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NYC Court 'Scraps' Foreclosure Hearings Amid Scrutiny

By Emma Whitford · 2021-10-25 19:47:19 -0400 ·

A Brooklyn judge's plan to delve into homeowners' financial hardship during the pandemic has been "scrapped," according to the state's Office of Court Administration, as legal service providers continue to challenge him in court.

Attorneys and elected officials spoke out last week against a "threatening" court-issued notice sent to hundreds of homeowners in the borough's oldest foreclosure cases, which date to 2008. The notice said defendants must attend a "hardship hearing" and status conference before Kings County Civil Administrative Judge Lawrence Knipel or risk losing their case.

The hardship hearings have now been "scrapped," courts spokesperson Lucian Chalfen told Law360 Monday, though Judge Knipel will proceed with "conferences" for the hundreds of cases at issue, currently calendared through mid-November.

A handwritten notice outside of Judge Lawrence Knipel's courtroom at 360 Adams St. on Monday morning. (Emma Whitford | Law360)

"After a number of discussions here, it was pointed out that what [Judge Knipel] wanted to do wasn't entirely by statute," Chalfen said, adding that defendants will receive revised notices in the mail.

According to legal service providers such as Legal Services NYC and Mobilization for Justice, the court notice disregarded a state law that allows homeowners to sign a simple form attesting to their hardship during the coronavirus pandemic and pause their foreclosure cases until Jan. 15, absent a challenge from the mortgage lender.

If a hardship form has already been submitted, the case should be stayed, they argued. And if no form has been submitted, homeowners should still be notified of their rights.

On Monday, the first day of Judge Knipel's in-person calendar at 360 Adams Street, the words "Status Conference" were written in bright red pen above a case list taped outside the courtroom. The judge ran through 40 cases in under an hour. If either party said a hardship was present, he accepted the claim without question.

This "after-the-fact" correction is "all well and good," said Jacob Inwald, director of foreclosure prevention at Legal Services NYC. "But it does not change the fact that several hundred defendants received notices from the court ordering them to appear for hardship hearings."

Despite the court's comments Monday, legal service providers say they plan to proceed with an Article 78 petition filed Friday in New York's Second Judicial Department against Judge Knipel.

Article 78 of New York's Civil Practice Law and Rules allows parties to seek appellate review of a judge's actions.

"We have to take a position that we can't rely on these representations [by the court]," Belinda Luu, a senior staff attorney at Mobilization for Justice, told Law360. "Either we get an order from the appellate division, or assurances that people won't face negative consequences."

Brought on behalf of two homeowners in foreclosure, as well as Mobilization for Justice and the Brooklyn Bar Association Volunteer Lawyers Project, the petition is seeking to force Judge Knipel to cancel any hearings that violate state law.

The plaintiffs also sought a restraining order to immediately block the allegedly illegal hearings, though the appeals court rejected the motion Monday, according to Luu.

The suit does not specify how many defendants on Judge Knipel's calendar have submitted a hardship form, though the Office of Court Administration says defendants in just 10% of pending foreclosure cases in Brooklyn have done so.

The vast majority of homeowners who were scheduled to appear before Judge Knipel Monday did not show up.

"I just heard a lot of names of people that just didn't show up, and I don't think they want to lose their homes," said one homeowner, who declined to provide her name. "I just think they're overwhelmed after coming out of a pandemic."

In cases where neither the homeowner nor their lawyer appeared, the judge deemed the defendant "defaulted" and moved on quickly to the next case.

"Default merely means the action may proceed," Chalfen later clarified. "There was no discussion, let alone determination, of the issue of hardship."

This could still be illegal in the case of a homeowner who submitted a hardship form to stay their case but failed to appear before Judge Knipel today, Inwald said.

The court should not "penalize" any defendant who "failed to answer a calendar that should never have been scheduled at all," he said.

--Editing by Adam LoBelia.

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