NYS Anti-Predatory Loan May Leave Mortgage Holders Holding The Bag

A client newsletter from the law firm Kelley Drye & Warren LLP contains a discussion of a recent court decision by a New York State trial judge which applied a state anti-predatory lending statute in favor of the borrower and which potentially can leave mortgage lenders holding loans that were originated in violation of this statute holding the bag. The discussion begins as follows:

• In an opinion that may well mark a rise in predatory lending claims and an expansion in the scope of lender liability, the New York Supreme Court recently found in favor of a homeowner who, in defending a motion for summary judgment in a foreclosure action, alleged that he was the victim of predatory lending practices prohibited by New York Banking Law §6-L. The court, in LaSalle Bank, N.A. v. Shearon, No. 100255/2007, 2008 WL 268449 (N.Y. Sup. Jan. 28, 2008), denied LaSalle’s motion and granted summary judgment for the homeowner based on his defenses under the state’s anti-predatory lending law. A hearing on damages is pending.

For more, including the reasons why the article's author believes the court’s decision in Shearon is noteworthy, see LaSalle Bank v. Shearon: A Harbinger of Things to Come (New York Supreme Court Rules in Favor of Borrower on Defensive Claims Under State’s Anti-Predatory Lending Law).

To view the trial judge's decision, see LaSalle Bank,N.A. v. Shearon, No. 100255/2007, 2008 WL 268449 (N.Y. Sup. Jan. 28, 2008).

For a February 3, 2008 media article from the Staten Island Advance reporting this story, see Stuck with a bad loan, a Staten Island family fights back (if link expires, try here).

For other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans, Go Here and Go Here.

Editor's Note:

For those unfamiliar with the New York judicial system, the "New York Supreme Court" is simply what the state calls its trial courts, not to be confused with the state's highest court - the New York Court of Appeals. So, while this case could potentially have significant ramifications, it is simply one decision by one trial judge which has yet to be reviewed by a state intermediate appellate court or the state high court. While there may be cause for celebrating this case in the future, consumer advocates who have already begun wild celebrations may well consider "putting the cork back in the champagne bottle" for the time being.