Bank Violates Truth In Lending Law; Case To Go Forward As Class Action

A Milwaukee Federal Court judge ruled last month that Chevy Chase Bank violated the Federal Truth in Lending Act, which requires lenders to clearly explain loan terms to borrowers, according to an article in The Washington Post, reported at washingtonpost.com.

The case involved a husband and wife who were misled into refinancing their 5.75% fixed rate loan by signing for a high rate, deferred interest (negative amortization), adjustable rate mortgage that was represented to them as being a 1.95% fixed rate mortgage for the first five years. The 1.95% was merely a "teaser rate" subject to adjustment after one month. It wasn't until after the couple received their first payment coupon for the new loan in the mail that they initially became aware of what they had signed for. A $5,700 prepayment penalty in the mortgage kept them from refinancing into a different loan.

The judge will allow the case to be treated as a class action lawsuit. The bank has filed an appeal.

For the whole story, see: A Fight Over the Fine Print (Chevy Chase Bank Faces Suit Over Adjustable-Rate Mortgages).

See also, Milwaukee Journal Sentinel: Mortgage lawsuit may have big effect (Couple's low interest rate lasted a month).