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High Cost Home Loan Law or RPAPL: Does a loan on a primary residence, which is used primarily for a business purpose, qualify?

Hauppauge, NY |
Filed under: Small business loans

Specifically, this is a hard money loan my father took on his house, co-owned with my mother. The loan was over $500,000 and was used to pay back a debt on his business. My father used my mother's power of attorney (without her knowledge) and my mother didn't benefit from the loan, nor was it for her business.

My question is if the loan goes into foreclosure, can the High Cost Home Loan Act, or any part of RPAPL, be used as a defense? The loan was for 1 year, with a balloon note and 16 percent interest.

Attorney Answers 1


So long as the the real property secured by the mortgage is considered residential (i.e. not commercial), then CPLR 3408 will automatically kick-in once an RJI is filed and the Court will direct the matter to mandatory foreclosure settlement conferences. So, if the foreclosure is filed as a "Residential Mortgage Foreclosure" then you will benefit from the mandatory foreclosure settlement conference program. Also, depending on when the mortgage was issued, it may be considered a high-cost loan which can be a defense to a foreclosure action.

Also, if the action is filed as a commercial foreclosure complaint, then the best strategy is to for you to file the RJI before the lender and file the RJI as a residential foreclosure action which will automatically bounce the case into the mandatory foreclosure settlement conference part where there you could argue whether the case should remain in conference or not.

Hope this helps and feel free to follow up with any further questions, comment or concerns. This seems like an interesting matter.

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