A federal court filing says the bank made errors when adjusting ARMs, but it does not specify the size of the errors or the dollar amounts overcharged. Plews says the suit is a class action and is attempting to hold Workingmen’s bank account for the errors. A spokesman for the bank denied the charges and said the bank will fight the class action vigorously in court. The issue of accuracy in ARM adjustments has now reached a national level, attracting the attention of congressional politicians and bank regulators.
Attorneys for the plaintiffs in a Libor manipulation lawsuit suspect that the financial institutions involved manipulated the LIBOR rate. This is a problem because LIBOR is used as a benchmark to measure the interest rates and the credit worthiness of banks. The lower the reported borrowing rate, the better. This created an incentive for the banks to coordinate their borrowing rates, thereby causing the public entity to pay higher rates than they otherwise would have and to receive lower rates than they would have.
Bank officials were naive about the extent of the Libor scandal and failed to recognize the lowballing that occurred. While bank fines for this scandal have been relatively small in comparison to the billions of dollars that were lost by customers, the banks themselves have said that the scandal is now a thing of the past. However, it will not be long before Libor will be eliminated. Once this happens, another benchmark will replace it.
The plaintiffs in the Libor manipulation lawsuit have chosen to sue banks in state court, and allege state and federal law violations. In doing so, they claim that banks used interest rate swaps to convert fixed-rate borrowings into indexed holdings and vice versa. As such, they could have received more money if they manipulated the rate. They are seeking economic damages of at least $2.5 billion. These damages could be devastating for the investors who were impacted by the manipulation.
Caps on increases on adjustable-rate mortgages
Those who have adjustable-rate mortgages should ask about caps on interest rate increases. These caps limit the amount of interest rate changes a borrower can see over a certain period. While market rates fluctuate, they don’t rise and fall continuously. Ideally, the benchmark interest rate will fall at least once during a 30-year term. These caps protect both lenders and borrowers from the risk of large increases and decreases in interest rates.
Adjustable-rate mortgages have periodic rate caps to protect borrowers. These caps limit the interest rate increase to a certain percentage or a fixed amount. For example, a 2% cap would limit interest rate increases to 4% or 8% per year. Periodic rate caps may be tied to an index that helps determine interest rates. An adjustable-rate mortgage attorney can help borrowers assess their mortgages for periodic increases.
In general, there are two kinds of caps on adjustable-rate mortgage interest rates: an initial and a lifetime cap. In both cases, the cap is a maximum percentage increase. Often, an adjustable-rate mortgage includes several caps. The initial adjustment cap limits interest rate increases to 2% of the prior rate. Periodic interest rate caps cover upcoming increases in the interest rate. When you sign up for an ARM, you should ask about the cap on a lifetime loan.
Lender’s duty to disclose terms of the loan
A recent Lender’s Duty to Disclose Adjustable Rate Mortgage Interest Rates lawsuit reveals that the loan was not disclosed correctly. The plaintiff believes she was misled into believing that she was applying for a 1% interest rate mortgage. Additionally, the lender failed to disclose certain terms promptly and did not disclose them to the borrower before closing. The court ruled that the lender had violated the Truth-in-Lending Act by failing to disclose important information about the interest rate of her loan.
Defendants must have known that negative amortization was a certainty when they provided the adjustable rate mortgage disclosure. Plaintiff may prove that the hypothetical references to negative amortization did not disclose that the principal balance would increase in the long run. The plaintiff’s complaint alleges that the lender had a duty to fully disclose the terms and conditions of the adjustable rate mortgage before the loan was made.