Loan Firm Ordered to Reduce Impound Fees

Twenty-six states, including California, have reached an agreement with Fleet Mortgage Corp. and Fleet Real Estate Corp. requiring the companies to change the way they calculate homeowners’ contributions to mortgage impound accounts, state Atty. Gen. Dan Lungren has announced.

The two companies, which are subsidiaries of the nation’s second-largest mortgage lender, Fleet/Norstar Financial Group Inc., will spend the next year refiguring the amount of monthly impound payments due and will no longer be allowed to collect amounts above the legal level.

Lungren estimates that consumers nationwide will save $150 million and that California homeowners will save approximately $15 million as a result of the action.

Under the agreement, Fleet will offer consumers the choice of a refund of excess impound funds or a credit toward the next year’s scheduled expenditures.

It is estimated that refunds or offers of credit will vary between about $50 and $400 per household, depending upon the specifications of each homeowner’s individual contract and the amount over-collected.

The states’ action, filed in Federal District Court for the Southern District of New York, alleged that the method used by Fleet to figure the amount homeowners must pay into their impound accounts violated both the terms of consumers mortgage documents and the federal Real Estate Settlement Procedures Act of 1975 (RESPA).

Many home mortgages require buyers to establish an impound account so that money necessary to pay taxes and insurance is available when payments become due.

RESPA requires that at least once each year, the amount of money held in the impound account must fall to an amount no greater than two months’ worth of the estimated total annual payments for all impound items. Under the terms of some mortgage contracts, the impound balance may be required to fall below the two-month amount.