Homeowners Sue Over ‘Drive-By’ Property Inspections

CHICAGO (CN) – Elderly homeowners who have reverse mortgages are being charged excessive fees for unnecessary and illegal “drive-by” inspections, a class of consumers claims.

The lawsuit filed Wednesday in Chicago federal court says Nationstar Mortgage – operating under the name Champion Mortgage Company – pads its bottom line by “systematically side-stepping” Housing and Urban Development requirements and conducting multiple inspections of the same properties in a 25-day period.

“Champion targets elderly homeowners who have purportedly defaulted on some obligation under their reverse mortgages, then charges them repeated, unnecessary, and unreasonable ‘drive-by’ property inspection fees for inspections that may or may not have actually occurred, and to the extent they did occur, lasted only a few seconds,” the complaint states.

The drive-bys are scheduled by an automated system that “orders property inspections at pre-set intervals to maximize company profits, without regard to the results of the initial inspections that reveal there is no risk or problem whatsoever with the condition or occupancy of the property,” according to the lawsuit.

Homeowners are supposed to be notified of any inspection fees charged to their accounts, but “based on the process implemented, Champion ignores its duty to provide notice to the borrower [and so] plaintiff and reverse mortgage customers nationwide have and continue to be fleeced by Champion’s unnecessary inspections,” the complaint states.

Rena Nicholson – an 80-year-old homeowner from Chicago – is the lead plaintiff in the case, and says her home was “inspected” five times in November alone.

She says each inspection resulted in a $20 charge to her account, with three of the charges coming on the same day.

These charges add “hundreds, if not thousands, of dollars to plaintiff’s reverse mortgage balance over time when compounded by interest on the fees,” Nicholson says.

According to the complaint, a reverse mortgage is “a type of home loan for older, cash-strapped homeowners (62 years or older) requiring no monthly mortgage payments … [that] allow these homeowners to borrow against the equity in their homes while still continuing to live there and keep the title to their homes.” (Parentheses in original.)

The proposed class seeks damages for claims of breach of contract, negligence, and unjust enrichment. It is represented by Katrina Carroll of Lite, DePalma, and Greenberg in Chicago, and by Joseph G. Sauder of McCune Wright Arevalo in Berwyn, Pa.

Nicholson’s attorney declined to comment further on the lawsuit, and Nationstar did not respond Thursday to a request for comment.