Plaintiff moves to strike the answer of defendants Sybil and Jason Weekes, for summary judgment pursuant to CPLR 3212, to substitute two necessary additional parties, and to appoint a referee to ascertain and compute the amount due to the plaintiff on the note and mortgage at issue in this foreclosure action.

Defendant Sybil Weekes ("Sybil") and her son, defendant Jason Weekes ("Jason", collectively, the "Weekes Defendants"), contend that, in 2002, they entered into a joint tenancy with non-party Vilma Durieux ("Durieux") in a multiple occupancy home located at 121 East 55th Street, Brooklyn, NY 11203 ("Property"). On May 5, 2006, defendant Sybil executed a note ("Note") to Tribeca Lending Corporation ("Tribeca") upon a loan of $330,000 in connection with a new deed on the Property removing Durieux. On May 5, 2006, the Weekes Defendants also signed a mortgage in which Mortgage Electronic Registration Systems, Inc. ("MERS") was identified as a nominee for Tribeca and was listed as the mortgagee of record ("Mortgage"). The appraisal value of the Property has not been revealed, but a pre-existing mortgage of $221,250 appears to have been satisfied at that time. The initial interest rate on the Note was 12.990%, but was adjustable up to a maximum rate of 18.990%. Plaintiff alleges that Sybil did not make a single payment on the Note and has been in default for over eight and a half years.

The Note and Mortgage have been assigned multiple times. By assignment dated November 24, 2010 ("Assignment 1"), MERS, as nominee for Tribeca, assigned the Note and Mortgage to Deutsche Bank National Trust Company, as Trustee for Tribeca Lending Series 1 ("Deutsche"). By assignment also dated November 24, 2010 ("Assignment 2"), Deutsche assigned the Note and Mortgage to Huntington National Bank, as Certificate Trustee of Franklin Mortgage Asset Trust 2009-A ("Huntington"). By assignment dated October 22, 2010 ("Assignment 3"), Huntington assigned the Note and Mortgage to the plaintiff. It is noted that all three assignments are signed by the same individual, "M. Arndt", who is solely identified as an "Authorized Signator" and it is not clear by which entity this individual is employed.

By letter dated March 24, 2011, from Sheldon May & Associates, on behalf of servicer Acqura Loan Services, LLC ("Acqura"), plaintiff provided defendants with a 90 day pre-foreclosure notice pursuant to CPLR 1304. By letter dated April 5, 2011, also from Sheldon May & Associates, on behalf of Acqura, plaintiff provided a notice of default pursuant to the Mortgage. On June 30, 2011, more than five years after the defendant had defaulted on the Note, plaintiff commenced this foreclosure action. Between May 1, 2012 and May 14, 2013, the parties appeared at numerous settlement conferences pursuant to CPLR 3408. On May 14, 2013, the action was referred to this court. On July 25, 2013, the defendants filed an answer with seven affirmative defenses and one counterclaim.^[FN1]

Plaintiff alleges that it has physical possession of the Note and had physical possession of [*2]the Note prior to the commencement of the action. The plaintiff's motion is supported by an affidavit signed by Brady Hannan ("Hannan"), an "agent" of the plaintiff's servicer, Home Servicing, LLC ("Home Servicing"), based in Baton Rouge, Louisiana. The affidavit states,

