Lender Violates NYS Predatory Lending Law; Judge Halts Foreclosure, May Void Mortgage

In New York City, the Staten Island Advance reports on a lawsuit filed by an area couple, who were first-time homebuyers, against a mortgage lender alleging a violation of a predatory lending provision in the New York State Banking Law when the loan was originated. According to the story:

• In what is likely to be a precedent-setting decision in New York, state Supreme Court Justice Joseph J. Maltese agreed with the [homeowners], recently telling the bank that it could not foreclose on the couple's [Staten Island] townhouse and that it may have to pay them damages for their troubles and void the $355,000 mortgage on their [...] home. In his 11-page decision, Maltese rips the original lenders and brokers for making the high-cost loan to the [homeowners] without checking to see if the couple could repay the mortgage -- a violation of the 2002 predatory lending provisions of New York State banking law.

• It's the first time in the state that a judge has invoked those predatory lending provisions against a lender, and it could signal a shifting tide in how foreclosures are handled, experts note. James Tierney, director of the National Attorneys General program at Columbia Law School, said trial judges across the country are beginning to question banks seeking to foreclose on homeowners in similar situations. "What I am seeing is a number of trial judges saying, 'Enough is enough, fraud is fraud.' They are kind of taking a stand," said Tierney.

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• At a hearing Feb. 28, the judge is expected to decide whether the mortgage should be voided and damages granted to the homeowners. [...] It's unclear if [the mortgage holder] will appeal Maltese's decision. [...] Margaret Becker, director of the Homeowner Defense Project at Staten Island Legal Services in St. George who represents Islanders in cases of alleged predatory lending, said many others don't have attorneys and don't challenge foreclosures. "It's good to hear a success story," she said of Maltese's decision. "It is very encouraging that judges are clearly taking the issue of predatory lending in the subprime market seriously and are willing to enforce laws to protect people from these kinds of pernicious practices."

The homeowners were represented by Cilmi & Associates PLLC, of New York City.

For more, see Stuck with a bad loan, a Staten Island family fights back.

See also, ABC News: Fighting Back Against Foreclosure (New York Judge Denies Foreclosure Based on Alleged Predatory Lending).

To view the trial judge's decision, see LaSalle Bank, N.A. v Shearon, Supreme Court, Richmond County, 2008 NY Slip Op 28032 (January 28, 2008).

Go here for other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans. undo mortgage loans TILA alpha