## Facts

- M & T Mortgage Corp. brought a foreclosure action on a July 2000, 30-year note and mortgage encumbering Major Jahn K. Foy’s home at 517 Rogers Avenue, Brooklyn.
- The loan principal was $245,000 with a 9.5% interest rate, monthly payments of about $2,060.09, and a 4% late charge on overdue payments.
- Foy is a reserve military officer who served multiple tours of active duty between 2001 and 2006; foreclosure proceedings began while she was on active duty.
- Foy moved under New York Military Law to reform the mortgage, claiming her deployments materially affected her ability to pay; the court granted a hearing and later continued it.
- The property is in a minority neighborhood, and Foy was described as a minority buyer receiving a high-rate loan for that neighborhood.
- During the continued hearing, the court identified a potential “reverse redlining” issue (credit extended on unfair terms in minority communities) and reconsidered which party should bear the burden of proof on discriminatory lending in the foreclosure case.

## Issues

1. In an equitable foreclosure action, whether a mortgage to a minority borrower buying in a minority neighborhood with an interest rate above 9% should trigger a rebuttable presumption of discriminatory “reverse redlining.”
2. Whether, as a condition of obtaining foreclosure (an equitable remedy), the plaintiff-lender must prove by a preponderance of the evidence that the mortgage was not the product of unlawful discrimination.

## Decision

- The court held that a mortgage granted to a minority buyer purchasing property in a minority area with an interest rate exceeding 9% creates a rebuttable presumption of discriminatory lending.
- The court placed the burden on the lender seeking foreclosure to rebut that presumption by a fair preponderance of the evidence and modified its earlier allocation that had placed the burden on the borrower.
- The court stated that if the lender fails to prove the mortgage was not the product of unlawful discrimination, the foreclosure proceeding will be dismissed and the lender left to remedies at law.
- The opinion set a burden-shifting framework for the ongoing proceeding rather than entering a final merits determination on all factual disputes.

## Legal Principles

- Foreclosure is an equitable remedy; the plaintiff must satisfy equity’s requirements and come to court with clean hands.
- Equity will not aid enforcement of discriminatory practices; discriminatory loan origination can bar equitable foreclosure even where default is otherwise established.
- A rebuttable presumption of discriminatory lending arises when: (1) the borrower is a minority, (2) the property is in a minority neighborhood, and (3) the mortgage interest rate exceeds 9%.
- Once the presumption applies, the lender must prove by a preponderance of the evidence that the loan’s pricing and terms were not the product of unlawful discrimination.
- If the lender cannot rebut the presumption, equitable foreclosure is denied, though legal remedies on the debt may remain available.

## Conclusion

The court treated discriminatory lending as a threshold equitable bar to foreclosure and adopted a rebuttable presumption—triggered by a >9% loan to a minority borrower in a minority neighborhood—requiring the lender to prove the mortgage was not unlawfully discriminatory to obtain foreclosure.


M & T Mortgage Corp. v. Foy, 20 Misc. 3d 274, 858 N.Y.S.2d 567 (Sup. Ct. Kings Cnty. 2008)