“The Mortgage Was A Fraud On Me”
While the subprime crisis rages, borrowers continue not to hesitate in hurling brickbats at lenders. A recent case confirms (yet again) that some borrowers will say anything. [Sander v. J.P. Morgan Chase Home Mortgage, 56 A.D. 3d 301, 867 N.Y.S. 2d 87 (1st Dept. 2008)] Of course, sometimes there really is a fraud and sometimes they win even in the absence of fraud. This time, though, the borrower lost, although the lender was forced to endure an appeal to cement the victory.
Here, the borrower signed an adjustable rate mortgage, nothing so unusual. She initialed the rider with the adjustable rate provision. When she defaulted upon the mortgage which led to a foreclosure action, she defended and said she was not required to pay, claiming:
- fraudulent inducement
- negligence
- unconscionability
- duress
There are more than a few grounds upon which courts can reject such defenses, but in this instance they said that the mortgage documents were clear and unambiguous and the borrower’s initialing of the rider confirmed the adjustable rate aspect.
Relating more to the legal underpinning, the court observed that because the borrower was obliged to exercise ordinary diligence in ascertaining the terms of the document she signed (that is the critical standard of care), she could not reasonably claim to believe that the terms were other than as recited in the mortgage. This is a borrower’s burden and it is hardly a weighty one.
(At the cost of time and expense) chalk one up for the servicer.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.