A new lawsuit is bringing attention to the issue of excessive mortgage default fees. The lawsuit claims that these fees have caused borrowers financial harm, resulting in damages to their credit scores. It also claims that some borrowers were forced into foreclosure. In some cases, the fees have been so high that they have prevented borrowers from making even minimum payments. If this sounds like your story, it may be time to take action.
Citibank charged excessive fees for default-related services
In a class-action lawsuit, Citibank has been accused of charging excessive fees to borrowers for a variety of default-related services, including property inspections and attorney fees. Citibank allegedly marked up these fees 100% and therefore profited from the fees by charging borrowers excessive amounts. The bank was able to charge these fees because they had a business model wherein they could charge borrowers on demand for services.
The decision was based on two different cases. In Martin, Citibank sought a summary judgment ruling. In that case, the bank was advised to refute local usury laws, and in Mahmoud, Citibank sought a summary judgment. Judge Straniere, however, upheld the plaintiffs’ claims in Mahmoud but raised questions about whether credit card issuers are entitled to use the federal statutory exemption.
Countrywide mortgage agreements allow it to charge delinquent homeowners for costs of bringing loans current
The lender is allowed to charge a delinquent homeowner for the costs of bringing the loan current if the homeowner fails to make the required payments. According to the lawsuit, this is a violation of the loan documents. The lender may charge the delinquent homeowner up to four times the flat-fee rate if the loan is not brought current within the agreed-upon period.
In the case of the Campbells, the foreclosure action commenced when they failed to make their mortgage payment. Countrywide asserted that they had the right to pursue the claim, but the Campbells argued that the unpaid escrow amounts were “claims” under the Bankruptcy Code. The Campbells argued that the unpaid mortgage payment and escrow amounts constituted the amount due on the loan. Regardless of whether the Campbells filed for bankruptcy, they owed the lender for past-due mortgage payments and escrow sums.
Pay-to-pay mortgage fees are much higher than the actual cost of processing transaction
Many homeowners are unaware that pay-pay mortgage fees are much higher than the actual cost of processing a transaction. These fees are billed at various points during the mortgage process. Most are related to closing costs, such as title insurance and loan origination. You should also consider the amount of time that you want to lock your mortgage rate – the shorter the period, the lower your closing costs will be.
The lender must earn a profit from these fees. No origination fee will typically result in a higher interest rate, which could cost you thousands over the life of the mortgage. This fee is sometimes called an underwriting or processing fee and is similar to an origination fee. Make sure to check the full list of closing costs and understand what each one will cost you. Beware of lenders who try to pass along the mortgage broker fee as the origination fee.
Pyramiding late fees is unfair to consumers
The Pyramiding of Late Fees is an unlawful practice. It occurs when a creditor applies late fees to more than one payment. In the above example, a late fee is applied to an initial payment, which is not a full payment. Then, the lender applies a later payment to the amount of the principal that was originally due. This is a violation of the Pyramiding of Late Fees rule, which prohibits pyramiding of late fees.
Mortgage loan servicers cannot charge additional late fees to future payments without notice. This is a deceptive practice and can make it difficult for consumers to catch up on their payments. Consumers should contact their mortgage servicer and report the practice to the Consumer Financial Protection Bureau to prevent further infringement of their rights. Pyramiding of late fees is unfair to consumers, and homeowners should send a Notice of Error to the mortgage company if they engage in this practice.