Amazing Short Payoff!

One of our clients owns a property in Queens that was in a foreclosure action in the Supreme Court. She had purchased it years before and began a major renovation. She had an architect with plans and a contractor. Midway, she had problems with the contractor and was unable to finish the project. Then she fell into arrears on the mortgage and the property sat idle for a few years while the weather took its toll. Parts of the property fell into disrepair. If she could finish it, it would be a luxury property in a good area. In the foreclosure action, I answered the summons and complaint with defenses and counterclaims that she had against her lender. We began to negotiate a settlement.

Recently, we achieved what I think is the best settlement I have ever seen in my career. Faced with a property that the lender did not want, with a limited market of buyers (possibly only builders or investors willing to spend money to finish the project), the lender agreed to accept a significantly reduced short pay off in full satisfaction of the mortgage loan. The original principal balance of the mortgage note was $504,000. At the time of settlement, the balance due was in excess of $650,000. Based on an appraisal and after negotiating, the lender agreed to accept $210,000 as payment in full and our client was thrilled. We executed a settlement agreement and a stipulation of discontinuance. Our client saved $440,000 and the property.