## Facts

- David Shearon purchased a Staten Island home as a first-time homebuyer; the home was located at 33 Westport Lane.
- Mortgage brokers told the Shearons they would qualify for conventional, fixed-rate financing.
- The contract reflected an inflated price structure: \$355,100 with a \$20,100 “seller’s concession,” although the agreed purchase price was \$335,000.
- The loan was originated by WMC Mortgage Corp. and later assigned to LaSalle Bank, N.A., as trustee.
- The transaction effectively financed about 106% of the purchase price, rolling approximately \$20,000 in closing costs and the “seller’s concession” into the principal balance.
- The lender treated the loan as a “high-cost home loan” by preparing documentation associated with New York Banking Law § 6-l.
- The borrower asserted the lender did not meaningfully assess repayment ability and did not provide required counseling-related disclosures.
- LaSalle commenced a residential mortgage foreclosure; Shearon answered and asserted counterclaims alleging predatory lending under Banking Law § 6-l.

## Issues

1. Whether the mortgage qualified as a “high-cost home loan” under New York Banking Law § 6-l.
2. Whether the originator violated Banking Law § 6-l by extending the loan without due regard to repayment ability, financing excessive fees/costs, and failing to provide required counseling disclosures.
3. Whether those statutory violations defeated the assignee’s entitlement to summary judgment in foreclosure and supported summary judgment for the borrower on a predatory-lending counterclaim, including rescission-type remedies.

## Decision

- The court denied LaSalle’s motion for summary judgment on the foreclosure claim.
- The court granted summary judgment to Shearon on his predatory-lending counterclaim, finding violations of New York Banking Law § 6-l.
- The court held that, given the statutory violations, the borrower could seek remedies that may include voiding the loan and mortgage, restitution of payments and loan-related expenses, and attorney’s fees.

## Legal Principles

- A loan’s status as a “high-cost home loan” under New York Banking Law § 6-l turns on the loan’s terms and costs; relatively strong credit scores do not preclude § 6-l coverage.
- Banking Law § 6-l prohibits making a high-cost home loan without due regard to the borrower’s ability to repay.
- Financing substantial fees and costs into the principal of a high-cost home loan, and structuring an inflated purchase price to fund costs through the mortgage, may support a finding of predatory lending under § 6-l.
- Failure to provide statutorily required counseling-related disclosures for a high-cost home loan constitutes a violation of § 6-l.
- Predatory-lending violations under § 6-l may be asserted as substantive defenses and counterclaims in foreclosure, including against an assignee seeking to enforce the note and mortgage.
- Where the record shows § 6-l violations as a matter of law, summary judgment may be granted for the borrower and denied to the foreclosing plaintiff.

## Conclusion

The court treated the transaction as a high-cost home loan and held that statutory predatory-lending violations by the originator defeated the assignee’s bid for foreclosure summary judgment and justified summary judgment for the homeowner, with potential rescission and restitution remedies under New York Banking Law § 6-l.


LaSalle Bank, N.A. v. Shearon, 19 Misc. 3d 433, 850 N.Y.S.2d 871 (Sup. Ct. Richmond Cnty. 2008)