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In support of its summary judgment motion, plaintiff has submitted the complaint, the Note, Mortgage, and Assignments, as proof that it is the successor to the original mortgagee, and an affidavit by the plaintiff's servicer indicating that the defendant has defaulted on the Note and that the plaintiff had possession of the Note and Mortgage when the action was commenced. However, the chain of assignments is broken. Assignment 3 is clearly dated before Assignments 1 and 2 and no explanation is given for the broken chain. In the answer, the defendants raised the affirmative defense of lack of standing, noting conflicting and "correcting" assignments, and asserting that the plaintiff did not own the Note. Accordingly, plaintiff has not established that Huntington owned the Note and Mortgage on October 22, 2014, thus making the assignment to plaintiff invalid. While physical possession of the Note and Mortgage may suffice to establish standing (Deutsche Bank Nat'l Trust Co. v Whalen, 107 AD3d 931 [2d Dept 2013]), the conflict between the assignments requires an explanation as it suggests a competing claim may be extant.Moreover, an affidavit from a plaintiff's servicing agent, that contains conclusory statements regarding the plaintiff's possession of the Note and does not give any factual details of the physical delivery, is insufficient to establish that the plaintiff had physical possession of the Note prior to the commencement of the action (see US Bank v Faruque, 120 AD3d 575, 577 [2d Dept 2014]; U.S. Bank v Collymore, 68 AD3d at 754; Homecomings Fin. v Guldi, 108 AD3d 506, 508 [2d Dept 2013]; HSBC v Hernandez, 92 AD3d at 844; compare Aurora Loan Servs., LLC v Taylor, 114 AD3d 627, 628-629 [2d Dept 2014] (holding that plaintiff established standing where the plaintiff's affidavit specifically stated the date of physical possession of the note four days prior to the commencement of the action)). In the affidavit submitted by plaintiff, Hannan recites a conclusory statement regarding possession of the Note, but does not state the specific date upon which the plaintiff obtained physical possession of the Note. As plaintiff relies [*3]on physical possession of the Note to demonstrate its standing at the time of the commencement of this action, defendant has raised an issue of fact as to whether plaintiff obtained physical possession of the Note on or before June 30, 2011 (see US Bank v Faruque, 120 AD3d at 577; U.S. Bank v Collymore, 68 AD3d at 754; Homecomings, 108 AD3d at 508; HSBC v Hernandez, 92 AD3d at 844). Further, plaintiff has not provided a copy of a power of attorney authorizing "an agent" of Home Servicing to act on behalf of the plaintiff (see Wells Fargo Bank, N.A. v Edeman, 2014 NY Slip Op 32013[U] [Sup Ct, New York County 2014], citing Lexow & Jenkins v Hertz Commercial Leasing Corp., 122 AD2d 25 [2d Dept 1986]). Plaintiff's motion for summary judgment, order of reference, and to strike the first and fifth affirmative defenses is therefore denied.

Defendants further argue that the terms of the 12.990% interest loan were unconscionable, the loan was designed "to be securitized into a pool of high yield residential mortgages and then defaulted upon", and that the defendants were the victims of deceptive conduct. Sybil is alleged to be an elderly woman (no age is given), Jason earned very low wages (no amount is specified), and they are African American. The Property is located in East Flatbush, Brooklyn, which is a "majority minority" neighborhood.^[FN2] The answer alleges that Tribeca targeted the defendants based upon the neighborhood's racial and ethnic makeup by "reverse redlining"^[FN3] in violation of the Equal Credit Opportunity Act ("ECOA"). The defendants argue that the required monthly payments of $3,647.88 were never affordable to the defendants. Defendants have sought discovery in this action from plaintiff, including the original loan application submitted by the defendants for the loan. Sybil's affidavit states,

In the seventh affirmative defense and counterclaim, defendants allege that Tribeca discriminated against the Weekes on the basis of their race, color and ethnic group in violation of the ECOA and that the plaintiff is liable for Tribeca's acts pursuant to "15 U.S.C. sec. 1691a(3) Reg B 12 C.F.R. sec. 202.2(l)". As the affirmative defense and counterclaim alleging violations of the ECOA would require the Weekes to establish that they were qualified for the loans in [*4]question, and their defense and counterclaim are based upon the contention that they did not qualify for the loan, the seventh affirmative defense and "third" counterclaim must be dismissed (see Equicredit Corp. of NY v Turcios, 300 AD2d 344, 346 [2d Dept 2002]).

