Mortage lawsuit holds ‘potential nightmare’ for banks

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Happy Independence Day. Reader Tsky pointed out this Reuters story in the comment section, and it’s worth a post: ‘A lawsuit filed by a Wisconsin couple against their mortgage lender could have major implications for banks should a U.S. appeals court agree that borrowers can cancel their loans en masse when their lenders violate a federal lending disclosure law.’

The suit in question was filed by a Wisconsin couple who said they believed their ‘teaser rate’ -- 1.95% -- was locked in for five years. Instead it more than doubled by their second monthly payment. Before you dismiss their argument, here’s the crucial ruling: A federal judge ruled that their lender, Chevy Chase Bank, had violated the Truth in Lending Act and that thousands of other Chevy Chase borrowers could join them as plaintiffs.

More from Reuters: ‘The judge transformed the case from a run-of-the-mill class action to a potential nightmare for the U.S. banking industry by also finding that the borrowers could force the bank to cancel, or rescind, their loans. That decision was stayed pending an appeal to the 7th U.S. Circuit Court of Appeals, which is expected to rule any day.’

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Reuters
Hat tip: Tsky via comments, link via Patrick.net