Circuit Court Judge Sues Mortgage Lenders For Predatory Lending Practices

for-sale-sign-313291-m.jpgToo often, bankruptcies are the result of predatory lending. Lenders find people who are vulnerable and give them loans that they could never afford to pay back, such as loans with extremely high interest rates, extremely high fees, or with loan prices that are not negotiable. The people then use these loans to purchase cars or homes. Then when they (inevitably) default, the lenders harass them and threaten to foreclose or repossess. The people who borrowed then often file for bankruptcy.

You do not need to be poor or have little education to be the victim of predatory lending — sometimes you can even be a circuit court judge. Such may be the case with Greenbrier County Circuit Judge James Rowe, who is suing Aurora Commercial Corp. (formerly Aurora Loan Services, Inc.) and Nationstar Mortgage, LLC for predatory lending practices.

In 2005, Judge Rowe and his wife purchased property in South Carolina. Before doing so, they entered into an adjustable rate note with TM Capital Inc. for $626,250. At some point later, Aurora became the loan holder and transferred the loan and the right to collect payments to Nationstar in 2012. In March 2012, Nationstar allegedly informed the Rowes that the rate had changed, from the agreed-upon 4.625 percent to 6.625 percent. In May 2012, the Rowes sent a letter to Nationstar requesting an audit and a recalculation of the interest rate since 2010. In June 2012, Nationstar sent the Rowes a notice of default.

Judge Rowe and his wife responded by filing a lawsuit, noting that under the federal Truth in Lending Act (TILA), lenders who regularly extend consumer credit with a finance charge must disclose certain key loan terms. Since Nationstar allegedly failed to do so, the Rowes had the right to rescind their mortgage loan, which they did in their May 2012 letter. Although the Rowes repeatedly tried to bring the issue to Nationstar’s attention, Nationstar never responded. The Rowes seek a permanent injunction, preventing Aurora or Nationstar from exercising remedies under the deed of trust (including, presumably, foreclosure).

Given Judge Rowe’s high-profile stature, his situation may shed light on harmful practices done to millions of people throughout this country. In addition to predatory lending, lenders have often confused and frustrated their customers by repackaging their mortgage loans and selling them to other lenders — often with little to no notice. The customers then pick up their loan statements and see names that they have never heard of.

If you experience this situation and cannot rescind your mortgage loan, one option you have is to file for Chapter 13 bankruptcy. While both Chapter 7 and Chapter 13 bankruptcy have an automatic stay to protect you from foreclosure efforts, only Chapter 13 allows you to pay down your mortgage loan over a three- to five-year period. Furthermore, if you have more than one property, in Chapter 13, you can exercise the option known as “cramdown.” Cramdown allows you to pay only what the property is worth, rather than what is owed on the loan. This option can be used on second properties (not on primary residences) or on cars purchased at least 910 days ago. For more information, ask a West Virginia bankruptcy attorney.

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