In accordance with the Rules of the Foreclosure Settlement Conference Part ("FSCP"), and upon the hearings held by and before David Evan Markus, Court Attorney Referee, on May 17, 2012 and May 24, 2012, and all prior proceedings and papers herein, the said Court Attorney Referee reports as follows:

In this residential foreclosure action concerning a one-family home in the Battle Hill neighborhood of White Plains, New York, defendant Dena V. Greenhut asserted in foreclosure settlement conferences, held pursuant to CPLR 3408 and Uniform Rules of Trial Court [22 NYCRR] section 202.12-a, that plaintiff One West Bank FSB had breached its duty to proceed in good faith (see CPLR 3408[f]) by unreasonably delaying a determination on defendant's short sale application and by imposing an allegedly unreasonable valuation of the property that delayed and ultimately defeated a potential short sale. Defendant also claimed that plaintiff [*2]unreasonably refused to consider a deed in lieu of foreclosure that would have brought this proceeding to an amicable conclusion, and failed to produce a representative with sufficient authority to negotiate a settlement of this action. Plaintiff asserted that defendant does not reside in the mortgaged premises and that therefore CPLR 3408 does not govern this proceeding. For the reasons that follow, this Court concludes that defendant remains a resident of the subject premises for purposes of CPLR 3408 and that plaintiff breached its CPLR 3408 duty to proceed in good faith to the limited extent of failing to produce a representative with sufficient authority to fully dispose of this case.

Over the course of nine Court-supervised settlement proceedings in 2010 and 2011, plaintiff twice denied defendant's application to modify her mortgage under guidelines of the federal Home Affordability Modification Program ("HAMP") (see generally 12 USC § 5219a) — once on grounds of defendant's alleged non-residency in the subject premises, then again on grounds of defendant's allegedly inadequate income relative to debt. While disagreeing with plaintiff's positions with regard to defendant's HAMP applications, defendant thereafter applied to plaintiff for consent to undertake a non-recourse short sale of the premises. At the February 9, 2012 appearance in the FSCP, defendant indicated that a potential buyer had executed a purchase and sale contract with a contract price of $270,000 and an appraised value of $245,000. Plaintiff confirmed that it had received defendant's short sale application but, based on plaintiff's policy not to consider multiple conflicting settlement options simultaneously, plaintiff asked defendant to resubmit the application with a clear stipulation that defendant was waiving her rights under HAMP and would proceed exclusively by short sale or deed in lieu of foreclosure. Defendant agreed to resubmit her short sale application by March 2, 2012, and plaintiff agreed to act on the application no later than April 20, 2012. The Court directed that if plaintiff did not act on the application by such date, then plaintiff must produce before the Court on April 26, 2012, the next scheduled conference, a bank representative with full authority to negotiate and settle the case on plaintiff's behalf. After defendant complained that plaintiff had apparently ignored multiple Court instructions to cease communicating with her personally and proceed through her counsel, despite defendant's prior transmission to plaintiff of multiple instruments empowering her attorney to receive plaintiff's communications on her behalf, this Court admonished plaintiff to route all future case-related communication through defendant's attorney. Plaintiff agreed to ensure this change.

At the settlement conference of April 26, 2012, however, the Court found that plaintiff did not obey the foregoing directives. While conceding that defendant timely resubmitted her short sale application, plaintiff did not finally act on it. Rather, plaintiff proffered a late counteroffer of $385,000 for a short sale — 43% above defendant's contract price — and refused to waive any resulting deficiency for which defendant might be liable on the loan. Plaintiff also failed to produce a bank representative with authority to negotiate and settle, and failed to cease direct communication with defendant. While plaintiff asserted that its $385,000 counteroffer effected timely action on defendant's short sale application in accordance with this Court's instruction, plaintiff offered no valid justification for failing to produce a bank representative with authority or for continuing direct communication with defendant rather than through her attorney. Accordingly, this Court (Scheinkman, J.) issued an Order tolling interest on the underlying loan nunc pro tunc effective February 26, 2012, and scheduled a hearing to determine [*3]whether plaintiff was proceeding in good faith as CPLR 3408(f) requires. Thereafter, on April 30, 2012, plaintiff tendered a revised counteroffer on the short sale of $339,000, and defendant's buyer refused plaintiff's counteroffer.

