On the homepage
Pardon Board
Out There
Petters
Vikings
Continued: Swanson sues mortgage firm, alleges deceit
Print this story
E-mail this story
Save to del.icio.us
Share on Facebook
Share on Digg
Minnesota business by the numbers
See Minnesota's top earning companies, CEOs and non-profits
More from Business
Noting that lending practices behind the nation's tenacious mortgage crisis still occur, Minnesota Attorney General Lori Swanson singled out Source Lending Corp. in a lawsuit filed Thursday in Hennepin County District Court.
The suit alleges that the Plymouth-baed mortgage brokerage misled borrowers into buying risky mortgages, causing some to lose their homes. The state is asking for an injunction, penalties of up to $25,000 per violation, and restitution for any borrowers harmed, Swanson said.
Through his attorney, Apurba Chakraborty, Source Lending CEO Chris Hacker declined to comment. "At this point we just haven't had a chance to look at the allegations in this complaint," Chakraborty said, noting that some of the events are three to four years old.
The website of the company, founded in 2003, claims that it specializes in "fast, hassle-free closings," and that "9 out of 10 people we talk to can save more than $200 on their current monthly payments."
Swanson's suit is the second against Source Lending in five months. The Foreclosure Relief Law Project in St. Paul sued in April -- the first suit under a new state anti-predatory lending law -- claiming violation of a new fee limit of 5 percent of a loan's value.
Thursday's lawsuit came amid more bad news for the housing market. Also on Thursday, RealtyTrac, which maintains a database of foreclosed properties, said the country had 272,171 foreclosure filings last month, up 8 percent from June and 55 percent from last July. Minnesota had 1,671 filings, down 1.4 percent from June but up 59.6 percent from last July.
Swanson announced the lawsuit at the Capitol in St. Paul, along with several Source Lending customers involved. Swanson said Source Lending used aggressive and misleading marketing, including one mailing that gave the false impression that it came from the Twin City Co-ops Federal Credit Union. Complicated, high-risk mortgages were sold to customers who believed they were buying a simple, fixed-rate loan, and some adjustable-rate mortgages were sold with a false promise to refinance them later at no charge, she said.
Bruce and Lisa Morris said they asked Source Lending to arrange a 30-year, fixed-rate mortgage on their Brooklyn Park home, hoping to lower their monthly payments while interest rates were low early last year. Instead, they said, the broker sold them an Option ARM loan, a complex product that cut the Morris' monthly payments from $1,550 to $1,200 -- but only by pushing back $900 in debt each month, to be paid later. That means the Morris' mortgage balance gets bigger -- not smaller -- with each payment, Bruce Morris said. They cannot refinance, because the house now is worth less than they owe. They are out $11,000 in fees and they worry they will lose their home.
"These guys ... destroyed our lives," said Morris, a building engineer and father of four.
Joseph and Betty Price did lose their St. Paul house to foreclosure. They refinanced the mortgage on their family home of 42 years in 2005, after being contacted by Source Lending. The Prices said they asked for a fixed-rate mortgage, and they didn't realize they bought an increasingly expensive adjustable-rate loan until a day after closing. They had paid $6,655 in fees.
Joseph Price, a retired electrician and Korean War veteran said, "You work all your life, and you be of service, and you don't expect something like this will happen to you."
The suit's allegations fall under state statutes on deceptive trade practices, false advertising, consumer fraud, and mortgage brokering. The events predate the state's new anti-predatory law. Swanson said her office expects to file more lawsuits involving both mortgage and foreclosure services.
H.J. Cummins • 612-673-4671
Previous pageRecent Business stories
Blog: Patent Pending
Lights out at U energy conference. Irony police notified.
Just as Lawrence Kazmerski, a top official at the National Renewable Energy Laboratory, was about to give the keynote address at the University of Minnesota's annual E3 conference at the RiverCentre in St. Paul, the lights went out, bathing the audience in darkness and a deep sense of irony.