A new lawsuit goes after major lenders for allegedly overstating what was owed on home equity loans after they fell into foreclosure.
A series of suits filed in federal court in Brooklyn allege that lenders and their partners systematically overcharged homeowners during foreclosure proceedings, Bloomberg reported. The suits are seeking class-action status.
The defendants improperly calculated interest on home equity loans, applying compound interest instead of simple interest during the period between when lenders requested court authorization for a sale and when that motion was granted, according to the lawsuits.
The lawsuits name major financial institutions as defendants, including Fannie Mae, Deutsche Bank, Bank of New York Mellon, Mr. Cooper Group and Shellpoint Mortgage Servicing.
The State of New York Mortgage Agency, a public benefit corporation providing low-interest loans to first-time homebuyers, was also named, as were five law firms and MTGLQ Investors, which specializes in purchasing pools of troubled home loans.
Attorney Mark Anderson, whose firm filed the suits, claims “countless mortgage holders were deprived of surplus funds” due to these alleged collective failures.
One highlighted case involves a woman who serves as legal guardian for her 89-year-old mother. During foreclosure proceedings on the mother’s home, the lawsuit alleges improper interest calculations amounted to over $13,300 in overcharges.
The winning bidder at auction initially offered $785,000 for the property but then assigned the bid to lender Deutsche Bank, which purchased the home for just $207,000, according to the suit. With the seller’s loan balance standing at only $168,000, the lawsuit claims she should have received approximately $591,000 from the sale.
Representatives from Deutsche Bank and Bank of New York Mellon clarified to Bloomberg that their roles were limited to serving as trustees, with no direct responsibility for foreclosure processes. Goldman Sachs (owner of MTGLQ), Shellpoint and the law firm Eckert Seamans declined to comment, while other defendants did not immediately respond to inquiries.
— Holden Walter-Warner
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