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November 11, 2011 at 08:02 AM
As the nation honors military personnel on Veterans Day, apparently 13 banks face a lawsuit alleging they cheated veterans by charging illegal fees on mortgages. At the same time, the Justice Department announced a settlement with Bank of America on charges that the bank illegally foreclosed on service members. In that case, there is an ongoing review to determine if other people in the military were wrongly foreclosed on.
MarketWatch reported that the lawsuit, made public in fedreal court in Atlanta in October, was brought under the False Claims Act by two mortgage brokers, and accuses 13 major banks and mortgage companies of cheating not just veterans, but taxpayers as well.
Wells Fargo Bank, Bank of America, JPMorgan Chase Bank, GMAC Mortgage, CitiMortgage, SunTrust Mortgage, Washington Mutual Bank, PNC Bank (which acquired National City Mortgage Co.), Countrywide Home Loans, Mortgage Investors Corp., First Tennessee Bank (which acquired First Horizon Home Loan Corp.), Irwin Mortgage Corp. and New Freedom Mortgage Corp. were all named in the suit.
Veterans are assisted by the Veterans Administration to obtain cheaper home loan refinancing with fewer requirements. The government, on behalf of American taxpayers, also guarantees up to 25% of each loan if a veteran defaults or forecloses. According to VA rules, lenders may charge veterans for recording fees and taxes, fees for a credit report and other “reasonable and customary amounts,” but not for attorneys’ fees or settlement closing fees in refinancing transactions involving VA loans.
The suit alleges that banks called attorney’s fees “title examination fees” and, in hundreds of thousands of refinancing transactions, collected anywhere from $300–$1,000 per loan from unsuspecting veterans. Over the last 10 years, that could amount to as many as 90% of the more than 1.2 million refinanced loans made to veterans and their families.
Mary Louise Cohen, one of the attorneys representing the whistleblowers, said in a statement, “By concealing the unallowable fees they charged, the banks benefited in two ways. The banks collected the illegal fees from veterans, and they obtained hundreds of millions of dollars in loan guarantees they otherwise wouldn’t have received.”
