Alliance Mortgage Banking Corp. v. Dobkin – Nassau County’s answer to Shearon

On March 28, 2008, the Supreme Court, Nassau County declined to stop a foreclosure action based upon a homeowner’s claim of predatory lending.

In a completely opposite stance to Justice Maltese in LaSalle Bank v. Shearon, Justice Palmeri held that "[A]bsent the violation of some statute or other relevant legal principle, the law does not permit judges to simply ignore payment obligations voluntarily taken on by mortgagors, even if it should have been evident to both lender and borrower that the loan was likely beyond the borrower’s ability to repay,"   It appears that Justice Palmeri really applied the statutory tests to determine whether or not the mortgage loans made therein met the threshold to be considered a "high cost loan" under New York law. In LaSalle Bank v. Shearon, the Justice, instead of applying any sort of statutory test, held the mortgages to be high cost loans simply based on the originator supplying the high cost loan disclosures in the mortgagor’s loan package and being  "over told".

We now have two opposing decisions on our trial court level and it will be fascinating to see how the Appellate Division handles these test cases.  Shearon was the first case to be brought under the New York Anti-Predatory Lending Law and sent shock waves throughout the lending and secondary mortgage markets.

Chose on March 28, 2008

10625/06

Steven J. Baum, P.C.

Victor Spinelli, Esq.

Attorney for Plaintiff

900 Merchants Concourse, Ste. 412

Westbury, NY 11590

Jo-Anne Dobkin

Defendant pro se

Daniel Palmieri, J.

Upon the foregoing papers and a hearing held on March 19, 2008, this motion by the defendant Jo-Anne S. Dobkin, pro se,
in effect,for an order vacating the judgment of foreclosure and sale in
this foreclosure case and barring any attempt to sell her home under
that judgment is denied. The temporary stay of proceedings granted upon
the signing of the order to show cause and extended by the undersigned
pending this choice is vacated.

Reading the order to show cause liberally, and based upon the
testimony adduced at the hearing, it is clear that the defendant seeks
to halt any further attempt to bring this foreclosure action to its
conclusion based on her claim that the plaintiff engaged in what is
often referred to as "predatory lending" under the New York State
Banking Law.

At the outset, it should be noted that the Court is not without
sympathy for the defendant, and indeed all foreclosure defendants, who
wish to maintain the family home but simply cannot meet the mortgage
payments due. But, absent the violation of some statute or other
relevant legal principle the law does not permit judges to simply
ignore payment obligations voluntarily taken on by mortgagors even if
it should have been evident to both lender and borrower that the loan
was likely beyond the borrower’s ability to repay.

That was certainly the case here. As a practical matter the
lender should not have offered, and the borrower should not have
accepted, the two loans at issue. ^[FN1]
Nevertheless, the defendant has been unable to show more than that. She
has claimed she was the victim of predatory lending, but has not
demonstrated that there was any fraud on the part of the lender, or
even any failure to tell fully the terms of the loans. She relies
on only one statute, Banking [*2]Law § 6-l. But, she has not been able to provide any proof that she falls under its protections, nor under a related Federal statute. See, Home Ownership and Equity Protection Act of 1994 ["HOEPA"] (15 USC § 1639).

Neither of these statutes allow mortgagors to escape their
legal obligations simply because they borrowed too much. Rather, their
protections are triggered only where certain types of home loans are
taken, described by the Banking Law as "high-cost" loans. The
defendant’s loans are not of this type.

Specifically, and insofar as is relevant here, to qualify for
the protections of the State statute the loan has to be a "home loan"
which under the law in effect at the time of this transaction meant an
amount not to exceed $300,000. Banking Law § 6-l former (1)[e]. The two loans made here by the plaintiff lender were $ 83,708 and $ 334,832, which together total $ 418,540.

Further, even if one were to treat the lower amount as a
separate transaction (which would be ignoring the reality of the home
buy), the smaller loan would not qualify as a "high-cost home
loan," which definition must also must be satisfied to trigger the
statute. This is defined as a loan whose interest rate is more than 8%
over the yield of treasury securities with a maturity date comparable
to the length of the loan (9% if it is a junior/subordinate loan), or
one where the total of points and fees payable by the borrower is more
than 5% of what was borrowed if the loan was for over $50,000, the case
here.. Banking Law § 6-l (1)[d],[g]i,ii. The defendant offered
nothing at all with regard to the rate of interest, and 5 % of $ 83,708
is $ 4,185.40. The amount listed payable to plaintiff on the closing
sheet submitted with the order to show cause was $ 2,581.60.
Accordingly, the Banking Law section upon which defendant relies does
not apply, even if one were to treat this loan separately.

Nor does HOEPA, the Federal statute, apply. That law provides
an even more stringent test, in that to qualify for protection the
borrower must show that the percentage interest charged is more than
10% over the comparable treasury rate, or that the total of points and
fees exceed 8 % of the total loan amount. 15 USC §§ 1639, 1602(aa). The
total fees complained of at the hearing were approximately $10,000, and
the documents show at most $ 12,635. This falls far small of $33, 483,
which is 8 % of the total borrowed.

In sum, the Court is left with the miserable result of a loan
that should never have been taken, but for which the defendant is
responsible. There is no challenge made to the procedural aspects of
the foreclosure, and indeed the undisputed history of this litigation
is devoid of any hint of error on the part of plaintiff’s attorneys in
the prosecution of the action.

Thus, under the well-established law that a defendant seeking
to vacate a judgment must show a reasonable excuse for the default in
failing to answer the complaint and a meritorious defense (CPLR
5015[a]; Chemical Bank v Vasquez, 234 AD2d 253 [2d Dept. 1996]), the Court must deny this motion.

This shall constitute the Choice and Order of this Court.

E N T E R

DATED: March 28, 2008

_____________________________
[*3]

Hon. Daniel Palmieri

Acting Supreme Court Justice

TO:

Steven J. Baum, P.C.

Victor Spinelli, Esq.

Attorney for Plaintiff

900 Merchants Concourse, Ste. 412

Westbury, NY 11590

Jo-Anne Dobkin

Defendant pro se

Footnote 1:
Although neither party specified which one of the loans underlies the
foreclosure, it is apparent from the judgment of foreclosure that it
was the larger of the two, as noted below.

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