Predatory Lending

Predatory conduct is rampant in the mortgage lending industry. Home mortgage borrowers are frequently the victims of illegal practices that increase the cost of obtaining a home mortgage or home equity loan. Attorney Eric Calhoun has represented borrowers both individually, and on behalf of large groups of borrowers in class actions, against lenders and others for violating consumer protection laws designed to deter and remedy these abuses. Mr. Calhoun has been co-counsel in class action lawsuits in which settlements aggregating in excess of $100,000,000.00 have been obtained for consumers.

One of the federal laws protecting consumers from predatory lending practices is the Real Estate Settlement Procedures Act (“RESPA”). RESPA was enacted to ensure that consumers throughout the nation are protected from unnecessarily high settlement charges caused by abusive practices by lenders, settlement service provides and others. RESPA prohibits, among other things, illegal kickbacks that are paid in exchange for the referral of real estate business. Section 8(a) of RESPA provides that “no person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of real estate settlement service involving a federally related mortgage loan shall be referred to any person.”

Section 8(b) of RESPA regulates fee splitting and unearned fees that tend to unnecessarily increase settlement service charges and the cost of obtaining a mortgage loan. Section 8(b) of RESPA provides that “no person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.” RESPA also prohibits the paying of kickbacks through the use of sham affiliated business arrangements (“ABAs”). The use of sham entities to redirect payment for settlement services to third parties referring mortgage loan business to lenders and others is increasingly common abuse in the mortgage industry.

Predatory lending also includes violations of the federal Truth In Lending Act (“TILA”). TILA was designed, among other things, to protect mortgage loan consumers by requiring clear and accurate disclosures of key terms of the lending arrangement as well the cost of the loan. TILA requires timely and accurate disclosure of the finance charges to be incurred in the loan and the annual percentage rate (“APR”) payable on the loan. Inaccurate disclosures can induce borrowers to obtain loans with excessive costs and payments. The Home Ownership and Equity Protection Act (“HOEPA”) requires accurate disclosures of the APR for high interest rate, high closing cost loans at least 3 business days prior to closing of the loan.

If you think you may have been a victim of predatory lending or other consumer fraud, please contact Eric Calhoun.