Predatory lending is a viable defense to foreclosure in New Jersey when the original mortgage loan was made through abusive practices such as making loans the borrower could not afford, charging excessive fees, steering to higher-cost products, or misrepresenting terms. NJ law provides strong protections through the NJ Consumer Fraud Act, the NJ Home Ownership Security Act, and federal statutes including TILA and HOEPA, all of which can be raised as defenses and counterclaims in foreclosure proceedings.
What Constitutes Predatory Lending in NJ
Predatory lending is not defined by a single practice but encompasses a range of abusive conduct at the time the loan was originated. Common predatory lending practices include making loans without regard to the borrower’s ability to repay (based on the property value alone rather than the borrower’s income), charging points and fees that are excessive relative to the loan amount, steering borrowers to subprime or higher-cost loan products when they qualified for conventional or prime-rate loans, misrepresenting the loan terms (including interest rates, payment amounts, or the presence of adjustable rate features), including abusive loan terms such as excessive prepayment penalties, balloon payments, or mandatory arbitration clauses, repeated refinancing (loan flipping) that strips equity without providing a genuine benefit to the borrower, and using high-pressure sales tactics or targeting vulnerable populations including elderly homeowners and non-English speakers.
NJ Consumer Fraud Act (N.J.S.A. 56:8-1 et seq.)
The NJ Consumer Fraud Act (CFA) is one of the broadest consumer protection statutes in the country. It prohibits unconscionable commercial practices, deception, fraud, and misrepresentation in connection with the sale of merchandise or real estate. Mortgage lending is covered under the CFA, and lenders who engaged in deceptive practices in originating a loan may be liable for actual damages, treble (triple) damages, and attorney fees. The CFA does not require proof of intent to deceive — a showing of an unconscionable practice is sufficient. This makes the CFA a particularly powerful tool in predatory lending cases.
NJ Home Ownership Security Act (N.J.S.A. 46:10B-22 et seq.)
The NJ Home Ownership Security Act (HOSA) specifically targets high-cost home loans and provides additional protections for borrowers. HOSA applies to home loans where the APR exceeds the applicable federal threshold or where the total points and fees exceed specified limits. For covered loans, HOSA prohibits certain abusive practices including financing points and fees, prepayment penalties beyond certain limits, balloon payments in certain circumstances, and negative amortization. HOSA provides borrowers with a private right of action for actual damages, statutory damages, and attorney fees.
Federal TILA and HOEPA Protections
The federal Truth in Lending Act (TILA, 15 U.S.C. § 1601 et seq.) requires lenders to provide accurate disclosures of loan terms. Material violations of TILA’s disclosure requirements can give rise to damages claims and, for certain refinance transactions, the right to rescind the loan. The Home Ownership and Equity Protection Act (HOEPA) provides additional protections for high-cost mortgages, restricting certain loan terms and practices. HOEPA violations can render the loan unenforceable and create liability for actual and statutory damages.
How to Raise Predatory Lending in Foreclosure
Predatory lending is raised in a NJ foreclosure case as both an affirmative defense and a counterclaim. As an affirmative defense, you assert that the mortgage should not be enforced because it was the product of predatory practices. As a counterclaim, you seek affirmative relief including damages, loan rescission, or reformation of the loan terms. The counterclaim is filed as part of your Answer to the foreclosure complaint and creates leverage in negotiations because the lender now faces potential liability rather than simply seeking to foreclose.
Call Friscia & Associates Today
If you believe your mortgage was the product of predatory lending practices, this may be a powerful defense to your foreclosure. Call Friscia & Associates at (973) 500-8024 to speak with a NJ foreclosure defense attorney who can review your original loan documents, identify predatory practices, and assert these defenses in your foreclosure case.
Legal Disclaimer: The information on this page is for general informational purposes only and does not constitute legal advice. No attorney-client relationship is formed by reading this content. Every foreclosure case is different, and outcomes depend on the specific facts and circumstances involved. If you need legal advice, please contact our office to schedule a consultation.