A New York State Supreme Court judge has cut a homeowner’s mortgage principal nearly in half. The court, finding that the bank had deliberately acted in bad faith while prosecuting the foreclosure over 34 months, ordered it to pay $200,000 in damages to the homeowner.

The award will be applied to the $493,219 principal owed on the mortgage. The ruling also blocked the bank from seeking to collect fees from the homeowner, except for the principal balance owed.

During one of 18 settlement conferences, the homeowner raised the possibility of a principal reduction, pointing to the bank’s advertisements holding out that hope. The bank first said it would weigh the principal reduction offer but later said it was not able to consider it under the terms of the pooling and servicing agreement.

The bank offered to produce salient portions of the document despite the Court’s clear and unambiguous order that the entire agreement be provided. But when the document was produced almost six months after the court’s request, the bank’s attorney acknowledged that there was no “absolute bar” to reducing the principal.

The judge chastised the bank for maintaining that the pooling and servicing agreement governing the terms of the mortgage prohibited any principal reductions.

Through the bank’s repeated and persistent failure and refusal to comply with the lawful orders of the Court, including those which directed production of documentation that was essential to address critical issues in the present matter, the bank was found to have repeatedly made material misstatements of fact calculated to deceive the Court.

This delayed the proceedings without good cause, needlessly increasing the amount owed on the mortgage and wasting the Court’s time and resources. New York court procedural rules require that judges ensure that both homeowners and lenders negotiate in good faith at the settlement conferences.

For more information regarding home buyer’s legal rights in New York, see “Free Legal Resources.”