NY’s Predatory Lending Statute Applicable to One-off Loan

In an issue of first impression, the Supreme Court of New York in Balsam v. Fioriglio held that private individuals, not just banking institutions and mortgage bankers/brokers, can be subject to New York’s predatory lending statute. 914 N.Y.S.2d 863, 865 (2010) (discussing N.Y. Banking Law § 6). Mr. Balsam lent the Fioriglios $60,000, with an additional $7,817.72 in fees, which the Fioriglios secured with a mortgage on their residential one-family dwelling. When the Fioriglios stopped making payments, Mr. Balsam moved for foreclosure and sale. While Mr. Balsam was not a lender, the court held that certain provisions of the Banking Law nevertheless “prohibit mortgage terms regardless of who the lender-mortgagee is.” Id. at 866 (referencing N.Y. Banking Law § 6-l(1)(i)). The court found that this lending arrangement constituted a high-cost home loan pursuant to N.Y. Banking Law section 6-l(1)(d). Accordingly, Mr. Balsam violated Banking Law by requiring a balloon payment and failing to provide an appropriate legend identifying the mortgage as a high-cost home loan. Id. (citing N.Y. Banking Law § 6-l(2)(b), (2-a)(a)). As a result, the Fioriglios had a defense against the foreclosure action since the terms of the loan violated N.Y. Banking Law section 6-l. Id. (citing Real Property Actions & Proceedings Law § 1302(2)). Although this was the first and only mortgage loan that Mr. Balsam had ever made, his inexperience was not factored into the court’s reasoning. Finding that “the language of the statute is unequivocal,” the motion was denied.

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