Worried Lenders Watch for Appellate Ruling in Mortgage Class Action
Posted Feb 27, 2008 11:46 AM CDT
By Debra Cassens Weiss
A federal appeals court will soon decide a closely watched case that seeks to undo mortgage loans that are based on mistakes in disclosure documents.
A Wisconsin couple is seeking class action status for their suit filed a few years ago against Chevy Chase Bank. Worried lenders fear a negative precedent could spur new suits by borrowers struggling to pay subprime mortgages, the Washington Post reports.
At stake is “the hefty cost of reimbursing all mortgage interest, closing costs and broker fees to groups of homeowners who uncover even minor mistakes in their loan documents,” the story says.
The homeowners, Bryan and Susan Andrews, are asking for rescission under the Truth in Lending Act. They refinanced their mortgage loan after receiving a mailing advertising a 1.95 percent interest rate. That teaser rate lasted for only a month and the rate soon jumped to more than 8 percent.
The Chicago-based 7th U.S. Circuit Court of Appeals based in Chicago could rule within the next few weeks, according to lawyers involved in the case. Chevy Chase says it issued about 7,000 loans that were similar to the one it gave the plaintiffs, and a class action could result in irreparable harm.