New York Court Hitting Hard

In LaSalle Bank NA v. Shearon, 2008 WL 268449 (Jan. 28, 2008), a New York trial court held that a home mortgage borrower might very well get his house for free plus a check from the mortgagee for his trouble.

Shearon, a first time homeowner, borrowed $355,000 to purchase his dream house on Staten Island. LaSalle Bank acquired the loan from the original lender. When Shearon defaulted, LaSalle moved to foreclose. Shearon counterclaimed alleging that the original lender violated a stack of NY "anti-predatory lending" laws. In particular, Shearon claimed that the lender: 1) approved "excessive finance (106% of the home purchase price) which Shearon used to finance the closing costs (a no no under NY law); 2) failed to conduct "due dilligence" regarding Shearon's ability to repay the loan; 3) intentionally sold Shearon a sub-prime loan with "excessively high interest rates;" 4) failed to provide federally mandated disclosures; 5) forged Shearon's signature on loan related documents; and 6) used "repeated and continuous coercive and concerted tactics" which "forced Shearon to close on the loans and the property or face significant and dire financial consequences."

The New York Supreme Court of Richmond County (a NY trial court) granted summary judgment for Shearon on his defense and counterclaim against LaSalle Bank. Here is the sound of hammer down on subprime lenders in New York:

In this case, the defendant David Shearon demonstrated by a preponderance of the evidence that the Lender violated the anti-predatory lending statutes of New York's Banking Law. Therefore, David Shearon may be entitled to receive: actual, consequential and incidental damages, as well as all of the interest, earned or unearned, points, fees, the closing costs charged for the loan; and a refund of any amounts paid. . . . The finding of intentional violation renders the home loan agreement (mortgage) void, and strips the lender from having a right to collect, receive or retain any principal, interest, or other charges whatsoever with respect to the loan, as well as giving the borrower the ability to recover any payments made under the agreement.