Here is a summary of the new rules which were released today by the Consumer Financial Protection Bureau (CFPB) which are intended to protect borrowers from obtaining loans that they cannot afford to repay. The rules eliminate “no doc” loans, preclude banks from using “teaser rates” and eases the requirements for borrowers refinancing loans which are deemed risky to more conventional loans.
Much has been written and litigated over the past couple of years about predatory lending by banks. However, little has been written about predatory servicing of loans by servicing companies.
Predatory lending is a term used to describe unfair, deceptive, or fraudulent practices by a lender while dealing with a borrower during the loan origination process. Those practices include providing a loan to a borrower whom the bank knows cannot re-pay the loan or charging excessive fees, points and expenses for the loan.
Predatory servicing however is a term used to describe unfair, deceptive or fraudulent practices by a lender, or another company which services a loan on behalf of the lender, after the loan is granted. Those practices include also charging excessive and unsubstantiated fees and expenses for servicing the loan, wrongfully disclosing credit defaults by a borrower, harassing a borrower for repayment and refusing to act in good faith in working with a borrower to effectuate a mortgage modification as required by federal law. In each such instance, a borrower may have a cause of action against a lender, or its servicing company, for predatory servicing.
Predatory servicing even takes place while a borrower is in bankruptcy. In some instances, a loan service provider will submit a proof of claim during the bankruptcy process and include unwarranted and unsubstantiated charges to the outstanding loan balance in an effort to recover additional profits from the bankruptcy estate.
For more information regarding predatory servicing, or to discuss a potential claim, you can contact Peter Moulinos at email@example.com.
In Katz 737 Corp. v. Cohen, our firm represented Carol Cohen, a prominent real estate broker in New York City, and her husband Lester Cohen who were accused by their landlord of under-reporting her income in order to maintain a rent stabilized apartment in violation of luxury rent deregulation laws. The landlord, prior to selling its building to Harry Macklowe for a reported $250 million, had argued that the Cohens had committed fraud in failing to properly report their income to the Department of Housing and Community Renewal (“DHCR”).
We successfully obtained dismissal of the landlord’s action in the Supreme Court of the State of New York on the basis that the landlord cannot assert a claim of fraud against the Cohens because any dispute must be resolved by the DHCR. Additionally, we successfully argued that the landlord had not stated any claim of fraud against the Cohens and merely conjured a lawsuit against them based on speculation and innuendo. The landlord thereafter appealed the dismissal.
The Appellate Division, First Department, in a lengthy opinion upheld the dismissal. Specifically, the Court ruled that “[t]his action is no more than an attempt to launch a belated collateral attack against determinations that are subject to the rule of administrative finality and by which [the landlord] is bound….The present plenary action alleging that the Cohens fraudulently underreported their income for the years in issue to avoid luxury deregulation of their dwelling unit is merely an attempt to relitigate issues administratively determined and to circumvent the jurisdiction of DHCR to decide such matters. The law vests exclusive original jurisdiction in DHCR to determine whether a rent-stabilized tenant’s household income exceeds the threshold for deregulation (Administrative Code § 26-504.3[b], [c]).”
The Court also ruled that that the landlord’s “pleadings show that it placed no reliance upon the Cohens’ statements of income or upon DHCR’s findings….Further, [the landlord's] fraud allegations are wholly speculative; there are no allegations offered from which it could reasonably be inferred that the Cohens provided fraudulent income statements, and there are no non-conclusory allegations that they earned more than $175,000 in two consecutive years (see generally Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 560 ). The crux of [the landlord's] fraud argument, that the Cohens fraudulently hid their annual income in an S-Corporation that cannot be traced without proper discovery, is likewise without merit since that income cannot be considered for purposes of determining whether the Cohens met the $175,000 threshold to warrant luxury deregulation (see e.g. Matter of Nestor, 257 AD2d 395 at 396). Thus, there is no basis upon which this action may be maintained.”
The case was decided on December 20, 2012 and is cited as Katz 737 Corp. v Cohen, 2012 NY Slip Op 08818.
The New York City Civil Court has ruled that a Not for Profit organization was not eligible to receive benefits as a rent stabilized tenant.
