Learning About Hard Money and Predatory Mortgage Loan Foreclosures in Long Island
It’s crucial to comprehend the differences between hard money, predatory, and standard lending techniques in order to successfully navigate the complexity of mortgage loans in New York State. To safeguard their rights and financial security, homeowners who are facing foreclosure need to pay close attention to the terms and conditions of their loans.
Defining Predatory Lending
Predatory lending involves unfair, deceptive, or fraudulent practices by lenders during the loan origination process. These practices are designed to benefit the lender at the expense of the borrower and often include:
- Excessive Interest Rates and Fees: Charging higher rates and fees than what is justified by the borrower’s credit risk.
- Loan Flipping: Encouraging borrowers to refinance repeatedly, each time charging fees and points, which can strip equity from the property.
- Balloon Payments: Structuring loans with low initial payments that suddenly increase, making it difficult for borrowers to keep up.
- Equity Stripping: Providing loans based on the home’s equity rather than the borrower’s ability to repay, leading to foreclosure and loss of the property.
In New York, predatory lending is a complete defense to foreclosure litigation. Courts have dismissed foreclosure actions upon finding that the lender engaged in predatory lending tactics. New York Banking Law Article 1, Section 6-l prohibits lenders from engaging in certain behaviors involving “high-cost home loans.” For example, “ballooning” mortgages are illegal unless the term of the loan is over 15 years, and the scheduled payments of such loan may not exceed twice the average payments over the course of the loan’s lifetime. Further, high-cost home loans may not contain provisions that increase interest rates after default or acceleration of the mortgage note, and “loan flipping” is strictly prohibited. New York law also prohibits “packing,” meaning that a lender cannot sell you insurance or force you to make additional purchases in conjunction with the loan. A violation of New York’s Banking laws can lead to a dismissal of a foreclosure complaint against you with prejudice and even a return of payments made.
