News Column

NJ Judge: Freedom Mortgage deal amounts to fraud

August 20, 2014

By Michael L. Diamond, Asbury Park Press, N.J.



Aug. 20--Freedom Mortgage Corp. defrauded an Englewood home owner in 2009, when it charged her nearly $11,500 in fees, a New Jersey Superior Court Judge has ruled.

Judge Gerald C. Escala in Bergen County said Freedom approved the loan to generate fees instead of to benefit the borrower, Mamie E. Major, who defaulted on the new mortgage after only six payments.

Freedom "never made diligent inquiry into her then ability to make the loan payments going forward," Escala wrote. "As demonstrated here, defendant defaulted within a few months. Such default so soon after making the loan suggests her then financial frailty."

The case comes five years after the housing bubble collapsed, ending an era when lenders approved home loans with little regard to the borrowers' income, credit score and other obvious indicators of their ability to repay.

Major's refinancing had all of the tell-tale signs.

The court documents said:

*Major, then 70, worked at Englewood Hospital and made a little more than $30,000 a year. She wanted to refinance her home, valued at $365,000 to lower her interest rate and to take out equity to help pay for her grandson's college.

*Freedom approved the loan without a new appraisal. Freedom obtained none of Major's tax returns. And Freedom didn't order a credit report.

*Freedom charged almost $11,500 in fees. It increased her loan from $341,523 to $354,005. It lowered her interest rate from 5-5/8 percent to 5 percent. Crunch the numbers and Major saved less than $63 a month. She made six payments and defaulted.

Escala ruled that the Freedom violated the New Jersey Consumer Fraud Act. He said Freedom still can foreclose. But he ordered the company to forfeit its fees and interest it made on the loan and to pay Major more than $34,000 in damages.

___

(c)2014 the Asbury Park Press (Neptune, N.J.)

Visit the Asbury Park Press (Neptune, N.J.) at www.app.com

Distributed by MCT Information Services


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Asbury Park Press (NJ)


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters