Subprime Borrower Lawsuits Allege Consumer Protection Law Violations, Racial Discrimination

American Association for Justice reports:

• Amid the subprime mortgage crisis, many people across the country—with both good and bad credit—have found themselves stuck with loans that are not what they anticipated. Mortgage lenders and related institutions are under intensifying scrutiny for a wide range of illegal conduct, including misrepresenting loan terms, adding bogus fees, inflating appraisals, committing securities fraud, and discriminating against borrowers based on their race and gender. Lawsuits allege violations of the Truth in Lending Act (TILA), the Fair Housing Act, the RICO statute, and state consumer protection laws, to name a few.

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• The option ARM has proved especially problematic. “It’s a subprime product being marketed to everybody,” said Jeffrey Berns, a Tarzana, California, lawyer, whose firm has filed 60 federal class actions against major lenders over option ARMs. He noted that these clients range “from doctors and lawyers to field workers.”

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• Paul Kiesel, a Beverly Hills, California, lawyer, also represents borrowers suing over option ARMs. His firm has filed 56 class actions, most of which revolve around TILA violations, all on behalf of borrowers who stand to lose their primary residences. He estimated that half had loans with low interest rates before signing up for the option ARMs. “They were eligible for far better mortgages than they got,” he said.

• If the terms are not adequately disclosed, a mortgage is rescindable, but the general public may not be aware of that, Kiesel said. He and his colleagues have built a consortium of firms to work together—which is necessary because “we have taken on the largest lenders in the United States, and they have unlimited resources,” he said. “We are facing such an imminent threat” of people being forced out of their homes that lawyers have a responsibility to take on this type of litigation.

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• The problem is acute in Cleveland, where foreclosure rates are among the highest in the country. Cleveland lawyer Edward Kramer and his firm have more than 25 cases pending over predatory-lending practices, most arising from foreclosure actions. [...] More recently, the Cleveland-based public-interest law firm Housing Advocates, Inc., which Kramer directs, filed a complaint with the Ohio Civil Rights Commission against Argent Mortgage Co. for racial discrimination, claiming that the company offered loans that were likely to result in foreclosure in mostly African-American neighborhoods. The commission investigated and found that the evidence substantiated the alleged discrimination claim. [...] (Housing Advocates, Inc. v. Argent Mortgage Co., (CLE)H4(38066)05212007, 05-07-0938-8 (Ohio Civ. Rights Commn. Mar. 13, 2008).) A hearing is to follow. [...] The complexity of mortgage securitization—determining which company is doing what—makes things difficult for plaintiffs, Kramer said, because “no one’s taking personal responsibility.” [...] “It’s not an easy situation,” Kramer said, but “if we could get lawyers to take a case or two, we could have a tremendous impact in the community.”

For more, see Predatory-lending litigation looms.

For other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans, Go Here and Go Here.

Go here for other posts on alleged discriminatory subprime lending.