The state Supreme Court on Thursday overturned lower court rulings against a Chimayo couple who have been fighting in court for years over their home foreclosure.
Lawyers for Joseph and Mary Romero maintain lenders had taken advantage of their limited education, using predatory lending practices to structure a loan that would strip them of their equity and with no regard for their ability to pay off the loan.
The Supreme Court's opinion says:"We hold that the Bank of New York did not establish its lawful standing in this case to file a home mortgage foreclosure action. We also hold that a borrower's ability to repay a home mortgage loan is one of the 'borrower's circumstances' that lenders and courts must consider in determining compliance with the New Mexico Home Loan Protection Act... which prohibits home mortgage refinancing that does not provide a reasonable, tangible net benefit to the borrower. Finally, we hold that the HLPA is not preempted by federal law. We reverse the Court of Appeals and district court and remand to the district court with instructions to vacate its foreclosure judgment and to dismiss the Bank of New York's foreclosure action for lack of standing."
The high court remanded the case to District Court "with instructions to vacate its judgment of foreclosure."
The Journal will provide additional reporting on this story Friday. For now, here is the Journal's story on the case from January 2012:
Chimayo home fight goes on: Couple's suit to stop foreclosure heads to state Supreme Court
By Jackie Jadrnak / Of the Journal
A Chimayo couple remain in their home into the new year as their 2007 default on their refinanced mortgage wends its way all the way to the state Supreme Court.
Their attorney, Joshua Simms of Albuquerque, said this week that Joseph and Mary Romero continue to make minimal payments to the Bank of New York to stay in their family home until the legal fight is concluded.
They haven't had much success so far in the court system with their case, which has gotten the support of such groups as the Santa Fe Neighborhood Law Center, Somos Un Pueblo Unido and the Archdiocese of Santa Fe.
The law center, in a court brief, called the Romeros' loan "a wild home mortgage refinancing loan based on no appraisal and no income verification." The groups supporting the Romeros hope the case can lead to more support from the court system for those enticed into risky home mortgages.
But in October, the New Mexico Court of Appeals upheld former state District Judge James Hall, who had ruled in favor of the bank and against all of the Romeros' counterclaims.
The couple contended Equity One Inc., the lender, had taken advantage of their limited education, using predatory lending practices to structure a loan that would strip them of their equity and with no regard for their ability to pay off the loan.
The Romeros took the Equity One loan in 2006 to pay off the original mortgage on their home that they took out to start a business. They were behind on the original mortgage.
They also wanted to gain extra money to pay off credit card and other debt, as well as to get extra money for their music and clothing store in Espanola. They had owned the home, which was inherited from Joseph Romero's father, since 1970.
The $227,240 loan increased their monthly mortgage payment from $1,200 to $1,683, according to court records. The Romeros have said they were told the payments would go down to $1,000 in six months but never got a statement verifying that.
By the end of 2007, they owed more than $8,000 in payments and fees on that loan, and on April 1, 2008, the Bank of New York, which then held the mortgage, filed for foreclosure.
One of the arguments by the Romeros' lawyers was that the bank was engaged in "flipping" -- making a refinancing loan that has no benefit for the borrower. Both the district and appeals court found the Romeros had in fact gained a "reasonable, net tangible benefit" that paid off some $9,000 in other debts and gave them a cash payout of more than $30,000.
While the appeals court agreed that the ability to pay off a loan is important in a decision to grant a loan, it said the statute related to predatory loans -- the state Home Loan Protection Act -- does not include language making that element a factor in determining illegality.
Court documents suggest that Joseph Romero made a mistake in giving $5,600 as his estimated monthly income, when he meant that to be his estimated annual income. The Journal has previously reported that the Romeros tax returns showed the they made only $12,272 in 2005 and $3,054 in 2006.
The couple said they did not initially approach the bank for a loan, but got a cold call from a loan officer offering them financing.
In addition to upholding the ruling that the Romeros benefited from the loan, the Court of Appeals also ruled that the District Court judge did not abuse his discretion when he barred testimony from a witness for the Romeros who they termed an expert on their loan.
It also held that the couple had sufficient time to review the loan closing documents, noting they had three days following the signing in which they could have rescinded the loan agreement.
In late October, the state Supreme Court agreed to take the case on further appeal.
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