Is This Predatory Loan Practices / real life situation

[welkin]

Jurisdiction

Florida

In 2005 my brother took out a HELOC to remodel his condo on Palm Beach Island, FL. The terms of the HELOC were $50,000 with a 5-year draw interest only payment until the draw ended. The bank had the option to extend the draw. In 2010, 2015, and 2020 they extended it without ending the draw period. All this time the HELOC was maxed out since no principal was being paid down. So, my brother was only paying interest. Alot of interest.

My brother was in business in FL from 2005 to 2015 and there was no problem paying the HELOC. He retired and gave up his business license and closed his LLC. He had no problem paying his living expensive with his SS benefits at the time. He was making over $1,000 payments to the bank each month. Yet, in September this year, the bank filed suit for a default judgement in preparation of foreclosure for the full amount owed.

The bank extended his draw period 4 times without any conformation as to his ability to pay and my brother (not the brightest bulb in financial matters) only knew that he had to pay the bank each month. He kept paying and getting statements from the bank to this day.

In January this year, the bank sent out a notice of default that was never delivered to my brother giving him a 30-day notice to cure. The USPS tracking confirms that the notice was returned to the bank and not delivered. He never was served with the complaint nor any summonses.

Floride statute 494.00791 (6) EXTENDING CREDIT WITHOUT REGARD TO THE PAYMENT ABILITY OF THE BORROWER.—A lender making a high-cost home loan shall not engage in any pattern or practice of extending high-cost home loans to borrowers based upon the borrowers' collateral without regard to the borrowers' ability to repay the loan, including the borrowers' current and expected income, current obligations, and employment.

I have the ability to pay off his loan, but I want to be in a bargaining position before I contact the attorney. So, what do you think? Was this predatory lending?

The bank is based in NJ. If I need to hire an attorney, do I hire one in NJ or FL?

Thank you.

 

[Zigner]

At the time that credit was "extended" to your brother, he had the ability to pay. Furthermore, we have no way to determine if your brother's loan was a "high-cost" loan as defined in the statutes.

 

[adjusterjack]

494.00791 doesn't appear to exist in the current Florida Statutes. And it isn't in the 2020 statutes. It was part of the Fair Lending Act. The section has not appeared since 2013. There are indications online that it was repealed.

It might not apply to the 2015 and 2020 extensions.

Even with that statute, it's likely not predatory lending. For a general definition of predatory lending see:

Predatory Lending: What It Is and How to Avoid It - NerdWallet

Predatory lending is any practice that benefits a lender at the expense of a borrower, such as charging high fees and creating a cycle of debt.

www.nerdwallet.com

Besides, there are other ways for a lender to confirm "the borrowers' ability to repay the loan, including the borrowers' current and expected income, current obligations, and employment" without direct contact with the borrower. Lenders do it all the time with a credit report and background check, also taking into consideration the borrower's performance.

If you had to hire an attorney it's likely to be in Florida where the property is located and the foreclosure is taking place.

PS. I haven't looked for the Florida rule but quite often evidence of mailing notice is evidence of notice to the recipient even if it's returned undeliverable.

 

[army judge]

So, what do you think? Was this predatory lending?

Has your sibling investigated a Chapter 7 Bankruptcy filing?

It can't hurt to investigate several options he might have to assist him in extracting himself from his looming financial crisis.

Whether I see it as predatory lending or not, would be of no value to your sibling.