Seattle, WA: The Seattle Mortgage Co, a unit of Seattle Bank, is facing a class action lawsuit over allegations that it was illegally paying fees to its mortgage brokers and overcharging borrowers on the cost of loan originations.
The lawsuit was filed in California, and lawyers representing the plaintiffs believe as many as 7,800 senior citizens in that state may have been affected by the mortgage company's alleged illegal lending activities.
According to media reports, the focus of the suit is the practice of "reverse mortgage lending." This refers to a practice whereby mortgage holders receive monthly payments against the equity in their homes, rather than paying down the mortgage with regular payments. When the mortgage holders die or sell their homes, they or their estates are charged the full value of the mortgage as well as any other costs incurred.
Also known as a home equity conversion mortgage, this option is available only to people over the age of 62 years. It is heavily regulated by the department of Housing and Urban Development (HUD).
However, while it is the intent of the regulation to ensure that mortgage brokers provide their customers with the best financial advice based on the customer's needs, it is possible that the brokers could be influenced by the fees they receive from the banks selling the loan products.
If the court finds in favor of the plaintiffs, reimbursement of costs and damages may total as much as $56 million, the lead attorney representing the plaintiffs has said.
