Three Lenders Belted For $100+ Million In Class Action Damages For Clipping Missouri Homeowners For Illegal Fees On 2nd Mortgages

(originally posted 1-5-08)
In Jackson County, Missouri, The Kansas City Star reports:

• A Jackson County jury Friday ordered three mortgage lenders to pay $99 million in punitive damages to Missouri residents who claimed they were charged illegal fees for second mortgages. The jury, which had assessed $5.1 million in actual damages against the three companies earlier in the day, reconvened in the afternoon and handed down the punitive damage awards. Collectively, the awards are among the highest assessed by a Jackson County jury in recent years in a commercial case.

• The mortgage companies — Residential Funding Co. LLC, Household Finance Corp. III and Wachovia Equity Servicing LLC — bought second mortgage loans from a lender that had charged excessive interest and illegal origination, loan discount, underwriting, processing, document preparation and legal fees under Missouri’s Second Mortgage Loan Act [sections 408.231 to 408.241, RSMo.]. The plaintiffs claimed that the companies knew of the lender’s fraudulent conduct and “stepped into its shoes.”

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• The originating lender, Mortgage Capital Resource Corp. of California, is no longer in business. Its former chief executive, Kenneth C. Ketner of Newport Beach, Calif., was sentenced last year to 57 months in prison for mortgage fraud and ordered to repay banks he swindled $9.27 million.

• Hit hardest by Friday’s jury’s verdict was Residential Funding, which is owned by GMAC Mortgage Group and was ordered to pay $4.33 million in actual damages and $92 million in punitive damages.

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• The case is one of several pending in Jackson County against mortgage companies that allegedly violated Missouri’s Second Mortgage Loan Act. About 10 months ago, one of the suits, against Memphis, Tenn.-based First Horizon National Corp., resulted in a $36.3 million settlement. The settlement covered the claims of more than 4,000 homeowners who obtained second-mortgage loans from First Horizon and Kansas City-based McGuire Mortgage Co. between Nov. 16, 1994, and April 13, 2005.

For more, see Mortgage lenders ordered to pay $99 million in punitive damages.