INDEPENDENCE, Mo. (CN) – Missouri law allows second mortgage lenders to charge usurious rates, but Sovereign Bank adds to homebuyers’ woes by charging illegally high fees on second mortgages, a class action claims in Jackson County Court.
“The MSMLA [Missouri Second Mortgage Loan Act] enables second mortgage lenders to charge and extraordinary and what would otherwise be a usurious rate of interest for residential second mortgage loans (since August of 1998 the rate has been unlimited),” lead plaintiff Daniel Thompson says in the complaint. “In exchange, the MSMLA strictly limits the type and amount of fees that can be directly or indirectly charged, contracted for or received in connection with any mortgage loan.”
But Thompson says that Sovereign Bank and originating lenders charged, directly or indirectly, fees that include an abstract or title search fee, CJ Processing fee[undefined], closing/credit fee, credit report fee, document preparation fee, loan origination fee, loan processing fee, mortgage broker fee, origination fee, processing/broker fee, recording fee, settlement or closing fee, signing fee, sub-escrow/UPS/App fee, title examination fee, title insurance fee, underwriting fee and a yield spread premium fee.
“In addition, the originating lenders also charged, contracted for and received pre-paid interest in connection with the Sovereign Bank related second mortgage loans,” the complaint states.
Thompson says Sovereign Bank knew or should have known that its fees and interest were illegal.
“Sovereign Bank consciously disregarded Missouri law and the rights of the plaintiffs and the Sovereign Bank second mortgage class at, during and/or after the time it funded, purchased, acquired, serviced or master serviced the Sovereign Bank related second Mortgage loans by failing and refusing to determine whether the loans fees the borrowers financed and repaid complied with the MSMLA,” the complaint states.
The class consists of anybody who obtained a second mortgage loan from Century Financial Group on or after June 28, 1994, or SMC Lending on or after June 29, 1994, or Preferred Credit Corporation on or after June 27, 1994 or First Consumers Mortgage on or after June 23, 1994 or Bann-Cor Mortgage on or after Oct. 31, 1994, that was secured by a mortgage or a deed of trust on a residential property in Missouri and was assigned to, owned by, held or serviced by Sovereign Bank.
Thompson seeks actual and punitive damages for violations of the MSMLA, a ruling prohibiting the defendant from continuing to violate the MSMLA, disgorgement of all improperly collected fees and a ruling allowing the class members the right to rescind their loan transactions.
He is represented by R. Frederick Walters with Walters Bender Strohbehn in Kansas City, Mo.