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Class action suit filed over loan modification programs

Story Published:
Jan 11, 2011 at 7:07 PM PST

Story Updated:
Jan 11, 2011 at 7:08 PM PST

f0be1 080818 mortgage Class action suit filed over loan modification programs

A major mortgage servicing company is slapped with a class action lawsuit over its loan modification program. The federal suit, filed on behalf of a Yakima homeowner, accuses Texas-based EMC Mortgage Corporation of deceptive practices, illegal fees and artificial obstacles that ultimately forced people to lose their homes.

Seattle law firm Keller Rohrback filed the suit on behalf of Basilisa Pacheco, whom attorney Gretchen Obrist says was strung along in a four-year loan modification illusion.

“You get a promise, usually verbally, that if you follow this plan and make the payments for 3 to 6 months, then you’ll get a permanent modification,” said attorney Gretchen Obrist.

Obrist says the permanent modification never came. Instead, Pacheco received multiple threats of foreclosure while she was making the monthly payments, and followed sudden cancellation of the foreclosure proceedings and offers of new modification plans. According to Obrist, Pacheco was set up in six plans over a four-year period.

“And the important thing to note about these modification plans is that every time there’s a new one, there’s a new set of fees that are added,” said Obrist.

The lawsuit alleges excessive and illegal fees — rejected payments, failure to apply payments, and arbitrary spikes in the homeowner’s total debt.

Obrist says Pacheco’s mortgage documents show an inexplicable $4,000 addition to the principal balance on her loan.

“There’s a point in the complaint where we describe a situation where within a period of two or three weeks, she’s told she owes about $7,000, and then she’s told she owes about $13,000,” Obrist said.

Similar lawsuits have already been filed in other states against Bank of America, Wells Fargo, JP Morgan Chase and other mortgage servicing companies.

The lawsuit seeks consumer compensation for any illegal fees and unjustified charges, as well as and tougher enforcement of existing consumer protection laws.

The suit also names EMC’s former parent company, Bear Stearns which went under during the early stages of the mortgage crisis. EMC’s current parent company is JP Morgan Chase, which says it cannot comment on pending litigation.

For more information:

Keller Rohrback L.L.P. Announces Class Action Complaint Filed Against EMC Mortgage Corp. and The Bear Stearns Companies LLC

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