HOMEOWNER IS NOT VICTIM OF PREDATORIAL
The defendant-homeowner sought an order vacating the judgment of foreclosure and sale with the defendant’s contention that the plaintiff lending institution engaged in what is often referred to as “predatory lending” under the NYS Banking Law. The court’s decision indicated that it was not without sympathy for the defendant-homeowner as well as all foreclosure defendants who seek to maintain the family home but could not meet the mortgage responsibilities. Nonetheless, absent a violation of some statute or other relevant legal principal, “the law does not permit judges to simply ignore payment obligations voluntarily taken on by mortgagors – even if it should have been evident to both lender and borrower that the loan was likely to exceed the borrower’s ability to repay.” While it may have been true that the lender in this case should not have offered and the borrower should not have accepted the two loans in question; nevertheless, the homeowner was unable to prove anything more than her inability to pay. She did not demonstrate that there was any fraud on the part of the lender or even any failure to disclose fully the terms of the loans. The homeowner relied on one statute, Banking Law Section 6-1; however, she was not able to provide any proof that she fell under its protections. The Banking Laws do not allow borrowers to escape their legal obligations “simply because they borrow too much.” Their protections are triggered only where certain types of home loans are taken which have been characterized as “high cost” loans. The loans in question in this case were not of this type. In order to qualify for the protections of the state statute, the loan has to be a “home loan” which under the law in effect at the time of the transaction meant an amount not to exceed $300,000. The two loans made by the plaintiff-lender were $83,708 and $334,832 which totaled $418,540. The plaintiff tried to allege that if the two loans were taken separately, the smaller loan would qualify under the statute. The court disagreed with this position since a “high cost home loan” is defined as a loan whose interest rate is more than 8% over the yield of Treasury Securities. (9% if it is a junior/subordinate loan), or one where the total of points and fees payable by the borrower is more than 5% of what was borrowed if the loan was over $50,000 as was the case here. The homeowner did not introduce any evidence regarding the rate of interest and 5% of $83,708 is $4,185.40, not exceeding $50,000 as required by statute. The court also declared that the Homeownership and Equity Protection Act of 1994 was not applicable. That law “provides an even more stringent test where the borrower must show that the percentage interest charged is more than 10% over the comparable treasury rate, or that the total of points and fees exceed 8% of the total loan amount. The fees charged against the borrower by the lender fell far short of the statutory threshold. The court determined that it was “left with the unhappy result of a loan that should never have been taken, but which for the defendant is responsible.” There was no challenge to the procedural aspects of the foreclosure and as a result, the court denied the homeowner’s motion and allowed the foreclosure sale to proceed. Alliance Mortgage Banking Corp. v. Dobkin, Supreme Court, Nassau County (NYLJ 4/25/2008).
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