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Buyers Sue Bank: Bad Prequalification Cost Them Money, They Contend

Posted Feb 20, 2009 6:42 PM CST
By Martha Neil

Several buyers who say they were somehow prequalified to purchase expensive Seattle condos utilizing mortgages they couldn't possibly afford are now suing the bank that allegedly put them in this position.

By prequalifying them, JPMorgan Chase bank set the plaintiffs up to lose $175,000 in earnest money when, inevitably, they failed to qualify for the actual mortgage, the plaintiffs argue in a King County Superior Court suit filed Wednesday. Under a Washington state law, condo developers can retain the earnest money deposit if a buyer backs out, reports the Seattle Times.

The bank apparently declined to comment. However, a real estate agent at upscale Bellevue Towers says the developer has no interest in selling to anyone who can't afford a unit. Among the condo units at issue in the suit, one reportedly was priced at $724,000 and another was $1.5 million.

Attorney Jim Robinson, who is representing the plaintiffs on a pro bono basis, also criticized the Washington law on earnest money. "If you take that law and combine it with a lousy real-estate market, guess what happens? You've got developers running around trying to grab people's earnest money," he tells the newspaper. "It's going on all over the state."

Comments

1.

Maybe I'm a jerk, but I don't feel sorry for them
Feb 21, 2009 9:49 AM CST

Shouldn’t there also be some personal accountability, though? Sure, the bank did a really, really lousy thing, especially to folks for whom English is not their first language. However, the Seattle Times article reported that the couple together made less than $4,000 per month. Their mortgage would have been along the lines of $7,000 per month. They couldn’t see that they had a deficit of at least $3,000 per month, not even considering how other necessities like taxes, electric, gas, and food would be paid for?!?! This type of ignorant thinking helped contribute to the current mess we are in right now. It is a bit hard to feel sympathetic for them.

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2.

B. McLeod
Feb 21, 2009 2:01 PM CST

The only reason these predatory lending institutions can succeed at their scams is that morality in this country has shifted such that there are millions of people looking to take out loans they really don’t intend to repay.  The borrowers think they are the ones working a scam, but instead, the lenders shake them down for what little money they may actually have.  The greedy feed on the greedy (until the government bailout, when they feed on everyone who pays taxes).

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3.

Jose
Feb 23, 2009 7:01 AM CST

If they can sue the bank I want to sue the Plantiff and every other stupid person who bought a house they couldnt afford and they took my tax dollars to get out of this mess.

The plantiff should be getting sued.

Don’t bail out dumb homeowners and the lawyers who take these cases should be laughed out of town.  These type of lawyers are perpetuating the problem by letting the public think it is ok to buy a $300,000 house on a $40,000 a year job.

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4.

whatever
Feb 23, 2009 7:32 AM CST

this is not predatory lending scams.  these are borrowers who are using the system to get what they don’t deserve. 

no bailouts to either the banks or the homeowners.  let them both go bankrupt.

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5.

multiple naughty parties
Feb 23, 2009 8:03 AM CST

I think we can blame the developer, the bank, and the plaintiffs all for this one.  The developer should have known they couldn’t afford the condo, the bank should not have falsified numbers, and the plaintiffs should have known they couldn’t afford the condos.  That being said, only the plaintiffs are financially punished here.  That does not seem right.  I would be interested to see whether some of the alleged facts provide some sort of relief against the bank due to missing some statutorily obligated steps in the mortgage process.

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6.

tim
Feb 23, 2009 9:01 AM CST

The banks didn’t falisy anything.  The banks simply didn’t check or care what the borrower’s credit was.  The majority of these borrowers lied on the credit applications about their income.

If the plaintiff’s want to sue.  The banks should go back and verify the income of all the borrowers and sue every single borrower who lied for fraud.

How are the banks not punished financially when they borrower is a dead beat, how is the developer not hurt when the deadbeat goes into foreclosure.

Any why should I have to pay to clean up my bum of a neighbor’s mess.

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7.

condo flippers
Feb 23, 2009 3:12 PM CST

I’m a BK debtors lawyer and normally very sympathetic to cases like this.  But the plaintiffs in this case should realize that by using what I’m guessing were no-doc loans they were pushing up housing prices for everybody, with the hope of flipping and making a quick buck.  Divorce and unemployment has often been a trigger for a BK but with the drop in home values we’re all seeing more clients who would normally sell the house and move on ending up bankrupt instead.  These are people who had relatively normal loans: they put some money down on full-doc loans for houses they moved into and intended to keep paying.  These condo flippers have really thrown this group under the bus as they’ve ended up with a large negative net-worth.  Of course it’s tough to believe the creditor or their agents weren’t somewhat complicit in this given what looks like a pattern.  The real shame here is the economic mayhem both these groups are unleashing on everybody else.

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