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Several Class Actions Filed Against MD Lenders

Several Class Actions Filed Against MD LendersConsumer Protection Act violations alleged

April 10, 2006

By LISA D. BURDEN
Washington, D.C., correspondent for MortgageDaily.com

One of Maryland’s most prominent class action attorneys has trained his sights on mortgage lenders in Maryland, setting up a predatory lending unit within his law firm, running newspaper ads and accusing an increasing number of lenders in court of charging excessive and illegal fees. But Maryland lenders and mortgage associations say the lawsuits have no merit and will hurt consumers and the smaller mortgage lenders.Lawyers in Peter G. Angelos’ office have filed a half-dozen class action lawsuits against banks such as Provident Bank of Maryland and mortgage companies such as Baltimore, Md.-based Admiral Mortgage and have declared there are more to come. Angelos rose to prominence after obtaining multi-million settlements against the asbestos and tobacco industries. The Maryland firm’s court filings come in the wake of attempts by regulators to quell predatory lending on a nationwide basis by obtaining agreements with big players such as Ameriquest. Mortgage Co. that ended in a $325 million settlement.

But Maryland’s lending community is critical of the firm’s efforts.

“It’s a witch hunt,” said Thomas Shaner, the executive director of the Maryland Association of Mortgage Brokers. “What they are finding is technicalities of law that they are twisting.”

Emphasizing that the consumers who obtained the loans agreed to defer certain fees associated with closing the loans, Shaner said, “It’s a tort lawyer just trying to maximize income, to support his baseball team.”

Angelos is the owner of the Baltimore Orioles baseball team.

In an earlier interview, lead plaintiff attorney John A Pica Jr. said there is a lot of predatory lending in the state. Many of the lawsuits rest upon the attorneys’ interpretation of two Maryland laws — Maryland’s Secondary Mortgage Loan Law and Maryland’s Consumer Protection Act.

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 can not exceed 10 percent of the loan’s net proceeds. If a lender collects an origination fee on a secondary loan, the lender can not collect any other fee.

Several of the complaints allege that the lenders’ inducement to consumers — that closing costs would be waived on home equity loans if the borrowing homeowner kept the loan for three years — were moot because Maryland’s lending laws forbid prepayment penalties on second mortgages.

The complaints allege that the lenders violated Maryland’s Consumer Protection Act by engaging in unfair and deceptive trade practices.

In an effort to obtain clients, Angelos is running ads in Baltimore’s daily newspaper, The Sun. The ads, featuring a picture of a perplexed black couple, explain that Angelos has established the predatory lending unit “in response to a growing problem in the mortgage industry.” The ads mention that the firm will review loan documents at no cost to determine if the consumer has been charged an illegal fee or prepayment penalty on their first or second mortgage.

Angelos’ firm often uses newspaper ads to obtain clients.

But Shaner cautioned that the smaller mortgage brokers would be hurt by the filing of the lawsuits. “It’s going to hurt the little guy,” he said.

The president of the Maryland Mortgage Banker Association was also skeptical of the claims made in the firm’s lawsuits, finding that consumers will be hurt. “Our understanding is that certain actual third party costs and governmental charges for which borrowers are liable at closings of second mortgage loans were deferred at the option of the consumers,” Glen Jackson said. “These deferrals enabled the consumers to close their loans without then paying for such items. To assert that these charges are prepayment penalties mischaracterizes the nature of these expenses.

“If deferrals of these expenses will not be permitted, consumers in Maryland will be required in the future to pay these third party costs and governmental charges up front. This would have an obvious adverse effect on consumer borrowers in this state,” Jackson added.

RELATED:

Credit Report, Doc Prep Fees Land Lender in Litigation
A Baltimore, Md.-based company has been accused in a class-action lawsuit of charging excessive and illegal fees in connection with second-mortgage loans.


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

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