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When is a Mortgage Loan Considered Predatory in NY Foreclosure Cases? A loan is deemed predatory when it should not have been made based on Industry Standards and Prohibited Acts and Practices §226.34 (a)(4), which prohibit the extension of credit without regard to consumers repayment ability including consumers current and expected income, obligations and employments. Based on the information reviewed in the documents provided, it is evident the lender ignored and/or never verified the income of the borrower.- In addition to NY State Laws, RESPA and TILA, other federal laws, including the Homeownership and Equity Protection Act (“HOEPA”), restrict predatory lending.
When is a Mortgage Loan Considered Predatory in NY Foreclosure Cases? A loan is deemed predatory when it should not have been made based on Industry Standards and Prohibited Acts and Practices §226.34 (a)(4), which prohibit the extension of credit without regard to consumers repayment ability including consumers current and expected income, obligations and employments. Based on the information reviewed in the documents provided, it is evident the lender ignored and/or never verified the income of the borrower.- The issuance of the loan, as a predatory loan, violated the Federal Truth in Lending Act (“TILA”), 15 USC §1601 et. seq. and it’s implementing regulations the Federal Reserve Board Regulation Z, 12 C.F.R § 226, the Real Estate Settlement Procedures Act (RESPA), 12 USC § 2601 et. seq., the Deceptive Practices Act General Business Law §349, General Obligations Law §5-501 and the Home Ownership and Equity Protect Act.
- Predatory lending practices are prohibited by both New York State and Federal laws. The “home loans” in question are governed by New York Banking Law § 6-L (1)(d) which governs “High Cost Home Loans” which are classified as such by the scheme provided for in Banking Law § 6-L(1)(g). New York Banking Law § 6-L(2) prohibits certain practices by lending institutions when offering High Cost Loans.
- New York Banking Law §6-L(2)(k) requires “due diligence” by the lender in reviewing the potential borrower’s income and ability to pay the loan as follows “A lender or mortgage broker shall not make or arrange a high-cost home loan without due regard to repayment ability, based upon consideration of the resident borrower or borrowers’ current and expected income, current obligations, employment status, and other financial resources (other than the borrower’s equity in the dwelling which secures repayment of the loan), as verified by detailed documentation of all sources of income and corroborated by independent verification.”
- Banking Law § 6-L(10) voids and prohibits collection of money on loans where there was an intentional violation, as follows:
The issuance of the loan, as a predatory loan, violated the Federal Truth in Lending Act (“TILA”), 15 USC §1601 et. seq. and it’s implementing regulations the Federal Reserve Board Regulation Z, 12 C.F.R § 226, the Real Estate Settlement Procedures Act (RESPA), 12 USC § 2601 et. seq., the Deceptive Practices Act General Business Law §349, General Obligations Law §5-501 and the Home Ownership and Equity Protect Act.
“Upon a finding by the court of an intentional violation by the lender of this section, or regulation thereunder, the home loan agreement shall be rendered void, and the lender shall have no right to collect, receive or retain any principal, interest, or other charges whatsoever with respect to the loan, and the borrower may recover any payments made under the agreement.”
7. New York Banking Law 6-L(11) states that the remedy of recession of a loan that violates this section is without a time limitations:
“Upon a judicial finding that a high-cost home loan violates any provision of this section, whether such violation is raised as an affirmative claim or as a defense, the loan transaction may be rescinded. Such remedy of rescission shall be available as a defense without time limitation.”
8. 
In LaSalle Bank, N.A. v. Shearon, 19 Misc. 3d 433, 850 N.Y.S2d 871 (N.Y. Supp. 2008), the Court ruled that the Plaintiff’s loan was predatory because “the Plaintiff’s do not offer one scintilla of evidence as to their required “due diligence” inquiry regarding…[the borrower’s] ability to pay which is a violation of New York Banking Law governing High Cost Loans”.
9. The Plaintiff cannot pretend to not realize that the amount and terms of the loan made it a blatantly predatory loan and subject to laws designed to discourage predatory lending.
10. In addition to NY State Laws, RESPA and TILA, other federal laws, including the Homeownership and Equity Protection Act (“HOEPA”) restrict predatory lending.
11. Based on the predatory nature of a mortgage loan, the relief sought by a New York foreclosure defendant may be granted.
