August 10, 2026
Written by: Stern & Eisenberg Managing New York Attorney, Richard Femano, and New York Managing Paralegal, Jennifer Vail
Under New York’s Civil Practice Law and Rules (CPLR) Rule 3408, a mandatory settlement conference is required in residential foreclosure actions involving owner-occupied home loans. The court must hold this conference that aims to help borrowers and lenders reach a mutually agreeable resolution, such as a loan modification, short sale, or deed in lieu of foreclosure.
From a legal perspective, New York’s CPLR 3408 functions as a strict procedural hurdle and a substantive mechanism for enforcement before a foreclosure action can proceed to summary judgment or an order of reference.
CPLR 3408 applies to residential properties with one to four family dwellings where the borrower(s) live in the home. It facilitates discussions between the two parties and explores loss mitigation options to prevent loss of the home. This process requires both parties to negotiate in good faith and is a useful tool in helping to resolving home loan defaults.
The court must hold the first conference within 60 days of the foreclosing plaintiff filing proof of service of the Summons and Complaint upon the borrower(s) with the county clerk. At the initial settlement conference, the borrower(s) are informed of their rights, including the right to retain counsel and file an answer. Borrower(s) may request the assistance of legal aid counsel if the borrower(s) are unable to afford the cost of retaining an attorney to represent them in the action, or solely for purposes of the foreclosure settlement conference. Attending the initial conference gives the homeowner an extra 30 days to file a formal answer to the foreclosure complaint.
Once it has been determined that the borrower(s) wish to retain the home and explore settlement options, both the borrower and the lender must work in good faith to try to reach a fair deal. Lenders must bring exact payment histories, loan notes, and calculations to the initial conference. An application for modification of the mortgage loan is provided to the borrower(s). Borrower(s) should make all effort to submit the completed application to the foreclosing lender pursuant to the schedule provided by the court and without unnecessary delay. The application should include all required supporting documentation, including financial and tax records as well as bank statements. Failure to timely submit a complete application or a missing supporting document to the lender may prolong the process and cause further delay and expense to both parties.
Once an application for assistance has been submitted, the foreclosing lender must exercise good faith in the review process. Mortgage loan servicers are uniquely qualified to review borrower(s) for all available home retention options. If the borrower(s) are unable to afford even a modified payment, or simply do not wish to retain the mortgaged property, then non-retention options such as a deed-in-lieu of foreclosure or short sale can be explored.
The foreclosing lender is also bound to adhere to their investor guidelines when reviewing the application. Certain market factors may have changed since the date the mortgage loan was originated or last modified which can effect which assistance programs can be offered. In a rising interest rate environment, the interest rate offered on a modification of the mortgage loan may not be attractive as the interest rate of the loan at the time of default. A small increase in the rate of interest can have a substantial effect on the modified mortgage payment. In such instances, the borrower(s) may wish consider other retention alternatives, such a repayment plan, which can be offered by certain lenders under certain well-defined circumstances. Once a repayment plan has been approved by the lender, accepted by the borrower(s) and completed, it may be possible for the borrower(s) to continue pursuant to the original mortgage agreement at the prior interest rate, provided all past due amounts have been paid.
The foreclosure settlement conference initiative of the New York State Court System was designed to assist borrower(s) who have fallen on unfortunate or unanticipated circumstances, and who wish to maintain their mortgaged home. It is the responsibility of the borrower(s) to comply with the application submission requirements, and it is incumbent upon foreclosure counsel and the lender to act in good faith in the review process. While not all borrower(s) will qualify for a modification of their mortgage loan, the court functions to ensure that all available options have been presented and reviewed in good faith, prior to any release of the matter from the foreclosure settlement conference part. If a borrower has additional questions regarding the settlement conferences in New York, the borrower should seek competent legal representation and inquire with the Court Attorney or Supreme Court Justice which is overseeing their settlement conference. There are numerous resources and dedicated homeowner assistance organizations available to assist borrower(s), whether they wish to retain the mortgaged property or seek other resolution.