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Irwin Law
Irwin Law, Attorney
Category: Legal
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Experience:  Lawyer & Real Estate Broker, 30+ years, foreclosure, land contracts, inheritance, probate.
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Regarding: Mortgage loan fraud lawsuits with interest only

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Regarding: Mortgage loan fraud lawsuits with interest only payments and steep pre-payment penalties.

I have done some research on the web and have noted that there have been some lawsuits regarding mortgage loans. Specifically there have been some lawsuits that say interest only payments and steep pre-payments are illegal.

My wife and I were married in July 2007. Before I met my wife she took out a loan and purchased our town home In September 2006 that we are currently living in. The loan was originally created through Fieldstone Mortgage Company Maryland. Fieldstone Mortgage company then sold our mortgage to Citimortgage Inc.

In November of 2007, after reviewing her mortgage loan documentation I realized the mortgage loan was an interest only loan for the first 5 years and started the process to refinance the loan with Quicken Loans. In the first 5 years of the loan we would have paid $85,695 in interest payments and not of penny of this would have paid down the principle. On 12/05/07 we signed our new loan documents and paid off the Citimortgage loan which included a $5,394.00 prepayment penalty fee. In October 2008 the mortgage crises happened and the bank’s mortgage lending practices were scrutinized.

Fieldstone Mortgage Company is no longer in existence. Since Citimortgage purchased the loan from Fieldstone do we have a legitimate claim against Citimortgage to reclaim the steep prepayment penalty fee and any excessive interest that we paid to them? They have encouraged this type of lending practice by purchasing our loan from Fieldstone Mortgage Company. I have contacted and sent Citimortgage documentation to back up our claim. At this time Citimortgage response is that they do not owe us anything. Can I take them to small claims court and what are the risks involved on our side?

Hello and thanks for submitting your question to Just Answer. Unless you can establish that the loan was illegal under Oregon laws in 2007 when it was made you would not win a lawsuit over a refund. The more recent laws in many states which outlawed or limited interest only and prepayment penalties were not made retroactive. Your loan would have been enforceable as written.


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Customer: replied 4 years ago.

Thank you for the information, very helpful.

Thanks for using Just Answer