Defendant's Alleged Non-Residency in the Mortgaged Premises

At the hearing of May 14, 2012, plaintiff raised the threshold issue of defendant's residency, suggesting that defendant no longer resided in the subject premises and therefore the FSCP lacked jurisdiction to hold either settlement conferences or the instant inquiry under CPLR 3408. On that basis, plaintiff applied to release this action from the settlement conference so that plaintiff could file a note of issue and move for summary judgment. In support of its application, plaintiff adduced evidence that defendant had listed her mother's home as defendant's own home address on the 2009 federal tax forms that defendant filed for her business. Plaintiff also made a record suggesting that defendant was sleeping at her mother's home and had instructed the U.S. Postal Service to redirect defendant's personal mail to her mother's home. In reply, defendant testified that she had lived in the subject premises full-time after closing on the loan and for some time thereafter. Defendant testified that during the pendency of the instant foreclosure proceedings, defendant's husband relocated to Florida to seek employment, and that after the property allegedly was vandalized, defendant felt afraid to remain in the home alone. Thereafter, defendant testified, she spent increasing amounts of time in her mother's home. Defendant also adduced evidence suggestive of break-ins at the mortgaged premises during the pendency of the foreclosure proceeding, and offered evidence of such break-ins in the form of photographs and reports to law enforcement authorities.

CPLR 3408(a) requires a foreclosure settlement conference for any "home loan" as defined by RPAPL section 1304(5)(a). Enacted as part of the Legislature's series of foreclosure reform statutes (see L 2009, ch 507, § 25; L 2008, ch 472), RPAPL section 1304(5)(a) defines a qualifying "home loan" as one in which the borrower is a natural person; the borrower incurs the debt "primarily for personal, family or household purposes"; and the loan is secured by a mortgage on real property in this state "used or occupied, or intended to be used or occupied wholly or partly, as the home or residence of one or more persons and which is or will be occupied by the borrower as the borrower's principal dwelling" (RPAPL § 1304[5][a][i]-[iv]). A foreclosure plaintiff bears the burden of showing that the loan subject to foreclosure does not meet these criteria and thus is exempt from a mandatory foreclosure settlement conference (see e.g. Rossrock Fund II LP v Arroyo, 34 Misc 3d 1211 [Sup Ct Kings Co, Jan. 9, 2012] [requiring plaintiff to produce "compelling proof" of defendant non-residency]; Butler Capital Corp. v Cannistra, 26 Misc 3d 598, 604 [Sup Ct Suffolk Co 2009]; Indymac Fed. Bank FSB v Black, 22 Misc 3d 1115 [Sup Ct Rensselaer Co 2009]; Accredited Home Lenders, Inc. v Hughes, 22 Misc 3d 323 [Sup Ct Essex Co 2008]; see also Aurora Loan Services, LLC v Weisblum, 85 AD3d 95 [2d Dept 2011] [plaintiff's burden to demonstrate compliance with RPAPL § 1304 commencement procedures]). This result inheres in the Legislature's remedial purpose to provide in these statutes "additional protections and foreclosure prevention opportunities for homeowners at risk of losing their homes" (Sponsor's Mem, Bill Jacket, L 2008, ch 472; see Cannistra, 26 Misc 3d at 605; Hughes, 22 Misc 3d at 326). In applying the RPAPL 1304 (5)(a) residency test, courts may not rely on conclusory statements concerning defendant's residency [*4](see e.g. Cannistra, 26 Misc 3d at 604-605), nor does it suffice to show that a foreclosure defendant was served at an address other than the mortgaged premises (see Cannistra, at 605) or even out of state (see Black, 22 Misc 3d 1115, at *2).

