Kentucky Appeals Court Affirms Lower Court "Kibosh" On Arbitartion Clause In Mortgage; Homeowners Facing Foreclosure To Have TILA Claims Heard

In Richmond, Kentucky, The Richmond Register reports:

• The Kentucky Court of Appeals has ruled in favor of a Waco couple who were the subject of a foreclosure action by Bank of New York Trust Company and Mortgage Electronic Registration Systems. The litigants, who lost their case against Donald Wayne and Roxane Abner in Madison Circuit Court, had sought to force the Abners into an arbitrated settlement over a $40,000 mortgage.

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• The Abners, represented by Addison Parker of the Appalachian Research and Defense Fund, a legal service group, filed a counterclaim, alleging that the mortgage’s 10.125 percent interest represented a “predatory high-cost loan” that violated the federal Home Ownership Equity Protection Act. The act provides for rescinding mortgages that violate the federal Truth In Lending Act as well as awarding both statutory and enhanced damages.

• The Abner’s mortgage contract called for waiving any damages as well as for arbitration. On July 25, the appeals court affirmed the trial court’s finding that the arbitration clause was “unconscionable and unenforceable.”

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• The Abners’ allegations of predatory lending practices may be valid the appellate judges said, but the mortgage contract’s arbitration cause was the only issue on appeal.

For more, see Couple wins foreclosure appeal against N.Y. bank.

To view the appellate decision, see Mortgage Electronic Registration Systems v. Abner (Case #2007-CA-000574, Ky. Court of Appeals; July 25, 2008).

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