait, that's exactly what we KNOW happened: banks gave "free money" to people who couldn't pay it back, but they knew it was safe because they'd be taking their intrest-only payments until they failed, and then they'd get a house that had appreciated in value! BRILLIANT!

[J]

OneWest said, "We respectfully disagree with the lower court's unprecedented ruling and we expect that it will be overturned on appeal."

It claimed it "has been extremely active in working with consumers on home loan modifications through the Obama administration's Home Affordable Modification Program and other loan modification initiatives."

Perhaps they'd like to explain why only 1080 people thus far in the entire US have qualified for a permanent mortgage modification. That's every last mortgage from every single lender in all of America. 1080. Extremely active huh? Right.

Source
See also the GAO report, page 93.

[Sea Skimmer]

I am not so supportive of the little guy in this case. They only ever paid interest on the loan; they did not deserve to have that property if they apparently can’t actually pay for it at all, ever. Paying interest only for years is retarded and they should have just rented something. This is pretty certain to be overturned on appeal because of this rather glaring reality. Knocking off the interest is supportable, but basically this judge is giving them the house for free and that isn’t gonna fly.

[J]

I believe it's possible to argue that the bank made a fraudulent loan in bad faith on the basis that it was an interest only loan which had a low likelyhood of ever being paid in full, which could then be construed as predatory lending, thus voiding the loan contract. The lender would in this case eat the full losses on both principal and interest leaving the borrower free & clear.

[Starglider]

I am not so supportive of the little guy in this case... Knocking off the interest is supportable, but basically this judge is giving them the house for free and that isn’t gonna fly.

I gather that's supposed to be a punitive measure due to the bank's bad faith and bad behavior. I agree that it's somewhat unfair to effectively give the couple the proceeds of a fine imposed on the bank, but I imagine the judge didn't have any other way to effectively punish the bank.

[SirNitram]

One more on the pile of the bankers getting theirs. No pity or remorse or even mercy for them, as far as I'm concerned. They happily bent or broke every rule they could for more debt-profit until the party stopped, then they're starting again.

I just no longer care whatever argument puts the people helped by these in the wrong. The banks deserve several pounds of flesh extracted, and if this is how, so be it.

[Sea Skimmer]

I gather that's supposed to be a punitive measure due to the bank's bad faith and bad behavior. I agree that it's somewhat unfair to effectively give the couple the proceeds of a fine imposed on the bank, but I imagine the judge didn't have any other way to effectively punish the bank.

I guess so but I still doubt it will hold on appeal. It would have been a little more reasonable in my book to knock off the interest, and then credit all interest the couple did pay against the principal which would then be held at a 0% rate. I got no idea what the law actually allows on the matter but I doubt the bank is wrong when it claimed this was unprecedented. These people will be extra screwed too if they have to pay for lawyers through several appeals and then don’t get anything in the end. But tis the system.

[CmdrWilkens]

I believe it's possible to argue that the bank made a fraudulent loan in bad faith on the basis that it was an interest only loan which had a low likelyhood of ever being paid in full, which could then be construed as predatory lending, thus voiding the loan contract. The lender would in this case eat the full losses on both principal and interest leaving the borrower free & clear.

Following on from this, they were paying principal on the house up until 2004, the original loan dates back to 1994 (based on the 15 year remark). Given that the house was originally valued at something under 200k they clearly have some proven ability to pay (10 years on a decent sized regular loan). However given that the principal on the revised loans ran up to 291k this means they've racked up either a huge business loss (and selling dolls doesn't sound like it needs all that much capital) or they wandered in to almost 100k in medical expenses. Based on that it would be pretty easy to say that any reasonable appraisal would have indicated high likelyhood of increased medical costs, reduced ability to pay, and a host of other facts that should have disqualified them from borrowing 50% more than what their collateral/house was originally worth. In other words I think they'd have a decent chance of arguing predatory lending.