While plaintiff adduced substantial evidence concerning defendant's residency, including defendant's federal tax filings and a change of mailing address, the statute's plain language compels this Court to conclude that defendant has not lost residence at the subject premises for purposes of this action. In a foreclosure action arising under RPAPL section 1304, residency is determined at "the time the loan was entered into" (Hughes, 22 Misc 3d at 326), not the time of the proceeding or any particular application therein. Thus, under the statute's plain language, any "home loan" for a premises ever "used or occupied, or intended to be used or occupied wholly or partly, as the borrower's principal dwelling," and thereafter either used or intended to be used as such qualifies for a mandatory settlement conference under CPLR 3408 (RPAPL § 1304[5][a][iii]; see Cannistra, 26 Misc 3d at 604). The statutory intent also is clear: the Legislature's goal "regarding occupancy [was only] to remove owners of investment properties or second homes from the ambit of the statute, not to require a homeowner to remain at the mortgaged premises even as a foreclosure action is being prepared or pending" (Hughes, 22 Misc 3d at 326). Accordingly, because plaintiff failed to demonstrate that defendant never resided or intended to reside in the subject premises, or that the subject premises was used primarily for commercial rather than residential purposes, defendant is entitled to the instant CPLR 3408 foreclosure settlement conference even if defendant does not now physically reside there. Plaintiff's application to dismiss this proceeding from the FSCP and file a note of issue therefore is denied.

Plaintiff's Alleged Failure to Proceed in Good Faith

In foreclosure settlement conferences pursuant to CPLR 3408, all parties bear a duty to proceed and pursue settlement options in good faith (see CPLR 3408[f]). This Court has an affirmative duty to "ensure that each party fulfills its obligations to negotiate in good faith and see that conferences are not unduly delayed or subject to willful dilatory tactics so that the rights of both parties may be adjudicated in a timely manner" (Uniform Rule § 202.12-a[c][4]).In enforcing these obligations, courts apply a presumption of regularity that can be overcome by a preponderance of evidence tending to demonstrate that a party fails to actively work toward a settlement (see Flagstar Bank FSB v Walker, __ Misc 3d __, 2012 NY Slip Op 22148, *3 [Sup Ct Kings Co, May 31, 2012] [CPLR 3408(f) requires not only "the absence of bad faith' but (also) requires actively working toward a standard of good faith"], citing Southern Industries, Inc. v Jeremias, 66 AD2d 178 [2d Dept 1978]). Where it is shown, for example, that a foreclosure plaintiff failed to follow HAMP guidelines, such failure violates the plaintiff's CPLR 3408(f) duty to proceed in good faith (see id.). Likewise, a foreclosure plaintiff may violate its duty of good faith by producing to the Court two different versions of a mortgage note or assignment (see HSBC Bank USA, N.A. v Sene, 34 Misc 3d 1232 [Sup Ct Kings Co, Feb. 28, 2012]), missing a settlement conference without adequate explanation (see BAC Home Loans Servicing v Westervelt, 29 Misc 3d 1224 [Sup Ct Dutchess Co 2010]), engaging in other dilatory tactics such as making piecemeal document requests or providing a defendant with contradictory information that substantially impedes settlement negotiations (see e.g. US Bank Nat. Ass'n v [*5]Padilla, 31 Misc 3d 1208 [Sup Ct Dutchess Co 2011]), or refusing reasonable settlement offers (see IndyMac Bank F.S.B. v Yano-Horoski, 26 Misc 3d 717 [Sup Ct Suffolk Co 2009], revd as to sanction 78 AD3d 895 [2d Dept 2010]). Where a foreclosure plaintiff violates its duty to proceed in good faith, such failure triggers this Court's enforcement duty under CPLR 3408(f) and Uniform Rule 202.12-a(c)(4). In superintending such enforcement, the Court may deploy its equity powers that attach in a foreclosure proceeding as "equity and justice require" (Mortgage Electronic Regis. Sys. v Horkin, 68 AD3d 948, 948 [2d Dept 2009], quoting Norstar Bank v Morabito, 201 AD2d 545 [2d Dept 1994]; Astoria Federal Savings & Loan Assn. v Rigano, __ Misc 3d __, 2012 NY Slip Op 22167 [Sup Ct Westchester Co, Mar. 23, 2012]; see also Notey v Darien Constr. Corp., 41 NY2d 1055 [1977]).