Iris House is a not for profit organization which operates a program that provides housing for women and families living with HIV. They rent numerous apartments out as scatter site housing as well as provide these individuals and families with supportive services. Since 1998 Iris House had rented an apartment from Lexington NY Realty LLC, each year the leases have been issued on rent stabilized lease forms. However in the fall of 2011 when it came time for Iris House to renew their lease they were served with a Notice to Vacate terminating Iris House’s tenancy December 31, 2011.
The question before the court to decide was whether Iris House is a rent stabilized tenant entitled to benefits under the rent stabilization laws. Lexington NY Realty brought before the court the case Manocherian v. Lenox Hosp 84 NY2d 385 . This stated that corporations renting premises on behalf of occupants who for various reasons could not be named tenants only were entitled to Rent Stabilization where the lease specifies a particular individual on the lease. This is to prevent a corporation from gaining perpetual tenancy.
Due to the fact that Iris House never had a specific occupant on the leases the court found they lack rent stabilization status. Even assuming that this lease was for the benefit of a group of families affected with HIV/AIDS, it still does not remedy the fact that no specific individual was on the lease. At the time of the lease signing, Iris House had no idea who the occupant of the apartment would be.
This case was reported in the New York Law Journal on October 11th, 2012.
We recently represented an incapacitated person, Nancy Lynch, who resided in an apartment on the Upper West Side for approximately 55 years. Ms. Lynch’s landlord, which is part of the wealthy Estate of Sol Goldman, sought to evict Ms. Lynch on the basis that she did not reside in the unit, which was rent stabilized. The landlord commenced eviction proceedings.
However, because Ms. Lynch was declared incapacitated by the Supreme Court of the State of New York, and appointed a guardian over her property and person, Peter Moulinos argued that the landlord needed Court approval prior to commencing an eviction proceeding against her. The Civil Court of the City of New York initially refused to dismiss the petition on such basis.
On appeal, the Appellate Term ruled that the eviction proceeding could not proceed without leave of the Supreme Court. This ruling was significant in that it required the landlord to obtain leave of court even though Ms. Lynch was declared incapacitated after the landlord filed the eviction proceeding.
The Appellate Term’s decision is cited as 25 W. 68th St. LLC v. Lynch, 2012 NY Slip Op 50843(U), 35 Misc 3d 138(A).
In Galli v. Galli, Peter Moulinos represented the Plaintiff who sought a judgment of adverse possession and to quiet title to a property previously held by his parents for more than twenty (20) years. The Plaintiff and his parents maintained and possessed the subject property continuously, exclusively, openly, notoriously and under a claim of right hostile to the ownership interest of the Defendant.
During the course of the litigation, the Defendant conceded that she never maintained the property, participated towards its expenses nor even visited the property. The Plaintiff also submitted an affidavit in support of his claim, as well as affidavits of other family members which stated that neither the Defendant, nor her deceased husband, ever made any claims to the property since 1960 and they “did not believe they were owners of the property having exercised no control, possession or claim to the property since 1960.” The Plaintiff also provided evidence of the extensive repairs, improvements and alterations made to the property since 1972 by he and his parents.
The Defendant argued that the Plaintiff did not have a “claim of right” to the property because the Defendant’s 25% interest in the subject property was never subject to an ouster. The Court did not agree with the Defendant and ruled that Plaintiff did not have to show ouster. All that Plaintiff was required to show was that his possession of the property was (1) hostile and under a claim of right, (2) actual, (3) open and notorious, (4) exclusive, and (5) continuous for the statutory period.
The ruling was significant as the Court was not required to deal with the application of the 2008 amendments to the adverse possession laws of New York given that adverse possession in the property vested in the Plaintiff prior to these amendments.
The case is cited as Galli v. Galli, 36 Misc. 3d 1203A, 2012 NY Slip Op 51182U (Sup.Ct. Kings Cty. 2012) and the ruling was issued by the Hon. Arthur M. Schack.
The Appellate Term recently reversed a lower court’s directed verdict which previously granted a nephew succession rights to a rent controlled apartment previously leased by the nephew’s aunt.
In Fort Washington Holdings LLC v. Abbott, the nephew, Maurice Abbott, had lived with his aunt in a rent controlled apartment since 1967 until his aunt passed away in 2008. The landlord sought to remove Abbott from the apartment claiming that Abbott was a non-traditional family member of the aunt who was not entitled to succession rights to the apartment. At trial, a jury ruled that Abbott was not entitled to the apartment. In a stunning reversal of the jury’s verdict, the presiding judge ruled that the evidence presented overwhelmingly favored Abbott and that, based on his relationship with his aunt since 1967, entitled him to continue to maintain the apartment.
