Greg and Diane Horoski bought their home before the boom and, when house prices soared, increased their mortgage to finance a small business.
Interest rates rose, health bills poured in, and then the housing market crashed so that they ended up owing thousands of dollars more than their bungalow was worth.
Yesterday they went to court in New York expecting to be thrown out but instead they emerged with their debt of $500,000 (£300,000) written off and a mortgage-free home.
Judge Jeffrey Spinner ruled that their lender’s behaviour had been ‘harsh, repugnant, shocking and repulsive to the extent that it must be appropriately sanctioned so as to deter it from imposing further mortifying abuse’.
The decision, which is to be the subject of an appeal, offers possible relief for some of the 7.5 million Americans who are behind with their mortgages and face losing their homes.
One in seven homes in America is now in the process of being repossessed as many families find it impossible to pay off the high-interest mortgages that were handed out in abundance when the property market was at its height.