Applying these standards, this Court concludes that plaintiff did not violate its duty to proceed in good faith by its July 14, 2011 denial of defendant's HAMP application on grounds of alleged non-residency in the subject premises. While the test for defendant residency under CPLR 3408 now is well-settled, at the time of the denial, the issue was susceptible of a good-faith argument that defendant did not reside in the subject premises and thus had rendered herself ineligible for a HAMP modification. Thus, while plaintiff's denial was legally incorrect and apparently cost substantial time in this proceeding, there is no cause therein to find a violation of plaintiff's CPLR 3408(f) duty to proceed in good faith.

Defendant also conceded at the May 17, 2012 hearing that plaintiff had ceased direct communication with her and was proceeding through her attorney. Accordingly, absent a further showing that plaintiff renews inappropriate communication with defendant in derogation of this Court's instructions to proceed through defendant's counsel, there is no basis therein to find a violation of plaintiff's duty to proceed in good faith.

As to plaintiff's duty to produce a bank representative with authority to negotiate and bind plaintiff to a settlement, defendant asserted that the two bank vice presidents that plaintiff produced on May 17 and May 24, respectively, lacked full authority inasmuch as the Federal National Mortgage Association ("Fannie Mae") (see generally 12 USC §§ 1716 et seq. [National Housing Act, tit III]) is the investor holding the subject mortgage and delegated to plaintiff only limited authority to negotiate dispositions within a specified range. Defendant also asserted, and plaintiff conceded on the record, that plaintiff had engaged a third-party consultant to act as intermediary on property values and settlement discussions, that this third party had undertaken the appraisal on which plaintiff relied in declining to accept defendant's short sale application, and that plaintiff's representative at the May 17, 2012 hearing did not have complete authority to bind plaintiff on short sale negotiations concerning the subject premises without discussing the matter with such consultant. Critically, this third-party consultant was neither present nor available to plaintiff or the Court on the hearing dates.

While both statute and court rule require a foreclosure plaintiff to appear at foreclosure settlement conferences with counsel "fully authorized to dispose of the case" (CPLR 3408[c], Uniform Rule § 202.12-a[c][3]), this duty does not prevent a plaintiff's representative from engaging in such telephonic or other electronic consultations as "appropriate" to facilitate settlement negotiations (Uniform Rule § 202.12-a[c][2]). Neither does this duty compel a lender [*6]or servicer to produce a representative with authority to bind the plaintiff to absolutely any conceivable negotiation position. Rather, a foreclosure plaintiff's representative must at each court appearance have substantial and actual authority to bind the plaintiff to a range of settlement options that to the Court appears reasonable and thereby "fully dispose of the case" (CPLR 3408[c]). Whether a plaintiff satisfies this obligation is a fact-specific determination that turns on the contours of the workout proposals and the history of the proceeding in which it arises. What a foreclosure plaintiff cannot do under CPLR 3408(c) is use its reliance on a third party to unreasonably delay a settlement conference or otherwise substantially impede the statutorily required authority of the plaintiff's representative to dispose of a case on terms that to the Court appear reasonable.

