Bad credit consumers who should not have received loan approval during the booming housing market, are now filing subprime predatory loan lawsuits.
Government officials and homeowners are going to court over what they claim to be unfair, predatory practices and are still going through the legal system. Many banks have settled for millions of dollars. A few defendants are Countrywide Financial, Citigroup, and Wells Fargo. Borrowers want to use the legal system to help them retain their homes and are using the courts as individuals or as class action lawsuits. Foreclosures continue to elevate and homeowners want banks to modify loans they can't pay or stop foreclosing.
Banks are use to lawsuits and have in the past paid millions of dollars in settlements. The problem during the housing boom was many borrowers were questionable and may not have been able to repay. Some common predatory lending schemes involve borrowers who got mortgages with high interest rates, or loans they could not afford. Middle-class borrowers seemed to be a factor during the boom and these may be more able to hire attorneys. Those who are financially unable are using lawyers who work for non-profit legal services agencies or who agree to get payment from the banks if they win the case. Some borrowers have been successful in getting lawyers to defend them against a foreclosure sale or have been able to get the courts to stop or delay the proceeding until the bank considers if loan modification could help. Some homeowners have an adjustable-rate mortgage which lets the borrowers make very low monthly payments with the unpaid interest added to the principal. Homeowners are looking for a second chance but even with this, many borrowers end up defaulting on their payments.
State attorneys generals have been filing suit against some mortgage companies alleging predatory lending and deceptive business practices. Banks have had to deal with suits from the NAACP, some cities and individuals claiming discrimination against minority borrowers. The dream of homeownership has turned into a nightmare for many borrowers because of predatory lending practices. Now companies are being held responsible for their role in the foreclosure problems and for creating some of the economic problems. Many homeowners can't afford to hire attorneys to help them and some of the biggest sub prime lenders have gone out of business, declared bankruptcy, or been put into receivership by the Federal Deposit Insurance Corp.
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