Published: August 05, 2008 07:55 am      

Couple wins foreclosure appeal against N.Y. bank

The Kentucky Court of Appeals has ruled in favor of a Waco couple who were the subject of a foreclosure action by Bank of New York Trust Company and Mortgage Electronic Registration Systems.

The litigants, who lost their case against Donald Wayne and Roxane Abner in Madison Circuit Court, had sought to force the Abners into an arbitrated settlement over a $40,000 mortgage.

The lenders filed a foreclosure action in December 2003, only 15 months after the loan originated, according to court documents.

The Abners, represented by Addison Parker of the Appalachian Research and Defense Fund, a legal service group, filed a counterclaim, alleging that the mortgage’s 10.125 percent interest represented a “predatory high-cost loan” that violated the federal Home Ownership Equity Protection Act.

The act provides for rescinding mortgages that violate the federal Truth In Lending Act as well as awarding both statutory and enhanced damages.

The Abner’s mortgage contract called for waiving any damages as well as for arbitration.

On July 25, the appeals court affirmed the trial court’s finding that the arbitration clause was “unconscionable and unenforceable.”

When they contested the foreclosure, the Abners attorney alleged that the lenders were guilty of usury and breach of contract by assessing charges and penalties “that were excessive and unauthorized.”

While Kentucky law generally favors arbitration to resolve contract disputes, even when fraud is alleged, the appeals court stated trial courts may invalidate arbitration clauses of “one-sided, oppressive and unfairly surprising contracts.”

The Abners’ allegations of predatory lending practices may be valid the appellate judges said, but the mortgage contract’s arbitration cause was the only issue on appeal.

“There is little doubt that Kentucky homeowners are suffering from the past abuses of some mortgage lenders,” said William Snyder, director of Volunteer Lawyers for Appalachian.

“In many cases, these abuses may give the victims a legal right to save their homes. If more homeowners knew of the availability of legal assistance, more homes might be saved from foreclosure.”

Bill Robinson can be reached at brobinson@richmondregister.com or at 623-1669, Ext. 267.