Based on these standards, plaintiff did not breach its duty to proceed in good faith merely because Fannie Mae was absent from the settlement conferences and good faith hearing. Neither statute nor court rule requires the investor to be present, though a court properly may inquire as to whether a foreclosure plaintiff's negotiation position follows written investor guidelines and whether such guidelines are reasonable. In this case, however, defendant did not challenge whether plaintiff was following Fannie Mae guidelines or whether such guidelines were reasonable. Even had defendant properly raised these issues, the record is insufficient to conclude that they would weigh in defendant's favor sufficient for this Court to conclude that plaintiff failed to act in good faith with respect thereto.

As to whether plaintiff's representatives had sufficient authority to negotiate and settle this case as CPLR 3408(c) requires, defendant conceded at the hearing of May 24, 2012 that the bank vice president appearing that day did have sufficient authority to bind plaintiff. The Court is concerned, however, that the bank representative appearing for plaintiff at the hearing of May 17, 2012 lacked such authority. In colloquy with the Court, the bank representative stated that he could not substantially adjust plaintiff's position on defendant's proposed short sale except in consultation with plaintiff's third-party contractor, who was neither present in the courtroom nor apparently available for consultation during the hearing. Plaintiff reiterated this impediment when defense counsel proffered a response of $300,000 to the bank's $339,000 counteroffer on the short sale. During the ensuing seven-day adjournment of this hearing, defendant lost her short sale buyer, who had waited months for plaintiff and defendant to reach an agreement.

While this Court cannot discern whether the parties would have concluded an agreement had plaintiff's contractor been present or available for timely consultation, the contractor's unavailability clearly foreclosed that possibility. If plaintiff outsourced its property valuation, negotiation or other loss-mitigation activities to a third party consultant — as statute's silence on the matter invited plaintiff to do — it nevertheless remained plaintiff's responsibility to ensure that its consultant was present or available to plaintiff's in-court representative to advance settlement negotiations. By failing to do so, plaintiff violated its CPLR 3408(c) duty to produce a representative with substantial and actual authority to fully dispose of the case. This violation, in turn, breached plaintiff's CPLR 3408(f) duty to conduct settlement discussions in good faith.

Defendant also asserted that plaintiff unreasonably delayed decision on defendant's short sale application for months prior to this Court's April 26, 2012 interest-tolling order, and that [*7]such delay evinced a further violation of plaintiff's duty to proceed in good faith. This assertion lacks merit. After the two HAMP denials of 2011, plaintiff allowed defendant to resubmit her HAMP application on December 1, 2011, notwithstanding that defendant also was weighing a short sale. On December 20, 2011, plaintiff in writing asked defendant's counsel to clarify whether defendant wished to pursue a mortgage modification or short sale because plaintiff's routine policy is to consider one option at a time. The record suggests that defendant's counsel did not reply in writing until February 14, 2012, and only then disclaimed defendant's pursuit of her HAMP options in favor of proceeding by short sale — ostensibly based on the short sale offer that defendant reported at the settlement conference of February 9, 2012. Because defendant did not expeditiously disclaim HAMP options and did not establish before this Court that plaintiff's policy of pursuing only one option at a time was unreasonable, there is no basis to conclude that any corresponding delay in plaintiff's decision on the short sale evinced a lack of good faith.

As to the substance of plaintiff's responses to defendant's short sale application, this Court's hearing of May 24, 2012 adduced substantial testimony about the parties' competing appraisals of the subject property and their apparently conflicting methodologies. This Court is cognizant that plaintiff did not produce at the hearings the consultant on which plaintiff relied to conduct its appraisal, who therefore could not be examined as to the basis for plaintiff's initial $389,000 counteroffer or its revised counteroffer of $339,000. While plaintiff was obliged under CPLR 3408(c) to produce the third party consultant to the extent that plaintiff deferred to the consultant's judgment to settle the case, the defendant — not the plaintiff — bore the initial burden to come forward with evidence tending to establish plaintiff's lack of good faith in conducting the appraisals. Defendant did not meet that burden: the differences in methodologies between plaintiff's and defendant's respective appraisals do not alone evince a lack of plaintiff's good faith. Moreover, testimony adduced at the hearings failed to show that plaintiff's appraisal so substantially departed from generally accepted appraisal standards as to constitute a lack of good faith. Accordingly, while plaintiff's failure to produce the third party consultant disturbs the Court and warrants a remedy, such remedy must be tailored only to the violation of plaintiff's duty to produce a representative with authority to settle the case.

