SAN FRANCISCO (CN) – After using automated valuation models to overvalue homes to justify bigger loans and fees during the real estate boom, Citibank now uses the same programs to reduce credit available on home equity lines, even on homes that have not decreased significantly in value, according to a federal class action.
David Levin sued on behalf of homeowners whose credit limits Citibank reduced due to declining home values in the area near their properties. Levin claims that his home value did not actually decrease enough for Citibank to reduce his credit limit. He alleges violations of the Truth-in-Lending Act and breach of contract.
Levin claims Citibank uses “automated valuation models” to track home values in general geographical areas, and has sent thousands of form letters to mortgage-holders who live in regions with declining home values, informing them it is reducing their home equity credit limit.
He claims the home loan industry manipulated similar automated valuation models to overvalue real estate to justify larger loans and fees, which helped create the current mortgage meltdown.
The models allegedly remain just as susceptible to manipulation now that the industry seeks to reduce outstanding credit lines and their exposure to the housing crisis.
Citibank received more than $300 billion in government aid as part of the Troubled Asset Relief Program. But Levin says it tells homeowners that if they want to restore their credit limit, they can have Citibank or another company appraise their home at their own cost.
Levin says he got a new line of credit from a different company and Citibank then charged him an early termination fee when he closed his line of credit with them.
He demands damages, the return of fees and properties and other relief the court sees fit to grant. The class is represented by David Parisi with Parisi & Havens in Sherman Oaks.