Another Predatory Lending Case And It’s A Doozy

It never ceases to amaze me but this latest one is a doozy. My new client has told me his story – and I believe him – about predatory lending. I won’t name names because this is an on-going confidential matter, but here are the facts.

Client borrows funds to buy a 3 family investment property in Brooklyn. He purchases it from a lender that took back title after a foreclosure action. He has good credit. He works for a phone company. This is his first venture into real estate. He is looking to get supplemental income from rents or at least to build up some equity. He gets bogged down in eviction proceedings to remove some non-paying tenants. Soon, he finds that he is now being sued by his lender in a foreclosure action. He cannot locate his file for his closing so he calls the lender and requests copies. They send it to him. He starts reading his loan application and discovers some fascinating things.

He sees that he supposedly has an extra $100,000 in his bank account. Someone has added a “1” before the $52,000 that he really had in the bank. He discovers that he has a second job. Actually, he doesn’t. But that’s what the app says. Supposedly it’s a real estate job of some sort. There is even a certification in the file from someone who says that they called the “employer” and verified his employment. So, being the inquisitive sort and wanting to verify his own moonlighting “employment”, he calls the number himself and says that he is calling to verify a borrower’s employment. He does not tell them that he is really the borrower. The person at the real estate job confirms that my client has been working there for some time and is an employee in good standing. Only he really isn’t. So this is starting to sound like a spy movie with fictitious fronts and fake passports.

Now, my client realizes that he only got this loan in the first place because someone at his mortgage company pumped up his application to give him more income and more assets that he really didn’t have. He never would have qualified for the loan otherwise. And he sees that someone has forged his name on the altered loan app. Starts to sound like a good predatory lending case. Only problem is that the client has already defaulted in the foreclosure action by not answering the summons on time. I can’t tell why because he did retain a lawyer and that lawyer’s retainer agreement says that he will defend the foreclosure action. Only thing is he didn’t. He just filed a notice of appearance. No answer.

Which brings me to the work I am doing this week – drafting an order to show cause to vacate the client’s default. This requires that we show a reasonable excuse for the default and a meritorious defense. I think we can show both. It will be an interesting case.