|As part of an agreement to settle a civil complaint for charging excessive interest on residential mortgage loans, a Washington Mutual subsidiary paid California’s investment and financing authority $800,000 — which is less than 10% of the amount the state was originally seeking.
The California Department of Corporations originally sought $9 million in civil penalties when it announced in December 2002 that it had filed a suit in the Superior Court of Sacramento County against Long Beach Mortgage, a subprime-lending arm of WaMu.
The suit came about when a regulatory examination ordered by the Department reportedly revealed that Long Beach charged interest on residential loans for an extra day prior to the loan closing. At that time, the Department said that under California law, mortgage lenders could not begin charging interest until one day before the loan closed. The audit reportedly found that on 3,618 loans made between Dec. 14, 1999 and Jan. 31, 2002, Long Beach charged consumers excess interest totaling $625,757.22.
Years prior to the suit, the Anaheim, Calif.-based subsidiary had agreed to cooperate by changing its policy and practice to prevent excess charges from recurring after an examination in 1999 found overcharges on a much smaller scale, the Department said.
However, the regulating authority said its agreement to the $800,000 settlement was due in part to Long Beach’s timely refund of the total interest overcharges to consumers, and also because of the company’s “internal changes to business practices to prevent overcharges from occurring in the future.”
“Long Beach Mortgage is pleased we were able to work cooperatively with the California Department of Corporations to bring this matter to a resolution,” WaMu spokeswoman Libby Hutchinson told MortgageDaily.com — adding that the law has changed to permit the lender to charge interest for one day prior to loan closing.
“We provided customers with a prompt refund and we remain committed to serving our customers in a fair and timely manner,” she concluded.
Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.