A lawsuit has been filed and is seeking class action status against the bank for allegedly being dishonest in explaining its option adjustable rate mortgages to consumers. The suit was filed in Federal Court in San Jose and claims Wachovia's deceptive conduct and concealment led customers to lose their homes through foreclosure. The suit was filed on behalf of consumers who have taken out option-ARM loans from the bank over the past four years.
The suit claims the bank did not disclose the actual interest rate on its loans, which were often raised immediately and significantly after closing. It also says if borrowers made payments at the teaser rate, the principal on the loan would actually increase, which is called negative amortization.