The landlord appealed the judge’s ruling and the Appellate Term sided with the landlord. The Appellate Term ruled that there was insufficient evidence presented to establish that the nephew and the aunt were financially interdependent on each other. The Court ruled that “a claimed successor must establish both the emotional and financial underpinnings of his or her relationship with the tenant to qualify for eviction protection as a nontraditional family member.”
According to Peter Moulinos, this ruling is significant in that the Appellate Term reverse the judge’s ruling, which reversed the jury’s finding, on the basis that the nephew did not present sufficient evidence to show that he had a financially intertwined relationship with his aunt that would prevent his eviction.
An internet website operator was deemed not liable, and not subject to a lawsuit in New York, for alleged defamatory online postings made on the operator’s website, out of state, by a third party.
In Foster v. Matlock, Supreme Court Justice Joan Kenney ruled that an out-of-state resident cannot be subject to personal jurisdiction in New York unless it can be proven that New York’s long-arm statute confers jurisdiction over the out-of-state resident due to the out of state resident’s contacts with New York. Specifically, defamation actions were found to be exempt from New York’s long arm statute.
Additionally, the Court ruled that federal Communications Decency Act (47 USC §230) provides that internet service providers are immune from defamation suits resulting from the exercise of their traditional editorial functions, such as deciding whether to publish a particular item on their website, regardless if that item is defamatory.
Accordingly, it was found that the out of state website operator could not be sued in New York for posting alleged defamatory statements on her website. Any questions relating to this decision can be directed to Peter Moulinos.
A cooperative shareholder, who owned shares in two cooperative apartments at the 111 Tenants Corp., had subleased both apartments since they were acquired in 1972. In 2003, the cooperative board passed a resolution restricting the subleasing of apartments and, in passing this resolution, targeted the shareholder. The shareholder claimed that the board resolution should not apply to her because, at the time she acquired the units, she was told by the Sponsor that she would have “full, unconditional and perpetual sublet rights”.
The cooperative shareholder challenged the board resolution and sought to have it set aside as being unenforceable against her. However, the Court ruled that pursuant to the shareholder’s proprietary leases, the right to sublet that she acquired when she purchased the shares to her apartments always required board consent, and there was no protection against consent being unreasonably withheld.
Moreover, the Court ruled that even if the shareholder had been granted preferential unfettered sublet rights, Business Corporations Law §501(c), which provides that “each share [issued by a corporation] shall be equal to every other share of the same class,” precludes any special subletting rights.
The action is entitled Bregman v. 111 Tenants Corp., and was decided in the Appellate Division, First Department, of New York.
Any questions regarding this decision, or issues regarding any similar matter, can be directed to Peter Moulinos at firstname.lastname@example.org.
Any questions regarding this action, or similar issues, can be directed to Peter Moulinos at email@example.com.
A Supreme Court judge in Suffolk County has decided that Bank of America should be penalized for its abusive tactics against a homeowner whose property was in foreclosure by reducing in half the amount owed by the homeowner to Bank of America.
Judge Arlen Spinner, who as previously issued harsh and newsworthy decisions against banks in foreclosure cases, ruled in Bank of America v. Lucido, deliberately acted in bad faith” while prosecuting the foreclosure over 34 months and ordered the bank to pay $200,000 in damages to the homeowner, John Lucido. Judge Spinner stated that “repeated and persistent failure and refusal to comply with the lawful orders of the Court including those which directed production of documentation that was essential to address critical issues in the present matter, it has repeatedly caused to be put forth material misstatements of fact which appear to have been calculated to deceive the Court and has delayed these proceedings without good cause, thereby needlessly increasing the amount owed upon the mortgage debt, to say nothing of the needless waste of the Court’s time and resources, as well as those of Defendant.”
Bank of America was originally represented by the law firm of Steven J. Baum, P.C., which has since shuttered its doors. Spinner wrote that he had “serious and substantial questions” on whether the Baum firm, along with the bank, acted in good faith. Judge Spinner cited that court rules under Uniform Rules for the Trial Courts 22 NYCRR §202.12-a required that both homeowners and lenders negotiate in good faith at the settlement conferences, pursuant to CPLR §3408(f). Based on Bank of America’s conduct in this action, Judge Spinner found that the bank had violated this rule.