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The Mortgage Lender Implode-O-Meter is reporting that the Loan Center of California is the defendant in a class action suit alledging that the company violated the Truth in Lending Act by not clearly disclosing the nature of their negative amortization pay options loans to customers. The suit alleges that LCC presented the neg-am loans as regularly amortizing loans in the sales process. (Personal note: this is an all-to-common practice.)
From the filing posted ML-Implode on the LCC TILA Violation class action lawsuit:
Defendents failed to clearly disclose to Plaintiff and Class Members, and fraudulently omitted, that there were payment options, instead providing Plaintiff and Class Members with a deceptive payment schedule that indicated borrowers would enjoy low payments without negative amortization.
If Loan Center of California rings a bell it’s because they sued ML-Implode for negatively impacting their business by accidentally reporting on the company’s implosion. At the time of the suit I called BS on LCC. Frankly it’s nice to see a company that seemed so frivolous with law suits getting kicked in the ass by karma.
While this “LCC” may have knowingly prepared TIL’s improperly, the underlying problem is that many mortgage industry staffers (LO’s most especially included) are innumerate and have no understand of how loans work - especially Option ARMs. That there are LO’s who defended the idea of taking a one-month ARM that was fully-indexed at 6% and heading for 7%+ at a time (say, 2005) when a 30 year fixed rate could have been had in the mid 5’s, demonstrates that these LO’s are/were incompetent to advise borrowers of their best options.
Most Option ARMs ended up at Countrywide, WaMu & IndyMac. Those companies were like the Cali cartel - flooding the US with cocaine. May the Lord smite them. With some kind of very big-ass smitey-thingy.
That made my day.
Nobody hates frivilous lawsuits more than I, and this story definitely put a smile on my face.