In fashioning a remedy for plaintiff's violation of its duties to proceed in good faith and produce a representative with full authority to dispose of this case, this Court observes that plaintiff's conduct did not inflate defendant's interest costs on the underlying loan because this Court already had tolled interest. Plaintiff's conduct, however, squandered resources of this Court and contributed to the need for the adjournment of the May 17, 2012 hearing to May 24. This Court also observes that the violation described herein was not the first time that plaintiff failed to produce a representative with authority to settle: plaintiff's first violation gave rise to this Court's April 26, 2012 order that tolled interest on the underlying loan, so plaintiff should have been well-aware of its obligations hereunder. This Court also notes plaintiff's concession, at the end of the May 24, 2012 hearing, that if this Court determined that defendant is a legal resident of the subject premises for CPLR 3408 purposes, then there would be no further obstacle to plaintiff accepting a deed in lieu of foreclosure to finally dispose of this case. On these facts and circumstances, this Court determines that plaintiff shall pay a sanction in the amount of one thousand dollars ($1,000.000 to the New York Interest on Lawyers Account ("IOLA") Fund, which the Legislature empowered to receive funds "from any source" to [*8]improve the availability of civil legal services for unrepresented parties in priority quality-of-life actions and proceedings, including foreclosures (State Finance Law § 97-v[3][a]).

Accordingly, it is hereby:

ORDERED that defendant is adjudged to be a resident of the mortgaged premises for purposes of this action, and plaintiff's application to release this action from the FSCP for lack of subject matter jurisdiction therefore is denied; and it is further

ORDERED that plaintiff is adjudged to have violated its duty under CPLR 3408(c) to produce a representative with authority to fully dispose of the case; the foregoing violation evinces a failure by plaintiff to proceed in good faith within the meaning of CPLR 3408(f); plaintiff therefore shall pay a sanction in the amount of one thousand dollars ($1,000.00) to the Interest on Lawyers Account Fund no later than 14 days after defendant shall cause a copy of this Decision and Order, with Notice of Entry thereof, to be served on plaintiff in the manner specified herein; and plaintiff shall transmit to the FSCP an affidavit attesting that it made such payment no later than seven days thereafter; and it is further

ORDERED that not later than August 16, 2012, plaintiff and defendant shall execute a deed in lieu of foreclosure or other mutually agreeable settlement to finally dispose of this case, and shall, on or before such date, transmit to the FSCP a stipulation that either (a) such settlement has not been executed timely, in which case the parties shall appear in the Foreclosure Settlement Conference Part, Room 1802 of this Courthouse, on August 22, 2012, at 2:00pm, for a hearing before the said Court Attorney Referee on whether further remedies are warranted consistent with this Decision and Order; or (b) such settlement has been executed timely and that the August 22, 2012 hearing is adjourned to a control date in November 2012 to be set by the Court, in which case plaintiff shall file with this Court a stipulation discontinuing this action no later than October 19, 2012; and it is further

ORDERED that the interest-tolling order of this Court (Scheinkman, J.), dated April 26, 2012, is continued in full force and effect; and it is further

ORDERED that defendant shall serve on plaintiff, by first-class mail return receipt requested to the office of plaintiff's respective counsel, a copy of this Decision and Order with Notice of Entry not later than seven days after the date hereof.

The foregoing constitutes the Decision and Order of this Court.

Dated:White Plains, New York

June 29, 2012

_______________________________

Hon. Alan D. Scheinkman

Justice of the Supreme Court