Mountain State Justice
Predatory Mortgage Lending and Deceptive Home Sales

Mountain State Justice is committed to combating predatory mortgage lending in the state of West Virginia.  Predatory mortgage lenders target low-income and minority homeowners and solicit them into loans that exceed the value of their homes and that contain excessive and/or adjustable rates of interest.  Predatory lending practices, which result in impossibly high monthly payments for unsuspecting borrowers, make default and foreclosure likely on homes that have often been in families for generations.  MSJ attorneys seek to protect West Virginian homeowners from foreclosure through state and federal litigation, specifically targeted at assisting individual homeowners and creating positive legal precedent.  

While most of the predatory loans in the MSJ caseload involve the refinancing of property, a subset of MSJ’s predatory lending cases involve the fraudulent sale of defective mobile or stationary homes.  In these cases, real estate brokers team up with predatory lenders and appraisers who overvalue the home and hide defects from unsuspecting buyers.  The buyers are then left with a defective, sometimes uninhabitable home and a debt that they cannot afford to repay.  MSJ assists low-income victims of predatory lending in reaching a solution that enables them to live in a safe and secure home that they can afford.

Through the assistance of a grant from the Institute for Foreclosure Legal Assistance, Mountain State Justice conducts outreach to legal aid offices and credit counseling agencies around the state of West Virginia.  An MSJ attorney has conducted trainings and developed informational literature to educate providers and consumers about predatory lending, and inform them of the free legal services available at MSJ.  An MSJ attorney travels to offices throughout the state to provide legal services to individuals who cannot travel to the main office in Charleston because of mobility or other impairments.

Signs of Predatory Mortgage Lending

  • You were told that your loan was a fixed rate mortgage, but the payments started to rise after two or three years.
  • You were not told the terms of your loan, and the payments turned out to be much higher than you could afford.
  • The loan is for a higher amount than you think your house is worth.
  • The interest rate on your loan is extremely high.

Predatory Lending Cases & Decisions

Smith v. BAC Home Loans Servicing, LP, 769 F.Supp.2d 1033 (S.D.W. Va. 2011): MSJ represented the consumer in this case.  On summary judgment, the district court rejected Bank of America’s argument that federal law preempted the consumer’s claims under state law that the bank had engaged in illegal debt collection by making various misrepresentations when threatening foreclosure and otherwise collecting on the her loan.  Instead, the court agreed with the consumer that banks are subject to West Virginia’s consumer protection statutes.

Ausborne, et al. v. ABN AMRO, et al., No. 04-C095-S: MSJ recently finalized a favorable settlement on behalf of a class of individuals who had received loans in excess of the value of their homes based on fraudulently inflated appraisals.  As the result of this settlement, depending on their circumstances, class members received a reduction of their loan balance, a cash award, or the voiding of their loan.

Anderson, et al. v. Provident Bank, et al., No. 04-C-199-F: On April 19, 2007, MSJ finalized a favorable settlement on behalf of a class of individuals who had received loans far in excess of the value of their homes based on fraudulently inflated appraisals that the predatory lender had intentionally sought out.  As the result of the settlement, class members’ loans were voided.

Short v. Wells Fargo Bank of Minn., N.A., 401 F. Supp. 2d 549 (S.D. W. Va. 2005): MSJ represented the plaintiff borrower against the predatory lender’s motion for summary judgment.  The district judge denied the defendant’s motion, holding that there was an issue of fact regarding whether the defendants—the originating lender, the servicer, and the trustee of the holder of the loan—had engaged in a joint venture, making the defendants jointly and severally liable.  The judge further denied summary judgment on whether the defendants had a principal-agent relationship. 

Herrod v. First Republic Mortgage Corp., Inc., 218 W. Va. 611, 625 S.E.2d 373 (W. Va. 2005): In this case, MSJ represented plaintiff borrowers in the West Virginia Supreme Court of Appeals.  The Supreme Court reversed the lower court’s decision granting summary judgment to the defendant mortgage companies.  The Supreme Court held that summary judgment could not be granted on the plaintiff’s unconscionability claims, based on excessive fees and an inflated appraisal.  The court further held that summary judgment was precluded on whether the assignee of the mortgage was liable under theories of joint venture and agency.  MSJ represented the plaintiff borrowers in this case.

Marks v. Global Mortgage Group, Inc., 218 F.R.D. 492 (S.D.W. Va. 2003): MSJ represented the plaintiff borrower in this action against predatory lenders.  In a dispute about whether the plaintiffs could obtain information about the lender’s pattern and practice of predatory lending to other customers, the district court agreed with the plaintiffs and ordered the defendants to disclose the information.  The court held that the Gramm-Leach-Bliley Act permits the discovery of financial information of an institution’s customers and that the discovery of information about other customers was relevant to the plaintiffs’ claims.

Osburn v. Community Home Mortgage, LLC, et al., No. 02-C-1164: MSJ filed this suit on behalf of a single mother who had been tricked into a predatory mortgage that contained a hidden enormous balloon payment that she had no ability to pay.  After entering into the loan, the loan servicer began harassing her and engaging in abusive debt collection practices.  After trial, the jury awarded Ms. Osburn $675,000 in actual and punitive damages, which was upheld on appeal.

Toppings v. Meritech Mortgage Servs., Inc., 212 W. Va. 73, 569 S.E.2d 149 (W. Va. 2002): MSJ represented the plaintiff before the West Virginia Supreme Court, which held that an arbitration clause designating a decision maker selected solely by the lender is unconscionable and unenforceable, because of inherent bias in the decision making system.

Harper v. Conseco Finance Servicing Corp., et al., No. 01-C-1341: MSJ filed this suit on behalf of victims of a predatory lending scheme who were tricked into an adjustable rate mortgage that they could not afford, with a principal in excess of the value of their home.  After trial, the jury awarded Mr. and Mrs. Harper $693,000 in actual and punitive damages. The judge then found the loan contract unenforceable, ordered that the deed be released, and ordered the defendants to pay a civil penalty.

Arnold v. United Cos. Lending Corp., 204 W.Va. 229, 511 S.E.2d 854 (W. Va. 1998): MSJ represented the plaintiff class before the West Virginia Supreme Court, which held that loan brokers have a duty to provide disclosures of options and risks to borrowers, as well as a written contract.  The Court further held that the arbitration agreement in the loan contract was unconscionable. 

Smith v. BAC Home Loans Servicing, 769 F. Supp. 2d 1033 (S.D.W. Va. 2011): In this case, MSJ represents the borrower in an action challenging Bank of America’s abusive mortgage loan servicing.  The court held that the borrower’s claims under the West Virginia Consumer Credit Protection Act were not preempted, and thus were not barred, by the federal National Bank Act.  The court held that the NBA only barred claims that would disrupt the bank’s business, and that the plaintiff’s state consumer claims could proceed.

 

Mountain State Justice 
304.344.3144 or 800.319.7132  Fax: 304.344.3145