The third affirmative defense is unconscionability. Defendants argue that there was an enormous disparity in bargaining power between the parties and that the plaintiff's predecessor "sought to profit from this disparity in bargaining power and sophistication and did so by deliberately targeting [Sybil] and [Jason] with misinformation. Said procedural and substantive unconscionability renders void and unenforceable the mortgage." Defendants have not provided any further explanation as to the nature of the misinformation they were purportedly provided. "In general, an unconscionable contract has been defined as one which is so grossly unreasonable as to be unenforceable because of an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party" (US Bank N.A. v Davis-Clarke, 2014 Slip Op 33142[U] [Sup Ct, Queens County 2014], citing King v Fox, 7 NY3d 181, 191 [2006]). "This definition has been broken down into two elements: procedural and substantive unconscionability" (US Bank N.A., 2014 Slip Op 33142[U]). " Substantive elements of unconscionability appear in the content of the contract per se; procedural elements must be identified by resort to evidence of the contract formation process' and meaningfulness of the choice. Examples of unreasonably favorable contractual provisions are virtually limitless but include inflated prices, unfair termination clauses, unfair limitations on consequential damages and improper disclaimers of warranty.' With respect to procedural unconscionability, examples include, but are not limited to, high pressure commercial tactics, inequality of bargaining power, deceptive practices and language in the contract, and an imbalance in the understanding and acumen of the parties.' [I]n general, it can be said that procedural and substantive unconscionability operate on a sliding scale'; the more questionable the meaningfulness of choice, the less imbalance in a contract's terms should be tolerated and vice versa'" (Emigrant Mtge. Co., Inc. v Fitzpatrick, 95 AD3d 1169, 1170 [2d Dept 2012], quoting Matter of Friedman, 64 AD2d 70, 85 [2d Dept 1978]; Simar Holding Corp. v GSC, 87 AD3d 688, 690 [2d Dept 2011]; State of New York v Wolowitz, 96 AD2d 47, 68 [2d Dept 1983]; internal citations omitted).

With respect to the "procedural elements" of unconscionability, defendants have argued, and it is uncontested, that Sybil was elderly, had little income at the time of entering the loan, lived in a "minority majority" neighborhood, has vision problems, and Tribeca specifically targeted her. With respect to the "substantive elements" of unconscionability, defendants have demonstrated that Sybil was given a loan from Tribeca that required her to make monthly payments of $3801.20 which included a 12.990% interest rate, adjustable up to a maximum rate of 18.990%. The court notes that this rate was significantly higher than standard interest rates at [*5]the time ^[FN5] and, if this loan had been closed after September 1, 2008, Banking Law 6-m(4)^[FN6] would have been applicable. Defendants have sought discovery from the plaintiffs with respect to the loan application documents submitted by defendants to Tribeca. " The determination of unconscionability is a matter of law for the court to decide'" (Emigrant Mtge., 95 AD3d at 1170, quoting Simar, 87 AD3d at 690). As discovery is on-going, and the defendants have raised issues of fact as to the unconscionability of the Note and Mortgage, the motion to dismiss the third affirmative defense is denied (see Emigrant Mtge., 95 AD3d at 1170).

Similarly, the defendants' second affirmative defense is for deceptive trade practices pursuant to General Business Law § 349. "Section 349 (a) of the General Business Law declares as unlawful [d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state'" (Emigrant Mtge. Co., Inc. v Fitzpatrick, 95 AD3d 1169, 1171 [2d Dept 2012], quoting General Business Law § 349 [a]). "To assert a viable claim under General Business Law § 349 (a), a plaintiff must plead that (1) the challenged conduct was consumer-oriented, (2) the conduct or statement was materially misleading, and (3) [he or she sustained] damages" (Emigrant Mtge. Co., 95 AD3d at 1172). Here, plaintiff established that Sybil and Jason were presented with written documents describing the terms of the loan. However, as discovery is ongoing with respect to the loan application documents sought by defendants, and defendants have alleged that they were specifically targeted to take a loan which they could not afford, the motion for summary judgment is premature with respect to the second affirmative defense. Accordingly, plaintiff's motion to dismiss the second affirmative defense is denied.

The sixth affirmative defense is for "unclean hands." In the answer, defendants allege that,

Defendants.

The plaintiff's motion for summary judgment is granted only as to the dismissal of affirmative defenses four, six, seven and the defendants' counterclaim, the amending of the caption, and the finding of default. The motion is otherwise denied.

A conference is scheduled for January 6, 2015. The parties will update the court on the status of discovery at that time and a hearing date may be scheduled at that time.

This constitutes the decision and order of the court.

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J.S.C.