Court Rules High Interest Creates Presumption of Discrimination
In yet another instance of turning the tables on a foreclosing lender, a New York Supreme Court judge has held that a mortgage loan at a rate of interest that exceeds nine percent, made to a member of a minority group for a property in a minority area, raises a rebuttable presumption of discriminatory practice. The consequence of the Court’s holding is that the burden of proof shifts to the lender which must prove by a fair preponderance of the evidence that the loan was not discriminatory or face dismissal of its foreclosure proceeding.
The case, M&T Mortgage Corp. v. Foy, 20 Misc.3d 274, 858 N.Y.S.2d 567, 2008 WL 1915125 (Sup. Ct. Kings Co. 2008) was reported in the private blog of the Real Estate Section of the New York State Bar Association.
Just in our last post we discussed a story in Law.com about borrowers suing their lender instead of waiting for the lender to foreclose and two of our earlier posts,here and here, were about cases where the Court treated the foreclosing lender harshly.
In the M&T case, the Court invoked equitable principles in refusing to simply allow the foreclosure proceeding to reach its logical conclusion if the result would be inequitable:
Equity, which abhors unconscionable and unjust results, mandates a shift in the burden of proof to the plaintiff-lender to demonstrate that the loan is not discriminatory. Indeed, our decisional law has long since recognized that a litigant seeking affirmative judicial action in equity ... may not succeed if [the litigant] is asking [for] an inequitable or unconscionable result. (Internal quotation and citations omitted).
The possibility of raising the issue of discrimination, of course, would be relevant only in a case involving a member of a minority group. The cases discussed in earlier posts were not so limited. All the cases under discussion are subject to appeal. The Supreme Court, for our out-of-state readers, is a trial court in New York, not an appellate court.
Most borrowers faced with foreclosure may feel helpless. And, we have to concede that in most cases the borrower may not have any really good options. However, where there is a suggestion that the lender's practices were questionable, the borrower would be well advised to seek legal counsel and consider all the options available. At a minimum, there might be a way to develop leverage for negotiation with the lender.
