Buying a home is stressful enough, but some financial institutions and other organizations linked to home buying fees are accused of predatory lending practices. Among the alleged practices are charging excessive mortgage fees and closing fees, violating the Truth in Lending Act, abusing force placed insurance, illegally foreclosing on homes, and discriminatory lending practices
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Charging Excessive Fees
The Truth in Lending Act (TILA) was created to protect consumers from lending fraud by requiring lenders to provide clear and accurate information regarding the terms and costs associated with a loan. Failure to do so—either by misrepresenting the fees or loan structure or by omitting important information—may result in the borrower terminating the loan and recovering all interest and fees returned to them.
In 2015, Wells Fargo agreed to settle a lawsuit concerning property inspection fees that were charged to borrowers who fell behind on their mortgage payments by 45 days or more. These inspections were ordered every 25 to 35 days until the borrower managed to get the mortgage payments up to date. Plaintiffs alleged the inspections were unnecessary and the true nature of the fees was hidden.
Predatory Mortgage Lending
It is illegal for a person or organization to encourage a mortgage applicant to lie on the application to secure a mortgage.
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.
Mortgage Servicing Fraud
Further, they say they've had the insurance force-placed even when they have an up-to-date insurance policy. Finally, some argue that when they provide proof of a new policy, the force-placed policy is not removed quickly enough. Some financial companies face allegations they received kickbacks for using force-placed insurance from certain companies and customers wound up paying for those bonuses.
In January 2016, PNC Bank NA agreed to pay $32.3 million to settle a lawsuit in Florida alleging the company overcharged consumers for force-placed insurance. Bank of America NA and HSBC Bank USA NA have also agreed to settle lawsuits linked to force-placed insurance.
In September 2016, a lawsuit was filed against Nationstar Mortgage, a mortgage-servicing company, alleging the company refused the payments of a homeowner, then charged thousands of dollars in fees for property inspections and disbursement insurance. According to reports, the lawsuit alleges negligence, fraud, and breach of contract.
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