[Darth Wong]

These people obviously did that "home equity loan" bullshit where you use the value of your home as a de facto bank account. I have very little sympathy for users of that tactic who end up getting hounded by the bank.

I do have sympathy for their medical bills, but that is an entirely separate issue from the supposed injustice of demanding money back from a couple who vastly over-borrowed. It makes no sense to try to solve the country's contemptible "health care system" injustices by attacking banks who want their loans repaid.

As for punishing banks who took bailout money, I'm all for blasting them with massive regulations and severe cutbacks on executive pay. However, forcing them to reward delinquent borrowers is just retarded.

[aerius]

These people obviously did that "home equity loan" bullshit where you use the value of your home as a de facto bank account. I have very little sympathy for users of that tactic who end up getting hounded by the bank.

On the other hand, what kind of dumbass bank lets a couple pull out all the equity in their home with a HELOC which they clearly couldn't afford? It doesn't take much brains to figure out that $300k at 10% is going to fucking bankrupt them unless they're making craploads of money every year, which ain't happening when they're using the loan to cover medical bills. If the loan agent had done his work the loan wouldn't have been made in the first place, a bit of research would've told him the loan is never going to be paid back.

I can't say I have a problem with the judgement, banks which make stupid loans deserve to eat the losses and go bankrupt. The couple gets a free house which is a bit unfair but I can deal with that.

[Broomstick]

If their only means of paying medical bills were loans that would inevitably result in bankruptcy then they were already bankrupt and should have gone through that song-and-dance back then (and if I read it right, it would have been prior to some of the "reforms" that make bankruptcy harder these days). If they had done that they might have kept their debt manageable.

[Havok]

Intellectually, too fucking bad for these people. The point you raised are very valid Aerius, however you can reverse that on to the people taking out the loan. They should have known they couldn't pay it back and too fucking bad if you have some unforeseen costs in the future. It's called financial planning, not financial gambling.

Emotionally, too fucking bad for this bank. The fact that they apparently ignored the willingness on the couple's part to keep paying but under renegotiated terms, which is just bad business, is pretty telling of their policies. Also, we are all pretty aware of the banking industries assholish behavior, so perhaps this can be a little kick in the ass to be a little less sharkish about the business.

[CmdrWilkens]

Intellectually, too fucking bad for these people. The point you raised are very valid Aerius, however you can reverse that on to the people taking out the loan. They should have known they couldn't pay it back and too fucking bad if you have some unforeseen costs in the future. It's called financial planning, not financial gambling.

The problem is that the consumer doesn't have an obligation to fully asses the risks and rewards of a particular loan product. The underwriter is the one who has to perform a due dilligence and thus are liable for the results. If the underwriter knew or should have known that this was an impossible loan then they are obligated not to offer it.


Addendum: This doesn't mean the couple wasn't stupid, they should have run a risk analysis of their own to determine if they could afford the loan they were taking it just that they have no legal obligation to do so.

[Havok]

Oh I know that, but considering the ramifications if something goes wrong? They should have felt a personal responsibility to check it out. 'Buyer Beware' isn't one of the oldest sayings for no reason.

[aerius]

Intellectually, too fucking bad for these people. The point you raised are very valid Aerius, however you can reverse that on to the people taking out the loan. They should have known they couldn't pay it back and too fucking bad if you have some unforeseen costs in the future. It's called financial planning, not financial gambling.

No doubt about that. If I'm taking out a $200k loan you can bet your ass I'm going to research the hell out of it and make damn sure I can afford it and pay it off in X amount of time. But I'm weird, apparently, since most of the people I know won't do that. The average person goes "I need a loan for $_________dollars, if the bank says it's ok and gives it to me it clearly must be good. The bankers are the experts, and they know best, right?" They assumed the bankers' word was good when in reality the bastards are a lot closer to used car salesmen on the snake scale. The banker is supposed to have way more information & knowledge than the person taking out the loan as well as being a bit of a Scrooge, so if he's giving you a loan the implication is that he knows you're good for the money.

