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Lawsuits accuse mortgage lenders of rip-offs
By Adrianne Appel
Updated Mar 27, 2009 - 11:51:00 AM

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?The suit, still under way, may help correct the egregious, demoralizing practices that too often turn the so-called American dream of homeownership into a nightmare.?
?Julia Bond,
NAACP Chairman

BOSTON (IPS/GIN) - Many of the biggest mortgage lenders in the United States have engaged in systematic schemes that ripped off hundreds of thousands of families seeking to buy a home, refinance or foreclose, according to lawsuits filed on behalf of consumers.

Scores of class-action lawsuits, from the 1990s and up to today, detail the illegal and questionable practices used by mortgage-lending companies that pushed millions into bad mortgages, then into bad refinancing loans and then into foreclosures with unfair fees.

Julia Bond
The lawsuits have been filed by private attorneys and state attorneys general, and on behalf of non-profit organizations.

Ameriquest, Countrywide Financial, H&R Block and Option One, HSBC Finance and Wells Fargo are just a few of the companies that have been sued—some repeatedly—for masterminding or carrying out plans to defraud families.

“Many of the mortgage lenders taking advantage of people today are those who were the biggest perpetrators last time around,” said Jim Campen, executive director of Americans for Fairness in Lending.

HSBC, Britain’s largest bank, and its entities Household International and Household Financial and Beneficial, wrote hundreds of thousands of sub-prime loans in the United States that have been the subject of multiple class-action lawsuits.

The company has gotten into trouble for its mortgages and consolidation loans aimed at low-income people.

It was sued in 2002 by attorneys general and paid $484 million into a fund for harmed homeowners in all 50 states. It later settled with ACORN, and later with private attorneys. Complaints against the company are ongoing, according to Fair Finance Watch, a non-governmental organization.

HSBC, which operates in Canada and recently expanded to India and Brazil, has announced it planned to shut down its mortgage-related business in the United States due to a high rate of delinquency on its mortgages. It will lay off 6,100 U.S. workers.

According to a lawsuit filed in Illinois, HSBC found customers by scanning lists of people who held mortgages and also had high credit card balances with K-Mart, Best Buy, Costco and other retailers affiliated with HSBC that provided the lists.

After aggressive mailings and phone calls, HSBC would “trick” the homeowners into providing their Social Security numbers, which allowed HSBC to gain access to their complete credit histories, and use the information to talk people into high-interest consolidation loans, the suit said.

The loan amounts were so high—and with interest up to 20 percent—that they often far exceeded the value of the homes, and made it impossible for the family to ever refinance with a competitor, according to the lawsuit.

HSBC settled that lawsuit, denying any wrongdoing. It has since been sued by ACORN, the grassroots organization, and others.

HSBC has plenty of company.

“There are dozens and dozens of cases against Countrywide,” class-action attorney Jeffrey Norton said. He is suing Countrywide on behalf of thousands of plaintiffs who are being charged unfounded fees during loan modifications and foreclosure.

“When someone gets a loan modification agreement, there is one line that said ‘fees.’ It can be anywhere from hundreds to thousands of dollars. No one can get answers as to what the fees are comprised of,” Mr. Norton said.

After receiving many complaints, the National Association for the Advancement of Colored People (NAACP) filed suit against HSBC, Countrywide and 17 other big-name lenders in 2007, accusing them of charging higher mortgage interest rates to people of color.

The suit, still under way, may help correct the “egregious, demoralizing practices that too often turn the so-called American dream of homeownership into a nightmare,” NAACP Chairman Julian Bond said.

Named in the suit are: Ameriquest, Accredited Home Lenders, Bear Sterns, BNC Mortgage, CitiMortgage, Encore Credit, Fremont Investment & Loan, First Horizon, First Franklin Financial, GMAC, JP Morgan, Long Beach Mortgage Co., National City, Option One, Suntrust Mortgage, Washington Mutual Inc. and WMC Mortgage Corp.

“If Congress did a better job this could have been prevented,” Odette Williamson, staff attorney at the National Consumer Law Center, said about predatory lending. Housing advocates first noticed an escalation of discrimination and abuse in mortgage lending in the 1990s and brought their concerns to Congress.

“We hope that with the folks in there now that they realize the importance of getting stronger protection for consumers on the books, so we can prevent the next round of predatory lending,” Atty. Williamson said.

Cash-strapped attorneys general offices in the United States have devoted significant time and money to suing large lending corporations and trying to stop the abuses.

Attorneys general recently won a $325 million settlement against Ameriquest, writer of the most sub-prime loans in the United States due to nationwide predatory lending.


 


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