If you think American homeowners have nothing to be grateful for this year, think again.
Thanks to the judge, the couple now owes nothing, at least until their bank appeals.
Diana Yano-Horoski and her husband Greg Horoski, struggling to make their monthly payments, had tried to get their loan with California-based OneWest Bank -- formerly IndyMac -- modified since February, but according to the judge, OneWest, instead, kept insisting that they foreclose.
The couple has "assiduously attempted to resolve this controversy in an amicable fashion, only to be callously and arbitrarily turned away" by OneWest, Judge Jeffery Spinner wrote in his ruling. "This has been so, even in spite of the court's continuing, albeit futile, endeavors at brokering a settlement."
The couple's daughter, Kimberly Horoski, told reporters outside her parents' home this afternoon that she was proud of them.
"My parents are good people. They're smart people, and I feel bad that they had poor luck and I'm happy that it's been changed," she said.
"We just wanted to modify the loan, that's all," she added. "I don't think that was asking too much."
The couple lives in a 3,400-square-foot ranch-style house in East Patchogue, Long Island, according to the New York Post.
"The bank was so intransigent that he (the judge) decided to punish them," Greg Horoski, who sells collectible dolls online, told the paper.
The couple originally obtained a $292,500 loan in 2004 with an adjustable-rate mortgage that jumped from 10.375 percent to 11.375 percent in the four years that followed, public records show.
Their loan was originally made through Deutsche Bank and serviced by IndyMac, which collapsed with the mortgage crisis and was taken over by a group of billionaire investors who renamed it OneWest Bank.
When the Horoskis began falling behind on their payments, the bank sent them a foreclosure notice, and they requested a court settlement, public records show. The court recommended a series of mediation sessions. The couple's daughter even offered to buy back the house at fair market value or help finance a modification with income from her job, according to court documents.
OneWest sent loss mitigation manager Karen Dickinson to represent its interests at the hearings, but Dickinson refused to cooperate, said Spinner. She made it clear that the bank "had no good faith intention whatsoever of resolving this matter" in any way other than forcing foreclosure, he said.
Dealmakers Buy Bad Mortgages for Profit
OneWest Bank was formed early this year, out of the remnants of IndyMac, by a group of wealthy investors who have made billions of dollars in the real estate market. It is owned by OneWest Group, one of the dozens of privately held firms that have sprung up during the recession and specialize in buying distressed debt.
Its CEO, Terry Laughlin, is a former head of the Merrill Lynch Global Bank Group. A list of the firm's other investors includes several private equity firms as well as billionaire investor and philanthropist George Soros, Dell founder Michael Dell and subprime mogul John Paulson. (Many of OneWest's investors worked at Goldman Sachs at some point in their careers, and have made lucrative careers out of buying distressed assets.)
Experts say private equity firms are making a killing in this economy, as they buy failed assets at huge discounts, and then resell what they can at a profit.
"Financially, this is relatively smart, but ethically it's challenging," said Josh Kosman, author of "The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis."
"There's no long-term interest for OneWest in bailing out these people in Patchogue," he said.
OneWest disagrees with the judge's ruling and says it plans to appeal the decision.
"We respectfully disagree with the lower court's unprecedented ruling," the bank said in a written statement. "The law does not authorize a judge to cancel a borrower's loan obligation because he did not like the way loan modification discussions were handled."
Lawyers say the ruling is likely to be overturned on appeal and is unlikely to set a precedent for other homeowners around the country.
"The judge knows darn well that this is going to get overturned on appeal, but he's sending a message," said Mory Brenner, a Massachusetts foreclosure specialist, explaining that letting the decision stand would encourage homeowners around the country to fight to have their mortgages canceled. "As much as I would like to see homeowners helped, this would set a horrendous precendent because it means the government gets to undercut the mortgage contract."
ABC News' Ed Fabry contributed to this report.