New class action lawsuit claims non-compliance with mortgage forbearance mandates | Bilzin Sumberg

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Millions of homeowners have signed up for forbearance under the CARES Act, which gives homeowners with federally guaranteed mortgages the right to obtain a temporary reduction or suspension of mortgage payments through a abstention. During the forbearance period, the financial institution cannot charge fees, penalties or interest beyond the amounts included in the owners’ regular monthly mortgage payments. A suspected new class action lawsuit claims a bank, however, is doing just that.

PNC Bank customers recently filed a class action lawsuit against the bank in federal court in Maryland over the bank’s handling of forbearances granted under a Fannie Mae COVID-19 deferral of payment agreement. The plaintiffs accused the bank of violating its deferral agreements, which gave homeowners extra time to make their mortgage payments during the pandemic.

According to the plaintiffs, the bank agreed to update their mortgages and delay any repayment obligations for missed monthly mortgage payments without borrowers accumulating interest or penalties. Customers would not be responsible for any amounts past due before the mortgage due date, the sale of the mortgaged property, or the repayment or refinancing of the mortgage. The plaintiffs allege that the bank violated its agreement by adding the total overdue payments to the outstanding principal balance of the loan, effectively charging the plaintiffs twice and unduly increasing the amount of their mortgages. The plaintiffs also allege violations of the Truth-In-Lending Act, alleging that the mortgage statements sent by PNC to its clients included inaccurate principal balances and did not reveal the existence of prepayment penalties for deferred amounts paid by anticipation. Additionally, the plaintiffs allege a violation of the Maryland Consumer Protection Act, which prohibits unfair and deceptive business practices in extending consumer credit and / or collecting consumer debt. The putative group alleges, among other things, that PNC distorted the application of deferred payments and did not disclose the additional interest charges. Representatives of the group, on an individual basis, also assert a claim for violation of the Real Estate Settlement Practices Act (“RESPA”) on the basis of the bank’s alleged failure to respond appropriately to the written opinions of the plaintiffs regarding their mortgage account.

The lawsuit seeks declaratory and injunctive relief, actual damages, restitution and statutory damages under fair loan laws, and also calls for their attorneys’ fees to be assessed against the bank.

Since the start of the COVID-19 pandemic, the focus has been on forbearance requirements. To date, courts have looked less at whether financial institutions take into account the specific details of mandatory forbearance periods. The putative class action lawsuit filed against PNC could herald a next wave of lawsuits arguing failure to follow these key details.


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