It's also possible the couple took out the loan knowing it was a gamble, and the bank let them because they wanted to collect a bunch of fees and then package the loan into some kind of asset backed securities product, picking up more fees for that. And since they're selling the loan to another bank, who the hell cares if the couple can actually pay? So they gave them loan at Guido rates and sent'em on their way, then sold the loan to IndyMac which went tits up last year, after which the loan got picked up by OneWest.

[Rogue 9]

Too bad we weren't in that courtroom to see the looks on the bankers' faces while the judge came down on them.

You wouldn't have. I highly doubt the bankers themselves were present; corporate types tend to just dispatch the lawyers and not bother to have anyone from the actual company there.

[Vympel]

The bank got everything they deserved in this instance. Read the entire judgment, it is quite illuminating - note the attempt to practically deceive the court by asserting that the defendants defaulted on a deed of forbearance whose terms had passed before it even came into fucking existence. Bad faith in the extreme, contrasted with extremely reasonable attempts by the Defendants to come to an agreement that would obviously have been of benefit to the bank. I don't know what the hell the bank was thinking, but they dug their own grave.

Link

Although Ms. Dickinson insisted that Ms. Yano-Horoski had been offered a "Forbearance Agreement" in the recent past upon which she quickly defaulted, it was only after substantial prodding by the Court that Ms. Dickinson conceded, with great reluctance, that it had not been sent to Defendant until after its stated first payment due date and hence, Defendant could not have consummated it under any circumstances (Defendant, through Plaintiff's duplicity, found herself to be in the unique and uncomfortable position of being placed in default of the "agreement" even before she had received it).

Money quote:-

It is the province and indeed the obligation of the trial court to assess and to determine issues regarding credibility, Morgan v. McCaffrey 14 AD3d 670 (2nd Dept. 2005). In the matter before the Court, the pendulum of credibility swings heavily in favor of Defendant. When the conduct of Plaintiff in this proceeding is viewed in its entirety, it compels the Court to invoke the ancient and venerable principle of "Falsus in uno, falsus in omni" (Latin; "false in one, false in all") upon Defendant which, after review, is wholly appropriate in the context presented, Deering v. Metcalf 74 NY 501 (1878). Regrettably, the Court has been unable to find even so much as a scintilla of good faith on the part of Plaintiff. Plaintiff comes before this Court with unclean hands yet has the insufferable temerity to demand equitable relief against Defendant.

Equity is a bitch. Suck it down

[Teebs]

The bank demanded equitable relief after behaving like that?! Epic fail, I'm only a law student and know you can't get equitable relief if you haven't behaved perfectly yourself. Their lawyers should be fired.

[J]

In light of the information linked to by Vympel, I don't think the bank will be appealing the decision as the case looks pretty solid. If the bank appeals the decision and loses, the case becomes precedent for everything within its appeals circuit and it will be cited as such for all similar cases with the same set of arguments within the system.

As is, the banks can still go after borrowers within the jurisdiction of the court and beat them down one by one. The case does not yet set precedence and while it can be cited in other similar cases, stare decisis does not apply, yet. It will though if the case is lost on appeal, which would anally violate every single bank attempting to argue a similar case.

*note - I haven't taken any law courses in nearly 8 years so I could be mistaken.

[Darth Wong]

If judges can just arbitrarily decide to effectively fine a plaintiff hundreds of thousands of dollars for being unreasonable and dishonest, why don't they do this to all of the frivolous lawsuit people?

[CmdrWilkens]

If judges can just arbitrarily decide to effectively fine a plaintiff hundreds of thousands of dollars for being unreasonable and dishonest, why don't they do this to all of the frivolous lawsuit people?

He isn't arbitrarily fining them, if the determination was made that the loan was offered and serviced in bad faith then predatory lending, as mentioned above, comes in to play...which gives the judge the right to erase the loan.