As we all know by now, the current state of the economy was created by mortgage lenders who were giving out money to people who did not previously qualify.
In the aftermath, many are now taking these banks to court for unfair and predatory practices. Banks have been going through these lawsuits for years but recently the number has jumped. Some have already settled out of court for millions of dollars. Banks like Wells Fargo and Countrywide have been sued by homeowners in an effort to keep their homes.
Some are seeking money for damages because they've already lost their house or paid off their mortgage. Others are looking for a loan modification, they just want their mortgage to be affordable.
Many have joined in on class action lawsuits because they do not agree with practices like high interest rates, misleading introductory rates and lack of income verification. These practices are called predatory because these loans are pretty much unaffordable, and given to people who do not understand what they are signing.
An example of these unaffordable loans is the originated payment option adjustable-rate mortgage. This type of loan allows borrowers to make very low monthly payments, and the unpaid interest is then added to the principal.
Even the NAACP is suing claiming discrimination against minority borrowers.
The largest predatory lending settlement was with Bank of America. They agreed to spend $8.4 billion to lower the interest rates or loan balances of nearly 400,000 Countrywide customers with subprime loans or payment option ARMs. This made the number one mortgage lender in the country accountable for putting borrowers in loans they didn't understand, couldn't afford and could not get out of.