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| A Maryland-based bank has been sued by a borrower who claims the lender deceived him when it waived closing costs on a second mortgage, then charged the fees when he prepaid the loan. Attorneys for the borrower are seeking class-action status.Andrew Bednar said he borrowed $17,000 from Provident Bank against his Essex, Md., home in August 2003. He said the bank agreed to waive $681 in what it termed “closing costs” provided that he kept the loan for three years.
But he claims the bank did not tell him that prepayment penalties on secondary loans are illegal in the state. After two years, Bednar refinanced the loan and Provident charged him $681 — leading to the lawsuit. Provident Bank says it did nothing wrong. “It is our position that any closing costs we collect in connection with our home equity products are permitted under Maryland law,” said Vicki Cox, a bank spokeswoman. “These charges are not prepayment penalties. We plan to defend ourselves vigorously against these charges.” While Maryland law allows prepayment penalties on first mortgage loans, the state’s Secondary Mortgage Loan Law — perhaps one of the nation’s most consumer-oriented — limits lenders to collecting an origination fee and a broker’s fee that cannot exceed 10 percent of the loan’s net proceeds. If a lender collects an origination fee on a secondary loan, the lender cannot collect any other fees, according to Bednar’s complaint. Bednar’s lawsuit, filed in Baltimore City’s circuit court, charges that the state-chartered bank violated Maryland’s Interest and Usury Law, the state’s Secondary Mortgage Loan Law and the Credit Grantor Closed End Credit Provisions. Bednar said that Provident has made thousands of residential mortgage loans in Maryland and he is seeking class-action status. |
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Lisa D. Burden is a legal analyst for MortgageDaily.com and holds a law degree from the University of Maryland. She is currently a freelance journalist who previously wrote for Institutional Investor publications and the Baltimore Daily Record. e-mail Lisa at: burdenlisa@yahoo.com |
