Buying a home can be a stressful time. Making it more stressful are financial institutions that are engaged in predatory lending practices. These include charging excessive mortgage fees, charging excessive closing fees violations of the Truth in Lending Act, misrepresenting the terms on a loan or mortgage, encouraging applicants to submit false information on their loan applications, illegal foreclosures and discriminatory lending practices.
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Charging Excessive Fees
 There are many fees associated with purchasing a home. These include title searches, Title insurance, home inspections and closing fees. Some of these fees are legitimate; however companies may charge excessive amounts for these mortgage fees. For example, a company may charge a borrower courier fees but bill more than the courier company charged them. Furthermore, companies may charge for the same services twice. They may bill once for paperwork under "paperwork processing," and a second time under a different paperwork heading. In reality, the consumer is being charged two times for one service.
Misrepresentation of Fees and/or Loan Structure
The Truth in Lending Act (TILA) is designed to protect consumers against lending fraud by requiring lenders to provide clear disclosure of the terms and costs associated with a loan. Consumers who are affected by TILA violations may be able to terminate their loan and have all interest and fees returned to them.
In 2008, a class action lawsuit was filed against Chevy Chase Bank, alleging the bank misrepresented the terms of customers' mortgages. The plaintiffs claimed the interest rate on their loan more than doubled in the second month, even though the plaintiffs thought they had locked in their rate for five years.
HAMP Program
The Home Affordable Modification Program (HAMP) was designed to help homeowners prevent foreclosure by providing incentives to banks and mortgage investors to reduce payments for certain borrowers. Borrowers who make three trial payments and meet certain criteria are supposed to be given modifications that lower their payments for five years.
Plaintiffs have now filed lawsuits against units of J.P. Morgan Chase & Co. alleging that the financial institution misled some customers about their chances of having their payments reduced long-term. They say they made their trial payments but were then told their income was too low to qualify for the HAMP program.  Instead of accepting foreclosure and looking for more affordable housing options, plaintiffs say they continued to make payments on their homes to avoid foreclosure, stretching their limited financial resources. Plaintiffs also say the financial institutions lose track of vital documents and advise them to fall behind on payments so they can become eligible for the HAMP program.
Homeowners should be eligible for HAMP modifications if they are delinquent on monthly payments or face risk of default, owe less than $729,750, took out the loan before January 2009, and if the payment on their first mortgage is more than 31 percent of their income. The property in question must also be the borrower's primary residence.
Mortgage Fraud
Mortgage fraud is the intentional misstatement, misrepresentation or omission of information by an applicant or other parties when providing information while applying for a mortgage or insurance for a mortgage loan. Mortgage fraud for property occurs when the applicant falsifies information solely to purchase a property for primary residence.
It is illegal for a person or organization to encourage a mortgage applicant to lie on the application to secure a mortgage.
Mortgage Discrimination
 Under the Equal Credit Opportunity Act (ECOA), it is illegal for lenders to commit credit discrimination on the basis of race, color, national original, sex, marital status, age, religion or whether the borrower receives public assistance. Although it is legal for the creditor to ask for this information in some situations, creditors cannot use that information to prevent a person from obtaining credit. Furthermore, creditors are never allowed to ask borrowers about their religion. The ECOA applies to anyone who participates in the decision to grant credit or in setting the terms of credit, including real estate brokers who arrange financing.
It is illegal for lenders to commit mortgage discrimination. Under the Fair Housing Act (FHA), it is illegal to discriminate in any aspect of residential real-estate transactions. This includes approving loans to buy, build or repair a dwelling; selling, brokering or appraising residential real estate; or selling or renting a dwelling.
Discriminatory practices include discouraging a person from applying for a mortgage, rejecting a mortgage application, imposing higher interest rates on a loan or requiring a larger down payment for discriminatory reasons such as age or race.
Predatory Mortgage Lending
Predatory mortgage lending activities put the homeowner at risk of foreclosure. Such activities include charging unauthorized fees, charging hidden fees at closing, refinancing loans when there is no benefit to the borrower, approving or offering a loan when the borrower does not have the means to repay it, offering excessively high interest rates, and failing to properly disclose figures or legally required documentation at the closing table.
Mortgage Servicing Fraud
Mortgage servicing fraud is different from predatory lending because it occurs after a loan has closed. Mortgage servicers are most often third parties that are hired by the lender to perform the daily duties associated with collecting loan payments. Servicing fraud activities include making a loan appear to be in default even though the borrower has paid on time, not accepting proper loan payments, charging fees for collection letters and inspections, charging more interest than is owed and putting payments in suspense accounts with no cause. In some cases, the mortgage servicer is allowed to keep any fees associated with late payments, giving the servicer an incentive to make payments appear late.
HELOC
A lawsuit has been filed regarding SunTrust Home Equity Line of Credit (HELOC) accounts. The lawsuit alleges SunTrust decreased, froze or terminated thousands of HELOCs and violated its contracts and its clients' rights in the process. Plaintiffs claim their HELOCs were frozen even though they had good credit and paid their account as agreed.
Foreclosure
Many people who fall victim to unethical mortgage and predatory lending practices find themselves facing foreclosure on their home, sometimes through no fault of their own. In some cases, victims uphold their end of an agreement only to have the banks deny them modifications to their mortgages, issue delinquency reports to credit ratings agencies and foreclose on their homes.
Mortgage Fee Legal Help
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Last updated on Nov-15-11 |
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