New Mexico Supreme Court Applies Loan Protection Act to Nullify Foreclosure

Last month the New Mexico Supreme Court found that the Bank of New York could not foreclose on the home of a New Mexico resident who had refinanced his home by entering in to a promissory note with a different company. The Court specifically interpreted the New Mexico Home Loan Protection Act (HLPA) which prohibits home mortgage refinancing that does not provide a reasonable, tangible net benefit to the borrower to serve as a basis for the ruling.

Joseph and Mary Romero signed a promissory note with Equity One, Inc. to borrow $227,240 to refinance their Chimayo home. As security for the loan, the Romeros signed a mortgage contract with the Mortgage Electronic Registration Systems (MERS), as the nominee for Equity One, pledging their home as collateral for the loan. Equity One’s interest rate was higher (starting at 8.1 percent and increasing to 14 percent compared to 7.71 percent), the Romeros’ monthly payments were greater ($1,683.28 compared to $1,256.39), and the loan amount due was greater ($227,240 compared to $176,450). However, the Romeros would receive a cash payout of nearly $43,000, which would cover about $12,000 in new closing costs and provide them with about $30,000 to pay off other debts.

The Supreme Court engaged in this statistical comparison as it held that the HLPA requires such comparison to determine if mortgage lenders are in breach of the statute. It also concluded that such lenders have a duty imposed by this statute to take into account the borrower’s ability to pay back a loan as a relevant factor which must be included in a required written worksheet when assessing whether the borrower qualifies for a loan. In this case the Court noted that Equity One did not even inquire as to the Romeros’ income or attempt to verify it in any fashion.

The Court also reached its holding by finding that the Bank of New York had failed to prove they had the right, at the time of the filing for the foreclosure, to do so. And it held that federal law does not preempt this state law as it relates to the particular regulation the HLPA applies to mortgage companies and lenders.

Before making any real estate purchase or transaction, contact the attorneys at the Law Office of George “Dave”Giddens, P.C. located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico. Call the Law Office of George “Dave”Giddens at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com for more information.