Predatory Lending: The Tables Turned
The tables have apparently been turned on the lender in a foreclosure case involving allegations of predatory lending and coercion to accept a sub-prime mortgage. The case, reported by the Real Estate Section of the Westchester County Bar Association in its private blog is LaSalle Bank NA v. Shearon, 19 Misc.3d 433, 850 N.Y.S.2d 871, 2008 N.Y. Slip Op. 28032 (Sup.Ct. Richmond Co. 2008), and was before the New York Supreme Court in Richmond County.
(For our non-New York and non-lawyer readers: the Supreme Court is not the highest court in the State, it is the trial court in this case; and Richmond County is better known as Staten Island.)
In LaSalle, the Court refused to grant summary judgment to the foreclosing lender, instead, granted summary judgment to the borrower and scheduled a hearing on what damages were to be awarded to the borrower. The damage award possibilities included: voiding the mortgage, returning all payments, returning all expenses of making the loan and attorneys fees. The Court found the lender had violated N.Y. Banking Law section 6-L (“High Cost Home Loans”). Apparently, the following acts of the lender brought on the reversal of fortunes:
- Lending in excess of the purchase price to finance points and closing fees;
- Leaving the borrower with negative equity;
- financing fees and points in excess of 3% of the loan;
- failure to undertake due diligence regarding borrower’s ability to pay a high-cost mortgage;
- Not issuing to the borrower a required consumer caution notice.
The borrower had been loaned $355,100 to purchase property for $335,000. The contract reflected a “seller’s concession” of $20,100. A $5,000 deposit had been lost in the shuffle.
Interestingly, the borrower did not make a cross-motion for summary judgment. This was an instance where the Court “searched the record” and exercised its authority to grant summary judgment to either of the parties, not necessarily the one making the motion. For our non-lawyer readers, a summary judgment motion involves a contention by the side making the motion that the facts are not disputed and the Court can decide the case on the law without a trial. In this case, the lender made the motion.
The Supreme Court decision and any award of damages are subject to appeal so we don’t know whether any of this will stand. Still, it’s a remarkable turn of events at this point in the case.
It would be unrealistic to expect an outcome such as this to happen very often in foreclosures. However, the case does illustrate that the careful borrower should consult an attorney and examine all options, whether available through negotiations with the lender or through the appropriate legal process.
