By October 6, 2011 0 Comments Read More →

Firms Accused of Fleecing VA Mortgage Borrowers

Thirteen lenders — including Wells Fargo, JP Morgan Chase and Bank of America — allegedly collected illegal fees worth millions of dollars from VA borrowers.

In hundreds of thousands of VA refinancing transactions, the lenders allegedly charged an additional $300 to $1,000 per loan, according to claims made in a lawsuit by two whistleblowers. In the last ten years, more than 1.2 million refinanced loans have been made to veterans and their families. Up to 90 percent of them may have been affected by the alleged fraud, according to the suit.

VA lenders are allowed to charge borrowers “reasonable” fees and costs, but the department limits closing costs and bars lenders from charging for things such as attorneys’ fees and other settlement costs.

The suit alleges the lenders flouted the regulations by misnaming fees.

“By concealing the unallowable fees they charged, the banks benefited in two ways,” alleged Mary Louise Cohen, a Washington, DC, attorney and one of several lawyers representing the whistleblowers. “The banks collected the illegal fees from veterans, and they obtained hundreds of millions of dollars in loan guarantees they otherwise wouldn’t have received.”

“Knowing they weren’t allowed to charge the fees,” alleged co-lead counsel in the case, alleged James E. Butler, Jr., with the Atlanta law firm Butler, Wooten & Fryhofer LLP., “the banks and mortgage companies inflated allowable charges to hide these illegal fees without telling the veterans who were the borrowers or the VA they were doing so.”

Earlier this year, subsidiaries of Bank of American and Morgan Stanley agreed to pay more than $22 million to settle claims they violated the Servicemembers Civil Relief Act, a law that safeguards active-duty military personnel from improper foreclosure.

In another case, JP Morgan Chase said in April  it would pay $56 million to settle allegations it overcharged military families and improperly foreclosed on nearly a dozen service members.

Additional information can be found at VAMortgageFraud.com.


About the author: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, from Lenderama and Bigger Pockets to the Huffington Post and Motley Fool. A former newspaper and magazine writer, he is also content director for a leading VA lender. Follow him on Google+.

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