Class Action Blog : Consumer Fraud, Consumer Protection, Securities and Antitrust Lawyer & Attorney : Meiselman, Denlea, Packman, Carton & Eberz

Before the recent economic meltdown, many home buyers who were not able to qualify for standard mortgages were approved for so-called sub-prime mortgages with very high interest rates. Of course, many consumers intended on refinancing at a better rate as soon as they could, and to profit on that expectation, lenders included an “early termination fee.” As a result, consumers who wanted to refinance had to pay a penalty for the privilege of doing so. While this penalty may have been unfair and usurious, it was typically disclosed to consumers.

In the aftermath of the mortgage crisis, most sub-prime mortgages, and their early termination fees, have disappeared. However, at least one huge mortgage lender, Bank of America, may be illegally and surreptitiously adding on early termination fees when its customers sell their homes. At least one consumer discovered that Bank of America had added a $300 early termination fee on the HUD settlement statement the consumer received immediately before closing on the sale of his home. Not only was the fee not authorized or disclosed to the consumer when he refinanced his home, but it was imposed on his home equity line of credit. Of course, a line of credit is typically an interest only loan of infinite duration – by definition, there can be no “early termination” because there is no loan termination or completion date.

Meiselman, Denlea, Packman, Carton & Eberz is investigating potential claims against Bank of America for unfairly and deceptively imposing early termination fees on its clients who never agreed to any such fees. If you have recently sold a home that had a Bank of America mortgage or line of credit, we encourage you to review your HUD settlement statement to determine if you have been charged an early termination fee. If you were, please contact us to discuss your legal options. 

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In my last post, I wrote about how some big banks are failing to live up to their commitment to help homeowners stay in their homes by not honoring temporary loan modification agreements that can lead to a permanent loan modification.  In this post, I would like to comment on something that may have caused homeowners to get into foreclosure in the first place.

MERS stands for Mortgage Electronic Registration Systems, Inc.  It was created in 1995 by the mortgage banking industry to track and service mortgages.  Historically, mortgages and notes have needed to be filed and recorded with the local county clerk where the property is located, and the banking industry created MERS in 1995 in order to have an electronic way to register every mortgage in the United States on the MERS system.

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As part of the Troubled Asset Relief Program financial bailout, many large national banks accepted huge sums of money from the United States government. Many of these large banks also signed agreements with the United States Treasury, in which they agreed to participate in the Home Affordable Modification Program. This program provides participating banks and mortgage servicers incentives to provide affordable mortgage loan modifications and other alternatives to foreclosure to eligible borrowers who are in danger of losing their homes.

Many banks have worked hard with homeowners to provide the homeowners with temporary trial modifications of their loans. These trial modifications, which are basically temporary modifications to the loan, are designed to lead to homeowners entering into permanent loan modifications with their banks, in order to save their homes permanently. Many homeowners have complied with temporary loan modifications on a trial basis, by providing the required documentation and making all agreed-upon payments towards the loan as it has been temporarily modified. However, many banks have not lived up to their promise to provide homeowners who have satisfied all requirements of a temporary loan modification with a permanent loan modification. This has resulted in thousands of residents across the country being deprived of the opportunity to permanently cure their delinquencies and save their homes.

The Home Affordable Modification Program has allocated to it approximately $75 billion dollars of government funds. Unfortunately, many banks have not gone far enough to make sure that their homeowners can obtain a permanent mortgage modification, even after the homeowners have satisfied all of the requirements of a temporary mortgage modification, which is supposed to lead to a permanent modification. Many of the agreements that the banks have with the homeowners state specifically that if the homeowner is in compliance with the loan modification trial period and makes all payments during the trial period, then the bank will provide the homeowner with a loan modification agreement on a permanent basis, but in practice this has not always happened.

These practices are not only contrary to the spirit of the federal legislation that created the Troubled Asset Relief Program, but may also violate the agreements between the banks and the homeowners. If you or someone you know has been effected by this practice, please contact us to discuss your legal options.

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A reverse mortgage can be a valuable means of support for a senior citizen, allowing the homeowner, aged 62 or higher, to pull equity of his or her home.  The money can come as a one- time payment, in monthly installments or as a line of credit to be drawn on when needed.  The mortgage is repaid when the senior sells the residence or after his or her death by the heirs.

The maximum allowed on a reverse mortgage is $625,000 and more than 110,000 such loans aggregating more than $17 billion are entered into annually by America’s senior citizens, according to the National Consumer Law Center.  Such a large financial market inevitably attracts abuse, however, and predatory lending practices have begun to emerge in reverse mortgages.  Loan brokers might use high pressure tactics on the unwary senior and fail to evaluate the appropriateness of the loan in an effort to secure commissions.  Similar to the disastrous subprime mortgage collapse, financial institutions have been passing on the risk inherent in these loans to other investors, thus attempting to insulate themselves from the potential consequences of granting high risk loans at a time when housing prices are still unstable.

In addition, predatory loan brokers may package other financial products or insurance into the reverse mortgage to generate additional revenue for themselves.  Since reverse mortgages are explicitly aimed at senior citizens, the potential always exists that the aging homeowner may not be able to make the best decision when confronted with the combination of financial needs, high pressure sales and confusing documentation.  In some cases, the senior may put their title to their home in jeopardy without realizing it.

If you think you or a member of your family may have fallen victim to a predatory reverse mortgage, please contact us to discuss your legal options.

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