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Too-Good-To-Be-True Refinance Deals Scrutinized

BOSTON -- What appears to be a good mortgage refinancing deal could result in the loss of a home.

Team 5 Investigates reported Wednesday that a national class action suit against a major mortgage lender points to deceptive sales practices that have resulted in foreclosure for some clients.

Jim and Terry Devlin lost their Cape home to foreclosure. It was a house they adored.
"Behind the house is a pond, and the picnic table overlooked the bogs," recalled Terry. "It was our life. The hardest day I ever had was walking out of here and never coming back," she said.

The couple said their downward spiral began when they became the target of aggressive marketing by Ameriquest Mortgage Company.
"I remember my husband, Jim, being so excited," said Terry. "He was so overwhelmed with bills and they said they'd help."

Ameriquest promised a lower interest rate with the possibility of further reductions. The Devlins were also told they could borrow more money to wipe out their mounting household debts.

They signed on with Ameriquest. But soon after, they discovered that their property taxes hadn't been paid. Jim said Ameriquest assured him that an escrow fund was set up to take care of those costs.

"I'm not a Rhodes scholar," Jim said. "What they told me and what ended up happening were light years apart."

Ameriquest told Team Five that the Devlins opted out of an escrow fund, something Jim and Terry insist they wouldn't have done. They wanted out of the loan, but were worried they'd be hit hard with thousands of dollars in hidden points and fees.

Today the Devlins are part of a national private class action suit against Ameriquest, involving 20 local families. The lawsuit's lead attorney, Gary Klein, said "There is all kind of fraud and abuse across the subprime lending market. The documents at closing are so enormous people can't even find the reference to the high costs and fees."

The class action suit claims deceptive sales practices, excessive fees, interest rates and penalties. These are hallmarks, says Klein, of the highly scrutinized sub-prime lending business. "Lenders have told people it's a good idea to use your own equity to finance your financial needs," said Klein. "When they refinance, the new set of points and fees are added to the balance, and the equity disappears."

Team Five investigates obtained mortgage documents held by plaintiffs in the Ameriquest lawsuit. Attorneys said the documents point to bait and switch tactics. One borrower said she was promised a fixed rate when she refinanced. She ended up with a variable rate, starting at 10.5 percent, and likely to soar over time.

Other borrowers paid $20,000, even $30,000 for what are called "discount points", fees for lower interest rates they never got. "It's clear to me they didn't understand the loan they were getting into," said Klein.

The situation got worse for the Devlins. They closed out their deal with Ameriquest, at great cost. Their mortgage with a new company had a high variable rate of over 9 percent. They couldn't keep up with the payments. Within no time they were foreclosed on.

"It was a house that I loved and picked out," said Terry. "It was the American dream, to pay off your mortgage." Jim said they always wanted their children to inherit the house. "And when our time runs out," Jim said, "leave it to our children. That's what every parent aspires to. We certainly had that in mind."

Ameriquest told Team 5 Investigates that the claims in the class action suit are not valid. The company has already settled similar claims with 49 Attorneys General for $295 million.

Article Source http://www.thebostonchannel.com/asseenon5/13292905/detail.html

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