Judges Say Banks Must Refund
Mortgage Payments On Misleading Loans
Federal Judges say If you were misled by one of the "creative lending" schemes of the past decade you could be due almost everything you've paid on your mortgage since the loan was issued.
February 12, 2009
Bryan and Susan Andrews were looking for a way to cut their monthly expenses when an ad arrived in the mail that promised to do just that. The ad promised a fixed rate mortgage at 1.95 percent for five years.
The couple was previously paying 5.75 percent for their existing fixed-rate mortgage. They decided the offer was too good to pass up and accepted the bank's offer in 2004.
When the payment book arrived, the Cedarburg, Wisconsin couple realized to their horror that the $191,000 loan they got from Bethesda-based Chevy Chase Bank was an adjustable-rate mortgage. They considered refinancing into a different loan but couldn't do so without a $5,700 prepayment penalty.
Documents provided by the bank at closing seemed to verify the
original offer as it had appeared in the advertisement. The top
right corner of one document the lender must provide under the
Truth in Lending Act. read: "WS Cashflow 5-year fixed," and the
line under it said "Note Interest Rate: 1.950%."
The bank appealed and won a partial victory when the 7th Circuit U.S. Court of Appeals in Chicago in a 2-1 decision reversed the part of Judge Adelman's ruling that granted the suit class-action status. The Appellate court left standing Adelman’s ruling that the bank violated the Truth-in-Lending Act by not clearly disclosing the terms of the adjustable rate mortgage it wrote to the Andrews' in 2004.
According to the court,
homeowners like the Andrews can seek a
rescission of their mortgage — having their loan revoked and all
of their fees and interest payments returned. Other borrowers who
feel their loans are deceptive will need to file independent
legal actions as opposed to the class action originally sought.
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