“U.S.-Backed Mortgages Put to Test in an Innovative Lawsuit”

If you lost your home because your bank foreclosed upon your mortgage, and your mortgage was backed by the Federal Housing Administration, you must read this, from the New York Times, about a radical new class-action lawsuit against mortgage banks which foreclosed FHA-backed mortgages without adhering to a certain federal rule.

Maybe you’ll recognize yourself in this article, which begins:

When Hayward Ferrell of Huber Heights, Ohio, fell behind on his mortgage payments several years ago, his bank did not meet with him to try to work out a plan to make the loan easier to pay, he says.

“They never sat me down and said, ‘It looks like you are going to lose this, so why don’t you do this?’ ” he said. “They never did that.” The lender, U.S. Bank, foreclosed on the house in 2009.

Not engaging with borrowers who have missed payments may not seem like the strongest grounds for litigation against a bank. Yet that is the basis for an innovative lawsuit against U.S. Bank, a division of U.S. Bancorp, one of the largest banks in the country. The legal action could mean fresh legal problems for other big mortgage banks, as well. It is the latest threat to emerge from a barrage of cases that have forced big banks to pay tens of billions of dollars in recent months.

The piece continues to describe specifically the legal basis for the lawsuit:

The lawsuit focuses on a popular type of government-guaranteed mortgage that in fact requires that banks take distinct steps — like trying to arrange a meeting — when borrowers stop paying.

And here is a paragraph about the legal organization that is filing the lawsuit:

The lawsuit is being brought by Advocates for Basic Legal Equality, a legal aid group. In a twist, the group is suing U.S. Bank in federal court in Ohio on behalf of the United States government, using the False Claims Act. This legislation, which dates to the Civil War, allows private citizens and groups to pursue legal action against companies and other entities for receiving payments from the government on false grounds.

I noticed that ABLE (the acronym for Advocates for Basic Legal Equality) is a pro bono Legal Aid group that represents Ohioans in much more than just this case. Take a look at their web site, the link for which I’ve provided above.

And if you recognize your mortgage experience in Mr. Ferrell’s, you’ll want to read the entire piece. If one Ohio pro bono legal group is pursuing this lawsuit, I’ll bet other groups around the country are gearing up to do the same thing.

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