Maryland Class Action Suit Alleging Illegal Mortgage Prepayment Fee Allowed To Continue
- A class-action lawsuit against Provident Bank’s alleged charging of prepayment fees on mortgages will go forward after the state Court of Appeals [last month] overturned a lower court’s decision in favor of the bank. The Court of Appeals ruled 7-0 that the Circuit Court of Baltimore City erred in ruling against Andrew Bednar, who filed suit in 2005 against Provident alleging that the bank charged him a penalty in violation of state law after he paid off a second mortgage within three years of taking out the loan. In an opinion, retired Judge John C. Eldridge wrote that state law “unambiguously and flatly” forbids a prepayment charge, and to find an exception to the law “would be to violate the most basic principle of statutory construction.”
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- Bednar claims he was charged $681 by Provident when he refinanced with another lender and paid off a $17,000 second mortgage two years after taking it out with the bank. According to court documents, in taking out the loan, the bank waived closing costs on the condition that Bednar not close the account for a minimum of three years. At the settlement of his refinanced loan, Bednar said the bank collected $681 in a variety of fees from his original closing cost. Provident argued, and the lower court maintained, that the charge was imposed not at the time of Bednar’s refinancing but when he closed the second mortgage in 2003. The Court of Appeals disagreed.
The Maryland prohibition against charging prepayment fees apparently applies to Provident Bank, a state chartered bank, and other non-federally chartered lenders. One gripe about the law is that since it doesn't apply to federally chartered institutions, those lenders arguably have a competitve advantage over lenders like Provident.
For more, see Court of Appeals allows class-action lawsuit against Provident.
See also, The Baltimore Sun: Md. mortgage fee lawsuit reinstated (State high court finds against Provident Bank).
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