A group of Florida homeowners sued Seterus Inc, which allegedly violates the terms of the mortgages by requiring a monthly payment to cover their house payments over the phone and a monthly fee for processing their home loans over the phone. This is in violation of FHA’s policy that they have written into a contract with the homeowner.
Seterus disputed this, saying that they had received proper authorization from the homeowner. The homeowners filed suit claiming that the fee for processing loans over the phone constitutes illegal discrimination. They further claimed that the policy itself also violates the rights of FHA borrowers in violation of the Fair Housing Act. The case is currently going on trial.
Class Action Lawsuit Against Setterus
The trial will be held in an out of court situation. It is expected that both sides will present their cases in court. If the plaintiffs win, they can get their delinquent mortgage payments forgiven, along with additional money toward their lost equity. If the defendants win, they must pay the original debt plus attorney’s fees and costs. The credit bureaus, who stand behind the FHA’s policies, cannot be sued for the class action lawsuit because the borrowers signed non-disclosure agreements.
The suit claims that FHA’s programs for foreclosing on homes were designed to prevent lawsuits over debt collectors and collection practices, but the class-action lawsuit against the setters of mortgage services charges that they engage in a wholesale program to collect delinquent payments from homeowners.
As stated in a recent article at Forbes, “If the housing market were going to bring back buyers in droves, the FHA would have no trouble meeting demand. But as it is, there are more units on the market than there are buyers.” According to the same article at Forbes, “Borrowers can pursue the case through normal channels with an attorney, but without a FHA guarantee, lenders may not come forward to help the borrowers.”
For borrowers who fall into one of the class action lawsuit against Setterus, the most likely scenario involves a note holder selling an FHA insured loan to an investor for more than the face value of the loan.
When the borrower is not in a position to repay the new loan, the investors often resort to taking the house back from the former homeowners as well as holding onto it through foreclosure. These circumstances leave distressed borrowers with a massive amount of accumulated debt, with little hope of recovery.
The class action lawsuit against Setterus asserts that the FHA’s guidelines and regulations do not apply to notes that are held in escrow or are owned by investors.
This means that if the lender fails to make interest payments on the loan, the debtor is not entitled to any compensation. The complaint also states that it is unfair for the government to favor one set of rules over another. The complaint is being contested by a group of Florida investors, who believe that the state attorney general has no standing to bring the lawsuit.
Setterus responded to the complaint in a court filing denying liability and stating that the state law was “arbitrary and capricious.”
He noted that many class action lawsuits filed by Florida consumers are directed at his company because the state attorney general has specifically authorized its enforcement. He has previously stated that if a class action lawsuit is filed against a particular individual, it may be the case that the individual’s estate will direct that the proceeds of the lawsuit be divided between all of the named plaintiffs. He has also stated that if the court finds merit in the complaint, it may direct that the state attorney general to file a report of judgment.